MSCI to remove Strategy from global indexes, risking passive fund inflows
A broader review of companies with large non-operating asset holdings is prompting MSCI to drop Strategy and other firms from its global indexes. The change could limit automatic buying by passive funds that track the benchmarks and add pressure to affected stocks.
Highlights
- MSCI will remove Michael Saylor's Strategy and similar companies from its global indexes, classifying them as non-operating entities resembling investment funds.
- The exclusion risks reducing passive investment flows into affected stocks, as MSCI-tracking funds will no longer be required to hold them.
- Strategy shares dropped 0.8% in extended trading Wednesday and have fallen about 20% year-to-date, while bitcoin prices are down 15%.
Index review targets non-operating companies
As reported by Reuters, MSCI says it will remove Michael Saylor's Strategy and other companies from its global indexes after deciding they more closely resemble investment funds than operating businesses.MSCI proposed last year to exclude digital asset treasury companies whose holdings represent 50% or more of their total assets, and it later expanded that work into a broader review of what it calls non-operating companies. It says such companies have fund-type characteristics, which are excluded from its benchmarks.
Market impact for passive investment flows
The decision puts passive investment flows into the affected stocks at risk because funds that track MSCI indexes may no longer be required to hold them. That could reduce a source of demand for companies that have benefited from inclusion in widely followed global benchmarks.Strategy shares fall 0.8% in extended trading on Wednesday. The stock has slid about 20% this year, while bitcoin prices are down 15%.
We have also looked at Centre disinvestment proceeds, where ETFs and public issues drove most receipts while strategic sales stayed limited.
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