MSCI Seeks to Raise China Index Weightings – Change for SWFs

June 18, 2015 by Loch Adamson

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A big provider of stock indexes plans to include A-shares of Chinese stocks in its benchmarks. That could mean major changes for passive sovereign wealth fund investors. Last week, New York-based MSCI Inc. , which manages a range of stock indexes, announced it was moving forward with plans to include China A-shares in its roster of global equity benchmarks. That may seem on the picayune side of portfolio management arcana, but it’s definitely not. The shift would change the ground rules governing oversight of tens of billions of dollars worth of sovereign wealth fund and other assets, shifting huge amounts of capital among various emerging markets, and likely altering risk parameters and return assumptions for institutional investors of all stripes. What’s at stake? Given current stock market valuations, the percentage of assets allocated to Chinese stocks under the planned shift would rise to 43.6 percent of the MSCI…

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