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FTSE Russell, ta global index provider that manages the FTSE NAREIT US Real Estate Index and the FTSE EPRA/NAREIT Global Real Estate Index, has announced several upcoming changes to its Industry Classification Benchmark (ICB), including the addition of Real Estate as the 11th ICB Industry. The new Real Estate Industry group will be segmented out of the ICB’s Financials Industry group, of which it currently is a part.
Industry classification systems like FTSE Russell’s ICB are used by investment professionals to analyze and manage investments, and create financial products, such as ETFs. Within the ICB structure, every stock exchange-listed company is allocated to the Industry and subsector that most closely represents the nature of its business, as determined by its primary source of revenue and other publicly available information. Approximately 100,000 equity securities worldwide are classified by the ICB system, providing a comprehensive data source for global industry analysis.
“We are very pleased with FTSE Russell’s decision to establish publicly listed Real Estate as a separate Industry within ICB, distinct from the Financials Industry group,” says Steven A. Wechsler, president and CEO of the National Association of Real Estate Investment Trusts (NAREIT). “REITs, which will represent the bulk of the Industry group’s equity market capitalization, are real estate – a distinct asset class with its own investment characteristics separate from those of financials. REITs are an important allocation in diversified securities portfolios, and FTSE Russell’s action will help build global recognition of that fact.”
The new ICB Real Estate Industry group will represent approximately 4 percent, or $2 trillion, of the equity market capitalization of the FTSE Global All Cap Index, with the restructured ICB Financials Industry group comprising 20 percent, based on data as of June 30, 2017, FTSE Russell said. The change will be effective after market close on December 31, 2018.
The establishment of a distinct Real Estate Industry group within the FTSE Russell ICB mirrors the creation last August 31 of a new headline Real Estate Sector in the Global Industry Classification Standard (GICS), the industry classification system jointly managed by S&P Dow Jones Indices and MSCI, which is used to structure their index products.
