Real Estate Promoted to Standalone Sector Under GICS

Stan Garrun, Executive Director, MSCI at the MSCI South Africa Real Estate Investment Conference 2016 which took place at the V&A Waterfront in Cape Town

S&P Dow Jones Indices, a provider of financial market indices, and MSCI Inc., a provider of portfolio construction and risk management tools for global investors, have announced changes to the Global Industry Classification Standard (GICS®) structure. 

A new Real Estate Sector is being created, elevating its position from Industry Group within the Financials Sector. This is the first time a new Sector has been created under the GICS structure since its inception in 1999, and the update acknowledges the importance of real estate in the global economy.

According to David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices, “When GICS was introduced in 1999, we committed to keeping the structure up to date as the global economy evolves. The creation of an eleventh sector recognizes the growing importance of real estate in the world’s equity markets. The decision to add a real estate sector was based on extensive comments from investors and analysts as well as in-depth analysis and discussions between S&P Dow Jones Indices and MSCI.”

Remy Briand, Managing Director and Global Head of Research at MSCI, said, “This is the first significant structural change to GICS sectors since its inception and reflects the position of real estate as a distinct asset class and a foundational building block of a modern portfolio, rather than an alternative. GICS was developed as a means of standardization that would keep up with the evolving investment landscape.”

The changes to the GICS structure will be implemented in the GICS Direct product after the close of business (ET) on Wednesday, August 31, 2016. To coincide with their annual rebalance, S&P Dow Jones Indices will implement the changes after the close of business on September 16, 2016.

The Real Estate Sector is being moved out from the Financials sector and is being promoted to a standalone sector under the code 60. The Real Estate Investment Trusts Industry is being renamed Equity Real Estate Investment Trusts (REITs) and excludes Mortgage REITs. Mortgage REITs remain in the Financials sector under a newly created Industry and Sub-industry called Mortgage REITs.

 The new GICS structure will consist of 11 sectors, 24 industry groups, 68 industries and 157 subindustries.