With a wave of mega IPOs on the horizon slated to go public as soon as November, the speed at which mainstream indexes include these newly listed companies has a significant impact on the institutional investors who invest billions of dollars against the benchmarks.
New research from MSCI reveals that delaying the inclusion of mega IPOs can create significant tracking error and potentially costly deviations from policy benchmarks, underscoring the implications of index providers’ differing approaches to incorporating newly public companies into popular benchmarks.
The timeframe in which mega IPOs are added to indexes also has an impact on the ETFs that passively track these benchmarks, as they must adjust their holdings to reflect the inclusion of newly listed companies.
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