MSCI to cap single issuer at 25% in US value index on interim basis

MSCI Inc. Class A

MSCI Inc. Class A

MSCI

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- Global index provider MSCI MSCI.N said on Tuesday it will temporarily cap the weight of any single issuer in its MSCI USA Enhanced Value Index at 25% to address potential concentration risks.

The exceptional issuer cap, to be reviewed monthly, will take effect from September 1.

The move comes as a rally in a handful of U.S. mega-cap stocks has increased concentration in equity indexes, raising concerns over investors' exposure to a small number of companies.

MSCI's stock market indices serve as benchmarks for ‌trillions of dollars in assets held by investment ​funds, pension plans, and asset managers to measure performance and guide investment decisions.

Under the rule, if the combined weight of securities from a single issuer exceeds 25% on a given day, MSCI will reduce that issuer's weight to 20% and redistribute the excess weight proportionately among the remaining issuers in the index.

MSCI said it is reviewing concentration levels across its Enhanced Value indexes and will soon launch a public consultation with methodology enhancement proposals to address the issue.