A new sector is being launched by S&P Dow Jones Indices after the markets close on September 16, moving the real estate companies from financials to their own segment. Lots of investments, particularly, ETFs focus on the area, and the compartmentalization the real estate category will allow investors to tap into the growth potential here more easily.
The 11th sector will be part of the Global Industry Classification Standard (GICS®) - Real Estate and will include REITs and real estate development companies. The transition is occurring because real estate companies consist of 3.1% of the S&P 500 and have a higher yield than financials, said David Blitzer, managing director and chairman of the index committee at New York-based S&P Dow Jones indices.
This change will lower the current yield for the financials sector and investors can expect changes to also occur regarding taxation since REITs are not tax-qualified securities. S&P DJI's indices will reflect the change after trading closes on September 16 and the first day of trading with the new sector will occur on September 19.
Since September 16 is the third Friday of the month, it is also triple witching day when equity options, equity futures and index options and futures contracts all expire, which means there will be a large amount of liquidity in the marketplace. Mortgage REITs will remain in the financials sector although none exist in the S&P 500 and only one, Capstead Mortgage Corporation Real Estate Trust (CMO), is in the S&P Small Cap 600.