This article was originally published on ETFTrends.com.
Last year, index providers Standard & Poor’s and MSCI previously announced the creation of the communication services sector, an expanded, refreshed look at the old telecommunications sector. In May, S&P Dow Jones Indices said the Communication Services Select Sector Index went live.
On Tuesday, the Communication Services Select Sector SPDR (NYSEARCA:XLC), the first ETF dedicated to the new communication services sector, debuted. The new ETF tracks the Communication Services Select Sector Index and “seeks to provide precise exposure to companies from the media, retailing, and software & services industries in the U.S.,” according to State Street Global Advisors (SsgA).
XLC's launch means changes for some well-known consumer discretionary and technology exchange traded funds, including the Consumer Discretionary Select Sector SPDR (XLY) and the Technology Select Sector SPDR (XLK) .
“At the close of business on September 21, classifications for 26 Consumer Discretionary or Information Technology stocks will be changed in the Global Industry Classification Standard (GICS®),” said SSgA in a note out Tuesday. “The old Telecommunication Services (Telecom) sector will disappear, and it will re-emerge as the new, expanded Communication Services sector.”
Inside The New XLC
The new XLC is home to 26 stocks with a weighted average market capitalization of $368.89 billion. The new fund devotes almost 47% of its weight to the Internet software and services industry, 26.15% to media stocks and 11.89% to telecommunications stocks.
“The Communication Services sector will become the fourth-largest sector, comprising 10% of the S&P 500® Index, and three out of the five FAANG stocks—Facebook, Netflix and Alphabet’s Google—will now be classified within this new sector, the most for any GICS sector,” said SSgA.
Related: Twitter, Netflix to Join Large-Cap S&P Index ETFs
Facebook and Alphabet previously resided in traditional tech ETFs like XLK while Netflix has been classified as a consumer discretionary stock. Index providers believe the evolution of how people communicate and consume media made changes to the traditional telecommunications sector necessary.
“Change also creates opportunities. The old sector classifications obscured secular shifts apparent within our society. The new sector classifications create more focus on drivers of economic change and potential returns,” said SSgA.
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