Tracker funds are poised for a “D-day” that could see weightings cut in media, technology tobacco and food as FTSE adopts new criteria for evaluating its indices.
FTSE will adopt “free float” on Friday, which means it will only count share capital freely available for trading in assessing a company's value, no longer including shares not for sale.
Passive fund managers will have to carry out huge levels of trading to replace stocks falling out of FTSE indices.
Gartmore senior fund manager Derek Quinn says: “Friday is D-day. Managers will have to achieve a huge rebalancing. Europe ex UK funds tracking the FTSE will have to replace around 9.5 per cent of stocks that will drop out.”
LM Financial adviser Steve Buttercase says: “The jury is still out on the effect of these changes. If you bought a tracker for cost reasons, stick with it but I think we are moving into a stockpickers' market.”