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The Spotlight Turns on Index Providers (Part 2)

Some suggestions: Index-construction decisions; Corporate-governance standards; National relationships

John Rekenthaler, CFA 27 February, 2020 | 11:53

We continue to see how the spotlight shines on the index providers.

The Sausage Factory

As the authors show, index constituents react variously to the index providers’ decisions. Sometimes they capitulate. Unilever UNLVF scrapped a plan to consolidate its headquarters in Amsterdam because doing so would have led to its stock being removed from the FTSE 100 Index. The tail thoroughly wagged the dog--and harmed the business to the extent that moving the headquarters would have been a benefit. (Once again, it’s difficult to know.)

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About Author

John Rekenthaler, CFA  John Rekenthaler has been researching the fund industry since 1988. He is now a columnist for Morningstar.com and a member of Morningstar's investment research department. John is quick to point out that while Morningstar typically agrees with the views of the Rekenthaler Report, his views are his own.

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