S&P Releases Details Of Full Float Adjustment For U.S. Indices

Ensuring that its U.S. indices remain the most relevant solution for investor needs, Standard & Poor's today announced the details for bringing the world’s most recognized index, the S&P 500, and its affiliated indices to full float adjustment. Standard & Poor’s move to float adjustment will make certain that the S&P 500, S&P MidCap 400 and S&P SmallCap 600 continue to be the most liquid and widely used investable indices covering the U.S. markets. Standard & Poor’s is the leading provider of independent investment research, ratings and indices.

“The S&P 500 is an index with more than 80 years of history and $1 trillion invested,” notes David Blitzer, Managing Director and Chairman of the Index Committee at Standard & Poor’s. “But for an index to remain viable and useful, it must change with the market, and when it changes it must do so efficiently. The move to free float is Standard & Poor’s response to the evolution of the market.”

Documents and analysis released today by Standard & Poor’s show that the impact of float adjustment - where the number of company shares counted in the index calculation are adjusted for closely held shares not available to investors - will be modest:

• For the S&P 500, 395 stocks have investable weight factors (IWF’s) of 1.0. For the S&P MidCap 400 the figure is 280, and for the S&P SmallCap 600 the figure is 386.
• Estimated turnover due to float adjustment is 3.34% for the S&P 500, 5.22% for the S&P MidCap 400 and 5.30% for the S&P SmallCap 600. Annual turnover figures for the indices over the last three years were 3.23%, 12.10% and 12.53%, respectively.
• Index performance and risk will experience minimal changes. The performance difference between the float adjusted and non-float adjusted S&P 500 over the last 12 months is estimated at 0.25%.
• Stocks will see changes in their weight within the index. The largest weight decline in the S&P 500 is 0.79 percentage points; the largest increase is 0.14 percentage points.

“Our goal has always been to help limit short-term market disruptions while ensuring the long-term benefits of the index," adds Blitzer. “Not only does the move to full float adjustment have a modest impact, but nearly 80% of the stocks are not affected. Turnover for float adjustment is comparable to annual turnover in recent years.”

All documents detailing Standard & Poor’s move to full float adjustment for the U.S. indices, including the methodology, the float factors (percentage of shares outstanding to be included in the indices) and the impact of the indices transition, can be accessed by going to www.freefloat.standardandpoors.com.

About Standard & Poor’s

Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:MHP), is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research, data and valuations. With 6,000 employees located in 21 countries, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit www.standardandpoors.com.