Nasdaq is making substantial changes to its Nasdaq-100 Index. Of significant note is that Microsoft’s and Apple’s weightings within the index will be recalculated to better align with current market values.
As reported by Bloomberg, the Nasdaq-100 tracks some of the world’s largest non-financial companies listed on the Nasdaq Stock Market and assigns each company a proportional weight depending on their market value. Apple’s incredible growth in the last decade, in combination with previous Nasdaq-100 rules, “caused its weighting to grow disproportionately.” With the old rules, Apple was weighted six times higher than Microsoft even though their market value is only 46% higher.
Therefore, Apple’s weighting will drop from 20.49% to 12.33%. Microsoft, on the other hand, will more than double from 3.41% to 8.32%. The changes will have numerous effects, most primarily to international funds. Tim Schroeders, a money manager at Pengana Capital Ltd., noted that “Passive funds in particular will be forced to re-weight into those stocks that have had increases in weightings, and in the short term we will see some selling pressure on Apple.” While the change won’t cause long term instability, they will result in a reshuffle of many portfolios to match the new weightings.
Nasdaq provided a general overview of the changes noting that 82 of the 100 companies will drop in weight. Further details of individual companies is available here.