RE: Institutions not yet buying15 Mar 2025 08:12
Here’s a breakdown of the process:
1. Inclusion in the FTSE 250:
• The FTSE 250 index is updated quarterly (in March, June, September, and December). When a company is added to the FTSE 250, the index provider, FTSE Russell, announces the changes.
• The effective date of inclusion for the company (in this case, THG entering the FTSE 250) is set for the quarterly review date (March 21, 2025, in your example).
2. Tracker Funds’ Action:
• Tracker funds that replicate the FTSE 250 will adjust their portfolios to match the new composition of the index. This means they must buy the shares of THG when it is added to the FTSE 250 index.
• These funds typically begin buying the shares around the effective date of the index change, which is usually when FTSE Russell officially makes the change.
3. When Will Tracker Funds Start Buying?
• Tracker funds will typically start buying THG shares on or after the effective date of March 21, 2025.
• However, buying might not be instantaneous across all funds. Funds will start buying shares on that date, but the buying process could take several days depending on the liquidity of the stock and the size of the purchase. Large funds might spread their purchases over a few trading sessions to avoid significantly impacting the stock price.
4. Pre-Announcement Price Movement:
• Before the effective date (i.e., after the announcement of the change but before March 21), you might see anticipatory buying as investors and funds that track the index look to get ahead of the inclusion. This can cause the stock price to rise, as funds and other traders may anticipate that the company will be added to the index.
Summary:
• Yes, tracker funds that track the FTSE 250 are generally required to buy shares of companies that are added to the index.
• If THG is added on March 21, tracker funds will typically begin purchasing THG shares on or after this date, with the buying activity potentially spread over a few days depending on the fund and the liquidity of the stock.