Stock/Mutual Fund question
Just curious how mutual funds which seek to mimic the S&P 500 handle situations like this, would you see a massive dumping of say Eastman Kodak and a massive buying of the new companies on the list?
S&P 500: Netflix in, Kodak and New York Times out - Dec. 10, 2010
NEW YORK (CNNMoney.com) -- It's out with the old and in with the new at the Standard & Poor's 500, as four companies will replace current issues on the benchmark index.
Netflix (NFLX), F5 Networks (FFIV), and energy company Newfield Exploration (NFX) will replace The New York Times (NYT), Eastman Kodak (EK, Fortune 500) and Office Depot (ODP, Fortune 500) on the index, which aims to represent "the leading companies in leading industries" and act as a common proxy for the broader U.S. stock market.
Re: Stock/Mutual Fund question
Quote:
Originally Posted by
simply1 
Just curious how mutual funds which seek to mimic the S&P 500 handle situations like this, would you see a massive dumping of say Eastman Kodak and a massive buying of the new companies on the list?
S&P 500: Netflix in, Kodak and New York Times out - Dec. 10, 2010
NEW YORK (CNNMoney.com) -- It's out with the old and in with the new at the Standard & Poor's 500, as four companies will replace current issues on the benchmark index.
Netflix (NFLX), F5 Networks (FFIV), and energy company Newfield Exploration (NFX) will replace The New York Times (NYT), Eastman Kodak (EK, Fortune 500) and Office Depot (ODP, Fortune 500) on the index, which aims to represent "the leading companies in leading industries" and act as a common proxy for the broader U.S. stock market.
I'm not an expert on this, but I would assume they'd use a reasonable approach to adjust the portfolio's holdings to eventually match the "new" S & P's make-up. Also, I assume this type of issue and how it is handled would be addressed in the prospectus. I'm not motivated enough to look it up myself, but you may want to look there. .
Re: Stock/Mutual Fund question
probably, that is why EK is down 3+% and NYT is down 4+%. However there are a lot of institutional trading desks that are designed to match up buyers and sellers of large transactions at a neogiated price. So the SPY fund for example is not selling 20MM shares of EK at the market causing a panic on the stock. They probably also have a time frame to work out of their positions.
