Wealth management firm Exchange Capital Management is reviewing client accounts that include sector ETFs to identify which will be most affected by the changes, said portfolio manager Andrew Stewart. The Ann Arbor, Michigan firm will weigh the benefits of rebalancing clients’ ETFs against the taxes that would have to be paid on capital gains resulting from their sale.
“The powers at GICS have made a very rational, academic decision to reclassify these sectors,” Stewart said. “But I don’t think their systems are built to pay attention to the needs of Jane Doe’s retirement plan.”
To avoid having to make large trades when the changes go into effect, Vanguard has pegged its technology, telecommunications and consumer discretionary sector ETFs to temporary benchmarks adjusting gradually over four months. Its recently relabeled Communications Services fund already includes tiny investments in Alphabet and Facebook.