The widely observed and go-to financial sector exchange traded fund, the Financial Select Sector SPDR (NYSEArca: XLF), is scheduled to make some big adjustments as the Global Industry Classification Standard pulls real estate investments trusts out of the broader financial sector to create a new real estate sector.
According to State Street Global Investors, the money manager behind the SPDR line of ETFs, XLF will make certain modifications to its portfolio to efficiently track the benchmark Financial Sector Index in response to the S&P Dow Jones Indices’ upcoming changes to index constituents of the benchmark.
The Global Industry Classification Standard will divide the current financial sector into financial services and real estate. The S&P Dow Jones Indices stated it would add an 11th sector to its Global Industry Classification Standard. The changes to the S&P 500 index is expected to be implemented after the close of business on September 16, 2016.
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Consequently, XLF’s benchmark Financial Sector Index will be reconstituted to remove real estate companies from the financial sector, except for mortgage REITs.
For XLF investors who hold onto shares going into the the changes, the financial sector ETF will issue a special dividend to shareholders. Specifically, the special dividend will be comprised of shares of Real Estate Select Sector SPDR Fund (NYSEArca: XLRE), along with small cash residuals that will account for fractional shares of XLRE.
The ex-date for XLF will be September 19 – the ex-date, or ex-dividend date, is the date on which the investor of a stock will be entitled to a recently announced dividend. On September 19, XLF’s share price will decline by an amount equal to the approximate value of the special dividend as well. Additionally, investors should keep in mind the record date for the dividend will be September 21 and the pay date will be September 22.