Off balance

Changes to indices can create more problems than they solve, writes Jame DiBiasio.

FA magazine Oct: MSCIFund managers like to moan about Morgan Stanley Capital International MSCI and its damned indices. As the regions most high-profile index provider, MSCI is never far from controversy. Earlier this year it re-admitted Malaysia to its all-Asia ex-Japan free index and doubled Taiwans weighting. These kinds of changes force index managers and those who benchmark against them to follow suit, sometimes at great cost.

Vincent Duhamel, CEO at State Street Global Advisors Asia in Hong Kong, which manages approximately $400 billion in index funds, says he and other indexers are most vulnerable to these kinds of changes. Other fund managers know exactly what his positions will be. They line up their trades...

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