Company Background
S&P Dow Jones Indices (S&P DJI) is home to iconic financial market indicators, such as the S&P 500® and the Dow Jones Industrial Average® and is the largest global resource for essential index-based market concepts, data, and research.
Today, S&P DJI offers an extensive range of indices and index-based solutions to address varying performance objectives. These include the Select Sector Index Series, which is designed to track major economic sectors, such as Information Technology.
1. What is the Technology Select Sector Index? All components of the S&P 500 are assigned to 1 of the 11 Select Sector Indices, which track major economic segments and are highly liquid benchmarks. Stock classifications are based on the Global Industry Classification Standard (GICS®).
The Technology Select Sector Index is part of the Select Sector Index Series and is governed by the S&P U.S. Indices methodology. Per the methodology document, capping is applied to ensure diversification among companies within each index.
Further, S&P Dow Jones Indices initiated calculation of the Select Sector Indices as of Jan. 28, 2011. The Technology Select Sector Index was launched on Dec. 16, 1998. Prior to that date, the indices were calculated by affiliates of the New York Stock Exchange. Total return versions of the Select Sector Indices were launched on Jan. 28, 2011, with a launch value of 1000.
2. How is the Technology Select Sector Index constructed? As mentioned, the Technology Select Sector Index is part of the Select Sector Index Series and is governed by the S&P U.S. Indices methodology. The Technology Select Sector Index comprises all S&P 500 companies that are classified as Information Technology companies under the GICS framework. The assignment of companies under the GICS framework is outlined in the GICS methodology.
The Select Sector Indices are rebalanced quarterly after the close of the third Friday in March, June, September and December. The Select Sector Indices also employ a secondary rebalancing check on the second-to-last business day of March, June, September and December.
Each index within the Select Sector Index Series is capped market-capitalization weighted.
3. Why does the Select Sector Index Series use a capping mechanism? Capping is applied to ensure diversification among companies within each index. The capping thresholds defined in the Select Sector weighting section of the S&P U.S. Indices methodology document are intended to reflect certain diversification requirements imposed on regulated investment companies under the United States Internal Revenue Code (the “Code”) and the Investment Company Act of 1940 (the “40 Act”).
For more information on the capping thresholds, please refer to the Regulatory Capping Requirements section of S&P Dow Jones Indices’ Equity Indices Policies & Practices Methodology.
