Active Management Is Paying Off for the S&P 500 Index Keepers
- Half of companies that were at risk of deletion no longer are
- Only 15 companies have been removed from the index this year
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As Tesla Inc.’s plodding path to the S&P 500 demonstrates, the people who oversee passive benchmarks do so with a dose of what seems like active management. But for all the flak index firms get for how they handle the process, past episodes show their instincts have their merits.
Just a few months ago, when Covid-19 first raged, strict scrutiny of S&P inclusion rules might have suggested dozens of companies were on the verge of being kicked out of the equity gauge, particularly in virus-ravaged industries such as energy and retail. Acting then would’ve spurred one of the biggest reshufflings the index had ever seen.