MSCI index shake-up challenges China managers

China fund managers are preparing for ‘controversial' changes to the benchmark index, which could also prompt adjustments to Investment Association definitions.

The MSCI is set to include Chinese companies listed in America, such as Alibaba and Baidu, in its China index this November as it allows overseas-listed firms to enter for the first time. Certain active China fund managers already have the ability to hold these companies, but the changes will still have an impact on portfolios as benchmark weightings are realigned. The move could negatively affect technology company Tencent, which is the largest constituent of the MSCI China at more than 10% of the index, as passive investors sell out in order to allocate to Alibaba and Baidu instead....