KBW Announces Index Rebalancing for Fourth-Quarter 2024: A Deep Dive into Sectoral Shifts and Market Cap Distribution

Wesley ParkFriday, Dec 13, 2024 8:37 pm ET
4min read


The financial services and fintech sectors are dynamic and ever-evolving, with companies constantly adapting to changing market conditions. Keefe, Bruyette & Woods (KBW), a leading specialist investment bank, recently announced the upcoming index rebalancing for the fourth quarter of 2024. This quarterly adjustment aims to ensure that the KBW Nasdaq indexes accurately reflect the current market landscape and maintain their relevance as benchmarks for investment products.



The rebalancing process involves adding and removing components from the indexes to reflect the broader trends and shifts in the financial services and fintech sectors. This quarter, there are constituent changes within four of KBW's indexes: the KBW Nasdaq Capital Markets Index (Index Ticker: KSX, ETF Ticker:N/A), KBW Nasdaq Financial Technology Index (Index Ticker: KFTX, ETF Ticker: FTEK.LN), KBW Nasdaq Financial Sector Dividend Yield Index (Index Ticker: KDX, ETF Ticker: KBWD), and KBW Nasdaq Premium Yield Equity REIT Index (Index Ticker: KYX, ETF Ticker: KBWY).



The KBW Nasdaq Capital Markets Index (KSX) saw a significant shift in its sectoral distribution with the addition of Apollo Global Management (APO), Ares Management (ARES), and Blue Owl Capital (OWL), which are primarily financial services companies. This increased the index's exposure to the financial sector. Meanwhile, the removal of Brookfield Corp (BN) and Janus Henderson Group (JHG) reduced the index's exposure to real estate and asset management sectors. The market cap distribution also changed, with the addition of larger-cap stocks like Apollo and Ares, and the removal of smaller-cap stocks like SEI Investments (SEIC) and Virtu Financial (VIRT).

The KBW Nasdaq Financial Sector Dividend Yield Index (KDX) and KBW Nasdaq Premium Yield Equity REIT Index (KYX) also underwent significant changes, with the addition and removal of components that could impact their dividend yields and income distribution. The KDX added 15 companies and dropped 14, while the KYX added 10 and dropped 8. These changes could lead to shifts in the overall dividend yield of the indexes, as the added companies may have higher or lower yields than those removed.



Investors should monitor these changes and assess the potential impact on the income distribution of these indexes. The addition of Apollo Commercial Real Estate Finance, Inc. (ARI) to KDX could boost its yield, as ARI has a high dividend yield of around 10%. Conversely, the removal of Ally Financial Inc (ALLY) from KDX might reduce the index's yield, as ALLY had a lower yield of approximately 2%. Similarly, the addition of American Assets Trust, Inc. (AAT) to KYX could increase its yield, given AAT's dividend yield of around 3.5%. However, the removal of Brandywine Realty Trust (BDN) from KYX might decrease the index's yield, as BDN had a higher yield of approximately 4%.

In conclusion, the KBW index rebalancing for Q4 2024 reflects broader trends in the financial services and fintech sectors, with a growing interest in alternative investments, fintech platforms, and market infrastructure. The changes in the KBW Nasdaq Capital Markets Index, KBW Nasdaq Financial Technology Index, KBW Nasdaq Financial Sector Dividend Yield Index, and KBW Nasdaq Premium Yield Equity REIT Index could have significant impacts on sectoral and market cap distribution, as well as dividend yields and income distribution. Investors should keep an eye on these rebalancing events and understand their potential impact to navigate market changes and adapt strategies effectively.