A change is coming for the S&P 500 that likely will see billions pumped into real estate-related investments.
The popular stock market index will add a sector to the 10 broadest categories into which it is divided. That 11th sector will be real estate, an industry currently stuffed inside the financials group but set to break out on its own when the change takes place Aug. 31.
While the move on its face seems cosmetic, the actual ramifications could be substantial.
Most Wall Street experts foresee a substantial inflow to the new sector, with particular focus on real estate investment trusts. On the high end, JPMorgan Chase reportedly estimates that as much as $100 billion could come in. Others are bit more cautious, with Goldman Sachs putting the number close to $19 billion and Bank of America Merrill Lynch expecting considerably less, with $8 billion on the top end.
Investors looking to capitalize on the expected flows will have a number of considerations to weigh, Nick Colas, chief market strategist at Convergex, said in a recent note on the topic. Colas recommends watching not individual REITs and related stocks, but rather exchange-traded funds that track the sector.