- In 1999, MSCI and Standard & Poor’s developed the Global Industry Classification Standard (GICS), seeking to offer an efficient investment tool to capture the breadth, depth and evolution of industry sectors.
- GICS is a four-tiered, hierarchical industry classification system.
- It consists of 10 sectors, 24 industry groups, 67 industries and 156 sub-industries.
- Companies are classified quantitatively and qualitatively. Each company is assigned a single GICS classification at the sub-industry level according to its principal business activity. MSCI and Standard & Poor’s use revenues as a key factor in determining a firm’s principal business activity.
- Earnings and market perception, however, are also recognized as important and relevant information for classification purposes, and are taken into account during the annual review process.
GICS is a common global classification standard used by thousands of market participants across all major groups involved in the investment process: asset managers, brokers (institutional and retail), custodians, consultants, research teams and stock exchanges
GICS enables clients to:
- Capture and assess the impact of global, regional or local industry trends on a portfolio
- Compare and report on industry sector exposures versus peers or benchmarks
- Pinpoint industry investment opportunities across developed and emerging markets
- Analyze sector and industry contributions to portfolio performance
- Construct consistently defined global or regional sector-based and sector rotation strategies
- Standardized industry definitions are applied to companies globally
- The structure precisely reflects the current state of industries in global investment markets
- The classification consists of four levels of analysis, ranging from the most general sector to the most specific sub-industry
- Annual reviews are conducted to ensure that classifications remain accurate and fully reflective of the changing global economy Global Industry Classification Standard (GICS®)