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The changing face of the FTSE 100

Thursday 12th June 2014

The FTSE 100 index, which reached its 30th birthday this year, is within touching distance of its all-time high of 6,930, reached in December 1999. 
Financial advice firm Hargreaves Lansdown looks at how the index has changed a lot in the last 15 years: 
Consumer goods make up 15% of FTSE 100 today compared to just 5% in 1999. 
Basic Materials sector exposure has more than doubled to 8.5%. 
Even after the credit crisis, Financials account for 20.7% compared to 23.5% in 1999. 
Telecoms are the biggest losers, once accounting 22% of the index they now account for only 8.33%.
Adrian Lowcock, Senior Investment Manager, Hargreaves Lansdown commented: “Just focusing on the level of the FTSE 100 index does not provide the whole picture. Delving deeper shows that the index is constantly evolving as changes in company prospects, society, the economy and trends such as globalisation cause different areas to prosper. The FTSE 100 has become increasingly international, for example, with foreign miners such as Fresnillo listing in London.  
“Takeovers are a clear theme when looking at companies which have disappeared from the FTSE. Examples include drinks company Allied Domecq, which was bought by French rival Pernod Ricard in 2005; Corus bought by Indian steel giant Tata in 2006; and Cadbury Schweppes, bought by American firm Kraft in 2010. This theme continues today with AstraZeneca the focus of the rejected approach by Pfizer.” 
How active managers benefit from changes in FTSE 100
Tracker funds follow the market and their company and sector exposure moves with the FTSE 100. Trackers automatically buy as a company’s share price rises and sell as it falls, increasing or reducing their weight accordingly. 
Active managers don’t have to buy and sell automatically and can time their trading. The best active managers will rotate out of companies and sectors to limit their exposure to falls in share prices, buying companies in areas which they expect to grow or are more defensive when markets are volatile. 

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Editorial Contact Details - Conor Shilling
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