Within only the past five years or so weightings have become highly important. Portfolio managers have, in effect, become forced buyers of important listed companies. Fund managers have now become wise to these distortions. It would surely have been better if they had changed their own methodology, to avoid being under formulaic pressure to buy overpriced stocks. However, it is easier for them to blame the index providers and ask for rule changes.
Free floats can be hard to pin down in practice, however.
Definitions may vary, information may be poor and situations can change suddenly when shares come on to the market, or alternatively are subject to buyback programmes. The heat is being turned up. These operators have no doubt been front-running the free float developments for some time. Indeed, there are real fears that past distortions could be unwound in huge and chaotic programme trades. Arguably, tracker managers, in self-defence, should at all costs stop MSCI adopting strict free float methodology.