Our Q1 MSCI Rebalancing Predictions

Ahead of each quarter’s MSCI World rebalancing, we assess the accuracy of our predictions for the prior quarter’s rebalancing and release our predictions for upcoming changes to the index. With the first-quarter 2026 rebalancing announcement set for February 10, we now look back at our fourth-quarter predictions and ahead at the approaching announcement. 

For the fourth quarter, our prediction accuracy score came in solid in an environment of heightened activity. During the period, MSCI announced 25 adds and 26 deletes in the MSCI World Index, for a total of 51 total constituent changes. We correctly predicted 44 of the 51 and were fortunate enough to have no incorrect predictions. Consequently, our Rebalance Accuracy Score came in at 86. 

This quarter’s activity was notably higher than in the third quarter, with 51 changes compared to 30 previously. We believe our ability to maintain accuracy in a dynamic environment reinforces the consistency of our approach.

It’s important to emphasize that every rebalance is different. This is why we tend to put more weight on our cumulative average score as an indication of the efficiency of our approach, rather than focusing on the score from a single quarter. Figure 1 shows we currently have an average prediction score of 86, which is on the higher range of what could be reasonably expected with an investment process that is robust and consistent. 

Figure 1: MSCI rebalance prediction history

Source: L&G – Asset Management, America. Data as of January 26, 2026.

Our latest predictions

Figure 2 highlights our predictions for the first-quarter 2026 MSCI rebalance. The key dates for this cycle are the following:

• 10 business day window: January 16 - January 30
• Announcement: February 10.
• Implementation point: Close of Friday, February 27, but may be different for some markets (e.g., market holiday, exchange closures)

Figure 2: Our MSCI predictions for Q1 2026

Benchmark	Country	Name	Prediction
World ex USA	Austria	BAWAG GROUP AG	Add
World ex USA	France	AYVENS SA	Add
World ex USA	France	FDJ UNITED	Delete
World ex USA	France	EDENRED	Delete
World ex USA	Israel	TOWER SEMICONDUCTOR LTD	Add
World ex USA	Israel	WIX.COM LTD	Delete
World ex USA	Italy	TELECOM ITALIA-RSP	Add
World ex USA	Italy	NEXI SPA	Delete
World ex USA	Japan	SHIMIZU CORP	Add
World ex USA	Japan	IBIDEN CO LTD	Add
World ex USA	Japan	TOKYO METRO CO LTD	Delete
World ex USA	Japan	SG HOLDINGS CO LTD	Delete
World ex USA	Japan	TREND MICRO INC	Delete
World ex USA	Sweden	VERISURE PLC	Add
World ex USA	United Kingdom	DCC PLC	Delete
World ex USA	United Kingdom	HIKMA PHARMACEUTICALS PLC	Delete
USA	United States	IREN LTD	Add
USA	United States	FTAI AVIATION LTD	Add
USA	United States	COHERENT CORP	Add
USA	United States	AST SPACEMOBILE INC	Add
USA	United States	CURTISS-WRIGHT CORP	Add
USA	United States	LUMENTUM HOLDINGS INC	Add
USA	United States	CASEY'S GENERAL STORES INC	Add
USA	United States	BXP INC	Delete
USA	United States	JM SMUCKER CO/THE	Delete
USA	United States	ALEXANDRIA REAL ESTATE EQUIT	Delete
USA	United States	AMERICAN FINANCIAL GROUP INC	Delete
USA	United States	BAXTER INTERNATIONAL INC	Delete
USA	United States	PAYCOM SOFTWARE INC	Delete
USA	United States	ESSENTIAL UTILITIES INC	Delete
USA	United States	BOOZ ALLEN HAMILTON HOLDINGS	Delete
USA	United States	DOCUSIGN INC	Delete
USA	United States	AMERICAN HOMES 4 RENT- A	Delete
USA	United States	BENTLEY SYSTEMS INC-CLASS B	Delete
USA	United States	NUTANIX INC - A	Delete

Source: L&G – Asset Management, America as January 26, 2026. For illustrative purposes only.

Prediction process 

We have designed and implemented a low active risk approach to capture outperformance created by index micro inefficiencies. In our investment approach, we target a variety of opportunities, one being rebalance predictions, where we model widely followed approaches to predict index additions and deletions. This predictive capability provides an opportunity for us to optimize portfolio adjustments before official index announcements, potentially enhancing returns. Here’s how it works for an MSCI rebalance: 

• On a quarterly basis, MSCI will re-establish its market cap weighted index series using a publicly available methodology, which means it can be independently modeled with reasonable certainty. 
• We identify which companies we believe will be reclassified between the Standard (Large + Mid Cap) indices and Small Cap indices. 
• MSCI selects one of ten days at the end of the month prior to the actual rebalance to crystalize sizing classifications. 
• A public notification of the changes happens approximately two weeks before the rebalance, with the rebalance happening at the end of the month (February, May, August, November cycle). 

After the rebalance period ends, we evaluate our predictions based on the following method: 

• Correct prediction (i.e., True positive; 1 point)—We assign ourselves one point for every accurate add or delete prediction. 
• Incorrect prediction (i.e., False positive; -1 point)—One point is deducted for every prediction that is not ultimately added or deleted by MSCI. 
• No prediction (i.e., False negative; 0 points)—No points are assigned or deducted for an add or delete that was not originally predicted. 
• We add up the total number of points and divide it by the total number of adds and deletes implemented by MSCI to determine our Rebalance Accuracy Score. While we do not expect to achieve perfect accuracy, our aim is to maximize correct predictions and minimize mistakes. Accurately predicting this information in advance is knowing what trillions of dollars are likely to do before they do it.

Disclosures

Unless otherwise stated, references herein to "LGIM", "we" and "us" are meant to capture the global conglomerate that includes Legal & General Investment Management Ltd. (a U.K. FCA authorized adviser), Legal & General Investment Management America, Inc. (a U.S. SEC registered investment adviser) and Legal & General Investment Management Asia Limited (a Hong Kong SFC registered adviser). The LGIM Stewardship Team acts on behalf of all such locally authorized entities.

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