MSCI to cap single issuer at 25% in US value index on interim basis

The move comes as a rally in a handful of U.S. mega-cap stocks has increased concentration in equity indexes, raising concerns over investors' exposure to a small number of companies.

MSCI's stock market indices serve as benchmarks for trillions of dollars in assets held by investment funds, pension plans, and asset managers to measure performance and guide investment decisions.

Under the rule, if the combined weight of securities from a single issuer exceeds 25% on a given day, MSCI will reduce that issuer's weight to 20% and redistribute the excess weight proportionately among the remaining issuers in the index.

MSCI said it is reviewing concentration levels across its Enhanced Value indexes and will soon launch a public consultation with methodology enhancement proposals to address the issue.

July 21 (Reuters) - Global index provider MSCI said on Tuesday it will temporarily cap the weight of any single issuer in its MSCI USA Enhanced Value Index at 25% to address potential concentration risks.

The exceptional issuer cap, to be reviewed monthly, will take effect from September 1.