Worse Case, page-46

Hey Easysell, happy Wednesday!
A significant number of ETF's, Managed Funds and Superannuation Portfolios/Funds are setup to track indexes with very little mandate for portfolio manager discretion.

One of the most basic examples of this, is Vanguard's VAS fund. The fund's entire mandate is to track the S&P/ASX 300.
VAS is a very common ETF used throughout Australia, however there are many more examples of this from other fund managers.
According to Vanguard's website, as of 31-Jan-22 Vanguard's VAS fund has:

• ~$9.65 Billion AUD funds under management.
• Paradigm sitting at spot #293/301 holdings. (funnily enough, just about Nuix, another fallen angel)
• Paradigm making up 0.01421% of their fund holdings (market cap weighted, as a percent of ASX 300)
• ~$9.65B * ~0.01421% = ~$1.37m worth of PAR shares.
• On 31-Jan-22, PAR closed at ~$1.46 .... So I'd expect Vanguard's VAS Fund currently holds ~940,000 shares.

If/when PAR drops out of the ASX 300, it will no longer be part of Vanguard's mandate ... so they'll need to sell those 940k shares. Along with the other various index tracking fund managers (Blackrock, iShares, Index Tracking super funds, etc).

When companies enter the various indexes, it has the reverse effect. More than a few people/funds attempt to arbitrage play these index joining/leaving moments, so as a retail investor it's hard to fully know the impact of it. Quite possible that the Vanguards of the world have already been selling, as our market cap drops relative to the ASX 300 and the remaining impact will be minimal. ... Hard to tell.