Through the exclusion of offshore companies, more traditional indices may miss key elements of a local economy. Certain companies have chosen to list in one country, but their operations (and thus their revenue and asset generation) reside in another market. This is, for example, the case of many companies operating in Africa and South America.
The table below illustrates the potential under-representation of energy and mining companies in certain index methodologies if offshore companies are excluded.
The inclusion of offshore companies will change the sector representation of an index (sometimes significantly) and generally provides a more realistic representation of the economy.