Why Hamilton Lane shares rose 4% on Monday

The latest news from an influential financial services company had a very positive side effect Hamilton’s Way (HLNE 4.22%) shares on Monday. As a result, shares of the under-the-radar financial services provider were up more than 4% on the day, easily topping 1.2% gains S&P500 index.

Index advancement

After market hours on Friday, S&P GlobalThe S&P Dow Jones Indices unit announced the latest set of changes to several of its stock market indices. One of those changes introduced Hamilton Lane to the S&P family of indices, which is the leading group of market indicators for many investors and market professionals.

Specifically, Hamilton Lane is set to become part of the action S&P Mid Cap 400 an index in which it replaces a semiconductor company Wolf speed. The first one is one of six companies joining the mid-cap group, of which only one — Factory — is promoted from a “lower” index in the family, specifically S&P Small Cap 600.

The S&P Global Index adjustments are intended to better align the market capitalization of affected stocks with the index categories. This current set of changes will go into effect before the market open on Monday, September 23.

Don’t count on a long-term rebound

The so-called “index effect” often occurs in such situations. A company that might otherwise fly under the radar gains recognition and credibility by being included in the S&P. Because Hamilton Lane was not in the lower index immediately prior to the S&P Global move, some investors see it as a sleeper stock that deserves attention now. However, the index effect often does not last long, so market participants should be wary of Hamilton Lane in light of this news.