Why Hamilton Lane shares rose 4% on Monday

The latest news published by an influential financial services company had a very positive knock-on effect on Hamilton Lane (HLNE 4.22%) act on Monday. As a result, the under-the-radar financial services provider’s stock rose more than 4% on the day, handily outpacing the 1.2% gain of S&P 500 index.

Index advancement

Friday, after market hours, S&P GlobalThe S&P Dow Jones Indices unit has announced the latest set of changes to several stock indexes. One of those adjustments propelled Hamilton Lane into the S&P index family, which for many investors and market professionals is the primary group of market indicators.

Specifically, Hamilton Lane is to become a component stock of S&P MidCap 400 index where it replaces the semiconductor company Wolf speed. Prima is one of six companies joining the mid-cap group, of which only one — Factory — advances from a “lower” index in the family, especially the one S&P SmallCap 600.

Adjustments to the S&P Global indices are made to better align the market capitalization figures of the affected stocks with their index categories. This current set of changes will go into effect before the market opens on Monday, September 23rd.

Don’t count on a sustained jump

The so-called “index effect” often occurs in these situations. A company that would otherwise have gone unnoticed by the market gets a burst of recognition and a boost in legitimacy by being on an S&P index. Because Hamilton Lane wasn’t on a lower index immediately prior to the S&P Global move, some investors see it as a sleeper stock now worthy of attention. However, the effect of the index often does not last, so market players should be cautious with Hamilton Lane following the news.