More investors are switching to tracking the UCITS-compliant MSCI 10-40 Russia Index. The Russian market is fairly concentrated: Gazprom, Sberbank and LUKoil have respective weights in the MSCI Russia Standard Index of 27%, 12% and 11%, making it impossible for UCITS-compliant funds (e.g. European retail fund managers) to track its composition. They are instead tracking the 10-40 index, which caps the weight of any stock at 10% and the combined weight of the top five stocks at 40%. The index thus caps Gazprom, LUKoil and Sberbank at coefficients that depend on an MSCI algorithm and provide room for speculation as to what will happen with index weights.

This time, most of the speculation surrounds NOVATEK. It is currently the fourth-largest stock in MSCI Russia with a weighting of 5.1% in the uncapped index. As a result of the algorithm that MSCI uses, its weight in MSCI Russia 10-40 is 8.8%. This is higher than in the uncapped index and corresponds to the capping of NOVATEK's (free float unadjusted) market cap by 48%. To get that number, MSCI ranks the stocks in the index by dollar free float. NOVATEK benefits by being in fourth place in the ranking by free float. MSCI uses a 30% free float factor for NOVATEK. If, for example, it used a 25% free float factor instead, NOVATEK's dollar free float would drop below that of Rosneft and its weight would be downgraded to 4.5% in the MSCI Russia 10-40 Index from a current 8.8%.

MSCI last changed NOVATEK's free float factor in May 2009, when Volga Resources bought a 5% stake in the company from VEB. MSCI then increased the company's free float factor from 25% to 30%. At that time, Gennady Timchenko's Volga Resources looked like a portfolio investor, and the sale by VEB was seen as a divestiture by the state, hence the increase in free float.