Gregory Simpson

Gregory Simpson inquired about MSCI's product offering, revenue, and strategy with the GP client base, given alternatives' growing share in asset management, and the opportunity to increase the private asset segment's 5.5% run rate growth.

Answer

Henry Fernandez (Chairman and CEO, MSCI) detailed MSCI's private assets strategy, focusing on institutional LPs (transparency tools, performance/risk analysis), expanding to wealth LPs (reprogramming tools for wealth management), and building products for GPs (e.g., Asset and Deal Information in Private Equities). He noted that direct GP revenues in private capital solutions are currently minimal but represent a massive opportunity.

Gregory Simpson asked for more information on MSCI's product offering, revenue, and strategy concerning the GP (General Partner) client base, given that alternatives now constitute over half of asset management's revenue pool, and the opportunity and timeline to increase the private asset segment's 5.5% run rate growth.

Answer

Henry Fernandez, Chairman and CEO, MSCI, explained that MSCI's Private Capital Solutions (PCS) business, primarily from the Burgiss acquisition, traditionally serves institutional LPs (Limited Partners) by providing transparency and analysis of GP funds. The strategy involves three key areas: deepening penetration with institutional LPs, expanding to wealth/individual LPs through wealth management, and building products directly for GPs. He noted that current revenues from GPs in private assets are minimal (around $5-$10 million), with most GP-related revenues coming from Analytics, sustainability, and climate. He sees a massive opportunity to grow products for GPs by leveraging existing underlying information and data.

Gregory Simpson asked about the stability of the ETF licensing yield, pricing trends from issuers, and whether yields on the non-ETF passive side are also stable.

Answer

CFO Andrew Wiechmann confirmed that fees have been stable on both the ETF and non-ETF sides. For ETFs, contractual fee tiering was offset by a positive mix shift from higher-fee international products. For non-ETFs, stability is supported by strong growth in higher-fee non-market-cap weighted products. He reiterated the long-term view that massive asset growth will more than offset gradual fee pressure.

Gregory Simpson requested more detail on the 15% run rate growth in Private Capital Solutions and the uptake of the private capital indexes launched last year.

Answer

Chairman and CEO Henry Fernandez explained that the growth is driven by providing transparency to institutional LPs, a market where MSCI is underpenetrated globally. He outlined key initiatives, including expanding with institutional LPs, targeting wealth LPs, and building products for GPs. He noted that while the benchmark indexes are a key part of the overall transparency solution, they may not be a large standalone revenue driver.

Gregory Simpson asked about the impact of actively managed ETFs, questioning whether their potential replacement of mutual funds would be a positive, neutral, or negative development for MSCI's opportunity set.

Answer

President & COO C. Pettit responded that this trend is 'definitely a positive' for MSCI. He explained that it represents a continuation of active strategies becoming more rules-based, which aligns perfectly with MSCI's strengths in both indexing and portfolio analytics. He noted it's a huge focus for the company and a positive global trend that they are well-positioned to capitalize on.

Gregory Simpson asked about the performance of the RCA (Real Capital Analytics) business and what is needed to accelerate its growth back towards double-digit aspirations.

Answer

President and COO Baer Pettit identified the primary headwind as the significant drop in real estate transaction volume, a key revenue driver for the business. He noted early signs of a market recovery, such as compressing bid-ask spreads, and stated that MSCI believes it could be 'turning the corner' in the coming year as activity picks up.