MSCI Inc.
Analysis
Across four calls MSCI moved from calling the bottom to its best sales in years, driven by hedge funds and private assets. Now the question is whether a flood of new products pays for the spending it set off. How much of the new-product sales lift came from hedge funds?
- MSCI's sales engine restarted, mostly from its own new products.
Management called the bottom a year ago, then posted its best first quarter for new sales since 2022, with Index subscription growth back in double digits. Executives credit new products and harder selling, not looser client budgets. How does Index subscription growth compare with the last three years?
- Hedge funds became the fastest-growing buyer of MSCI content.
Index sales to hedge funds roughly tripled year over year, and management calls the traders, banks and exchanges around its indices a 'trading ecosystem' it only started selling into recently, where new products turn into money quickest.
- Costs are climbing while Sustainability shrinks.
Management raised the expense outlook again and expects Sustainability sales to be about flat to lower for two quarters as US clients cut spend, so one product line is pulling against growth everywhere else. Which client segments are cutting sustainability spend the most?
- New products keep converting into sales. Because each one sells to clients MSCI already has, sales can keep growing without a matching jump in spending.
- Private assets and the wealth channel keep opening up. Wealth investors outnumber the pension funds MSCI sells to, so success there spreads growth across more clients.
- AI savings cover the cost of the new products. If the savings pay for the products, MSCI grows without giving up the profit it keeps on each sale.
- The big new products take quarters to turn into revenue. Their cost shows up now while the sales arrive later, so profit can lag even as the sales pipeline looks better.
- Private assets stay small next to the rest of MSCI. If the wealth channel takes years, growth still rests on hedge funds and index fees that swing with markets.
- Spending keeps rising faster than the sales it funds. More of each new dollar of revenue goes back out the door, so profit grows more slowly than sales.
| Politician | Transaction | Amount | Traded | Filed |
|---|---|---|---|---|
Donald Trump Republican · Executive | Sale | ≥$1K | Aug 24 | Oct 8 |
Donald Trump Republican · Executive | Sale | ≥$50K | Jul 8 | Sep 22 |
Donald Trump Republican · Executive | Sale | ≥$15K | Jun 12 | Aug 22 |
Donald Trump Republican · Executive | Sale | ≥$1K | May 18 | Jul 1 |
Donald Trump Republican · Executive | Purchase | ≥$50K | Mar 18 | May 13 |
Congressional trading data provided by QuiverQuant
How MSCI turned $3.1B of revenue into $1.7B of operating income.
| Revenue | ||
|---|---|---|
| Index | $1.8B | ▲ 11.95% YoY |
| Analytics | $714.4M | ▲ 5.82% YoY |
| Sustainability and Climate | $353.9M | |
| All Other - Private Assets | $279.3M | |
| Total revenue | $3.1B | |
| Gross profit | $2.6B | 82.4% |
| Operating income | $1.7B | 54.7% |