MSCI Inc. MSCI

MSCI is extensively leveraging AI for both operational efficiency and product enhancement. AI agents are used for day-to-day operations, such as analyzing ESG controversies and gathering private market data. On the product side, AI insights are integrated into Analytics for portfolio understanding, and AI automates custom index creation, significantly accelerating the process. This company-wide embrace of AI is expected to increase the value of tools for clients, accelerate product introduction, and enable a much higher pace of organic investment growth by reallocating cost savings.

The company is observing a significant uptick in activity and inflows into non-dollar assets, particularly in Europe and Asia Pacific. MSCI's Index run rate in EMEA (including subscription and ABF) has now surpassed that of the Americas, driven by substantial inflows into Europe-listed ETFs and increased product adoption. While it's early to determine if this is a secular 'great rotation' away from dollar assets, MSCI is well-positioned to benefit from this trend, having seen strong performance in APAC as well.

Private Capital Solutions (PCS) achieved its best net new sales quarter, with an 86% increase in recurring sales year-over-year, driven by strong traction in total plan offerings and transparency data. The segment benefits from continuous product enhancements, new capabilities like Document Management and SourceView, and AI-enabled data sourcing. Management views this as the early innings of a massive opportunity, with tokenization identified as a potential accelerant for private markets and the adoption of MSCI's tools in this space.

MSCI is proactively engaging with active asset managers to help them navigate secular pressures and return to growth. Strategies include supporting the transition of active portfolios to ETF wrappers, enabling clients to create new investment products, and encouraging supplier consolidation. This approach has yielded positive results, with active asset managers showing 13% recurring net new sales growth, indicating a successful shift in how MSCI approaches this important client segment.

MSCI extended its ETF agreement with BlackRock through 2035, solidifying a key partnership for future growth. This extension involves a phased reduction in fee floors for certain superscale ETFs, resulting in an aggregate impact of approximately 0.1 basis points based on year-end 2025 AUM levels. The reduction will occur in two steps: 0.05 basis points on January 1, 2026, and another 0.05 basis points on January 1, 2027, reflecting a shared success model.

The ESG market is undergoing transformation, with recovery observed in Europe driven by a focus on financial materiality and supplier consolidation. However, the Americas market remains soft due to political undertones. Strategically, MSCI is expanding its Sustainability franchise beyond traditional ESG to analyze other emerging risks like tariffs, supply chain disruption^🌐s, and the impact of AI on companies. A significant pivot towards physical risk in climate solutions is also underway, addressing growing demand from various capital pools.