You ask your asset manager how your portfolio is doing, but who does he ask? Probably MSCI. The company, formerly Morgan Stanley Capital International, manages more than 145,000 daily equity, fixed income, and hedge fund indices for use by large asset management firms. MSCI is organized through two business segments. Its Performance and Risk business provides equity indices, portfolio risk and performance analytics, credit analytics, and environmental, social and governance (ESG) products under brands such as MSCI, RiskMetrics, and Barra. Its Governance business provides corporate governance and specialized financial research and analysis. MSCI has about 7,500 clients across more than 80 countries.
Nearly half of the company's revenues come from outside the Americas. MSCI has more than 38 offices in 22 countries worldwide, including headquarters in New York and offices in San Francisco, Chicago, and São Paulo, Brazil. As part of its global expansion efforts, in the last few years MSCI has opened international offices in Budapest, Dubai, Monterrey, Mumbai, and Shanghai.
The company's indices act as benchmarks that measure the performance of global funds. Institutional investors use the indices as research tools and as the basis for their various investment vehicles. MSCI's Performance and Risk segment is by far its largest, accounting for 87% of the company's revenue in 2012, while the company's Governance segment brought in the remaining 13%. MSCI makes the majority of its revenues (more than 75%) from annual recurring subscriptions to its products.
The company has consistently achieved revenue growth and positive earnings by continually expanding its relationships with investment institutions and regularly developing and enhancing its products. It has also made key acquisitions in order to complement or expand its client base and offerings.
Mergers and Acquisitions
In early 2013 the company acquired Investor Force Holdings, a provider of asset performance reporting, for $23.5 million in cash. The previous year 2012 the company acquired IPD Group, a global real estate information business, for approximately $125 million. The purchase expanded its portfolio of investment tools for the equities, fixed income, hedge fund, energy, and commodities markets.
MSCI made a significant purchase in 2010 with the acquisition of rival RiskMetrics Group through a cash and stock transaction valued at approximately $1.5 billion. The deal united two risk management market leaders. The purchase enhanced MSCI's ability to provide investment decision support tools and widened its geographical reach. It also strengthened its customer base, adding RiskMetrics' 3,500 clients, including several of the largest asset managers, mutual funds, and hedge funds.
MSCI was formerly owned by financial services powerhouse Morgan Stanley, which began spinning off the business in 2007. MSCI became an independent, stand-alone public company 2009. Morgan Staley maintains an 8% share in the firm.