Okay, welcome to the next session of the Redburn Atlantic CEO Conference. My name is Russell Quelch. I'm the data analytics analyst here at Redburn Atlantic, and it's my pleasure to host Baer Pettit, president and CEO of MSCI. Maybe I'll go over to you for some introductory remarks, and then we'll jump straight into a Q&A, if that's okay.
Sure. So look, I'm actually very happy just to launch straight into it. Thank you all attending for your interest in MSCI. You know, a lot of interesting things going on right now at the company, in maybe a broader, sometimes a slightly more challenging environment for our industry occasionally. But that's, that's also a mixed scene, so I'm happy to, you know, go ahead and, you know, go with your questions, Russell. I would perhaps, you know, just make one slightly broader observation, you know, from my vantage point, because we're right now in the middle of finishing our operating plan or, or budget for next year.
I think a thing that's always been very important for me, both, you know, as an agent of the shareholders and as the shareholder myself, is, you know, balancing the longer-term growth opportunities for the company with the fact that we are, you know, as you're all aware, a U.S. public company with quarterly earnings. I think, you know, the way I think the really the central question of my personal responsibility is how I navigate between those two things, which is creating strong, you know, medium to longer term growth opportunities for the firm, and nonetheless, you know, trying to deliver attractive financial results, you know, quarter on quarter. So that's kind of the thing that I see as being, you know, central to my own role.
Well, so, what I think we'll do there is maybe run this as a Q&A then. There is the option for audience questions, so please submit them-
Sure.
via the webcast function, and I'll submit them to Baer. We'll weave them into the conversation. Then maybe let's start obviously with the index business, and MSCI has been at the forefront of innovation in the benchmark index space for a long time now. Maybe just to kick off, I mean, what are some of the latest trends that MSCI is hearing? What are you seeing and hearing from clients?
Sure.
Where are you kind of investing aggressively behind? There is obviously a lot of MSCI's competitive advantages, very close to its end clients. So just a kind of, yeah, snapshot of the latest trends of where you're kind of-
Sure.
What direction that's taking you in.
So, so maybe before even I go to the latest trends, I'd like to maybe make a few observations on the longer-term trends. And I was speaking this morning with Roger Urwin from WTW, Willis Towers Watson, who's a long-term sort of friend and advisor to the firm. And clearly, what's most striking is the very long-term trend, you know, on, let's say, the last 20-25 years, from a world where you had either active management, which was chiefly kind of a stock-picking thing, and some quantitative aspects to that, and indexation, which was, in essence, the representation of the market cap opportunity set.
And there's been a steady and continuous change with that over time, so that today, you know, the bulk of the new indexes that we build can really be called, you know, active rules-based portfolios because they really they represent, you know, they don't represent the market opportunity set, they represent a bet, you know, against that market opportunity set, whether that be, you know, a tilt of some kind in terms of geography, in terms of industry, in terms of, you know, different types of thematic or what have you. So that longer-term trend is still very strong, and I think it then manifests itself, you know, in different ways with different client segments.
So in terms of the asset owners or the institutional investors, I would say that you know that element that has most greatly affected their benchmarking/index allocation strategies in the last number of years and continues to despite the noise that one might hear in the market is ESG and climate. Which is the first thing that I think has really you know structurally affected a lot of ways that people think about benchmarking and will continue to do so. Now, there are other things as well: thematics, factor-based strategies, et cetera, but they haven't had nearly as much impact as those first two. Now, you know the hedge funds and broker-dealers are using a lot of index-type strategies or even structured products in a volatile environment.
And the area that's evolving very rapidly is in wealth. I would say not merely, so clearly, wealth is a large marginal consumer of ETFs. Many of those ETFs are not just on market cap, but a range of other strategies. But we're also seeing with direct indexing and other new types of approaches, you know, a variety of ways that people are using indexing in that area. And so then I would say, going back to my first comments, you know, regarding our investments for next year, and we don't really give out this detail, you know, granular level of detail, but, you know, just at a high level, probably the largest single bucket of investments across the firm for next year is our continued investment in index customization in the platform.
You know, and we've got, I think, some interesting smaller modest-sized acquisitions we're looking at, both related to the wealth portfolio construction/indexation opportunity and more broadly in custom indexes. So all of those areas remain very, very central to our strategy, you know, both clearly in mostly equities, but increasingly also in fixed income.
Yeah, maybe to pick up on that point of fixed income there, because, it's obviously an area that we, we've written to in detail recently. And MSCI is historically, you know, obviously been an equity-focused benchmark index provider. I mean, what are some of the barriers to entry on the fixed income side? And in fact, one area that I'm interested in is the margins on fixed income benchmarks versus equity benchmarks. It's something that often you... It's difficult to get to the bottom of as an analyst. What's the difference between-
Yeah.
the margins of fixed income versus an equity benchmark versus a multi-asset index product, and how attractive is it for MSCI to actually-
Sure.
enter that fixed income space?
Yeah. So look, a few different observations on that. One of them is going, you know, way back in time now, around the time, even before our IPO. You know, we had been gifted some, you know, not very successful fixed income indexes from our then parent and partner, Morgan Stanley. And around the time of the IPO, we shut them down because we couldn't find competitive advantage. And I think that what that experience taught us, that we should be somewhat reluctant to enter the market unless we had some clear areas where we had differentiation.
And I would say that if one looks at it kind of reciprocally to equities, the situation is not dramatically different in that, you know, major benchmarks are quite sticky, and it's difficult to move them, and you should be cautious about thinking about entering into competition there unless you have a differentiated strategy. So where are we today? Today, I think we're, you know, building out a series of fixed income indexes. In keeping with my theme of the day, which is balancing, you know, long-term growth with medium-term quarterly earnings. I think we're doing so at a reasonable pace, but we're not throwing enormous amounts of money at it, so we're doing it in a prudent, you know, stepped way.
And those will be, you could say, I mean, none of this stuff is ever complete, but we'll have covered the major, you know, asset classes and currencies over the course of, call it, the next year, roughly. But the main thing that we're focusing on is differentiation. So we have a partnership with MarketAxess, which we're very excited about.
We're, you know, we've been launching new products there, which are about creating liquid fixed income indexes, which is a huge need because, you know, as many of you analysts are aware, in fixed income, you know, the broad benchmarks, only a tiny percentage of those bonds are actually traded every day, and a large number of them may be held in portfolios or not be liquid, et cetera. So creating a liquid fixed income thing is very important. And then the other one is, again, with our big theme in ESG and climate, we found a lot of demand and interest there, so we're building those out.
Look, I would say that as a general observation, the fees in fixed income benchmarking are, at the margin, lower than in equities, but it's still a very, very attractive business can be built here. You know, but I think it goes to our point about we want to pace ourselves here. We want to be realistic that it's going to be chewing away at the major competitors, but if we do so and we're smart, we think we can build an attractive franchise over time.
Okay. And, another thing, just to pick back up on maybe where you started, actually, Baer, which was, the current kind of sales environment.
Yeah.
We have seen a bit of a slowdown in net new sales growth-
Yeah.
-back in Q3. Maybe can we address why that was, and if the sales environment is becoming even more difficult, or is it easing going into 2024? I'd say there's maybe some competitive challenge, a rise in some of the competitive challenges. Is there something to say about that? And how does that-
Sure.
affect your maybe near-term investments? I appreciate some
Yeah.
of the things you've talked about longer term
Sure.
But maybe near-term thoughts.
Yeah. So look, I think the, you know, the environment is not an easy one. I think it's mostly to do with, you know, some of the cost pressures on, notably in the asset manager segment, which are related to mostly to sideways/downward equity markets, depending on what part of them you're in, which I think everyone on the call doesn't need to have explained to them. And consequent pressure on, you know, on the P&Ls of our clients. So I think that what that means is, it is marginally more difficult a sales environment than a few years ago across the board. And so that's what I would call product-agnostic.... You know, it's a general observation.
And then I would also say that, which is not to denote any sort of complacency, because we have none, but I don't think it's fundamentally a change in the competitive dynamics in the market.
Right.
I think it's more of a tougher environment for everyone. What I think it tends to mean is that you really have to be able to justify your value added to clients, right? So then that becomes, you know, a really important filter on some of our marginal investments. I think that in terms of, you know, we have to see where we end up. We're close, just purely from a process point of view. We'll finish our operating plan for next year in the next week or so, and then we present it to the board, then we close our books and records for this year, and then we get a second formal approval in the beginning of January.
But I don't see, I don't see that those numbers changing radically unless there's some marginally, you know, bad news that comes through. But I think we've done a great job and, you know, in the circumstances, and I think one of the things that I'm sort of proudest about at MSCI is that we're really—we've become very, very strong at financial management and efficiency. So we have a fairly lengthy process where what we're trying to do the whole time is to drive efficiencies in our infrastructure so that we can fund investments. You know, and so that's a continuous process, and I think we're, you know, doing a reasonably good job there.
So I think we're, you know, this is not the moment for us, for me to go into specific, you know, numbers, and we'll readjust any targets as we do, you know, in our normal manner. But I think broadly speaking, we are going into next year with, I think, robust plans. I think we are somewhat cautious about the environment, but we're continuing to invest, you know, in all of our major product lines, because I think it is critical to have differentiated content, differentiated product that can add value to clients. Even in a tough market, you know, investors need competitive edge.
I'm just going to address some of the questions that came up.
Sure.
When you were talking then. One of the questions was maybe where you just finished now, which is in terms of investment. Your starting point on margins is obviously higher than most, if not all, of your peers.
Yeah.
When you think about growth in the business and the investments that you just talked to, are you focused on top-line growth, or do you still think margins in the business broadly, not just in index-?
Yeah
can continue to expand, maybe as some of the, you know, the private asset business, ESG business
Sure
-particularly mature?
Sure. So look, a few observations related to all of that. You know, I think as we've communicated in previous calls, you know, we are focused in continuing to try to drive earnings per share growth or, you know, as a, as a financial metric. We're definitely focused on trying to drive top-line growth as well. You know, we're. I would say that we're not so focused on margin or margin expansion per se, and this may be a slightly, I don't know if it's perverse or not. I was going to say, slightly perverse way of expressing it, but, you know, we found that as we manage our businesses pretty tightly and prudently over time, we've done pretty well on margin, you know, expansion.
I mean, if you would have told me where the analytics margin is today compared to 2015, you know, it's been a dramatic expansion in margin over time. But paradoxically, it's not so much that we set out to expand margin in analytics, it's that we wanted to fund our larger growth opportunities to a degree from, you know, from taking some investment money or at the margin from analytics and putting it into bigger, higher growth opportunities, right? So, so I think that with a subscription revenue growth model, if you manage the business prudently, and there are logical limits to this, there are logical limits to this, so I don't want to overstate it.
It has a tendency for the margins to expand if you're doing a good job, if you're adding value to clients, if you have a decent retention rate, you know, and, you know, and, and not all of those things hold at all times, right? So I would say that it's more, you know, we want to focus on growth, we want to focus on not giving any, any nasty surprises quarter on quarter. And when you manage the business that way, and you invest in a prudent manner, the margins, at the margin, have a tendency to expand a bit.
Okay. And there's another question here in terms of asset flows and how the asset flows you've seen this year. Obviously, you've seen decent inflows into cash and money market funds, and how that affects, A, your investments-
Yeah
... and your, the investment decisions, perhaps in the near term.
Sure.
Maybe also in the longer term, and also how that mix effect impacts, asset-based fees and the margins you take-
Sure
Out of the product?
... Yeah. So look, that's a good question, and I think that this is in the twilight zone where science meets art. So what do I mean by that? Look, it would be foolhardy to crazily expand your investments in a very buoyant equity market, where the main driver of the growth is pure equity market levels and, you know, and the resultant, you know, market beta, right? And equally, you know, if there's a market correction or a bit of the period where the market's going sideways, you know, it doesn't make any sense for us to slam on the brakes in investments, which might be fueling a completely different category of growth, right?
So, the element of our investments that are narrowly linked to that head of market beta component of what we have, you know, is relatively limited. So the way that I would say it is, we try to not let... You know, it is a reality, so at the, you know, it, you know, as things get a little bit better, we get a bit more breathing room. If things get a little tougher, we get pinched a little bit more, but we don't really want that to be the main driver of what's fueling our investments, because it's kind of a, it's a not entirely orthogonal, but it's a slightly different category of logic than what's fueling a lot of the, you know, subscription growth in other areas of what we do.
So, you know, clearly, you know, so in that regard, the way I would say it is, we would hope for, you know, slightly stronger equity markets. You know, clearly, we also have an international equity bias, and the US equity markets have done better, you know, relative to many other ex-U.S. markets, so that's not the best news for us. You know, so we'll see how those things play out. But the key point being is, we don't want to be whipsawed by market beta in our investments. We would look to avoid that in how we think about investing. Yeah.
Okay. And there's another question here, going back to your observation on competition. I think you said that in your answer to one of the previous questions, you saw no major change in competition. There's a question that directly addresses the fact that LSEG post-acquisition of Refinitiv, they've obviously had a bit of a push in FTSE Russell, rolling out a lot of new index product there, and there's also a comment here as regards to S&P's push since the acquisition of IHS Markit. Just wondered if, if either of those kind of major competitors having increased their scale in indexation, perhaps not directly on your patch, but if, if, if those kind of greater scale-
Yeah.
from two of your leading competitors are impacting your ability, maybe even to price, if it doesn't impact
Yeah.
-um, retention.
Sure. So look, you know, as my mother used to say, "If you don't have anything nice to say, don't say anything at all." So I'm not going to... Yeah, I can make one or two pointed comments about those things then, but I will refrain from doing so. And I just again want to make this distinction: We are not complacent at all about competition in any of our products, in any market, right? And I just want to be very explicit about that. But I would still repeat my point, I don't see the competitive dynamics have altered dramatically in any of our markets. I don't-
Mm-hmm.
At present, and this could change, that there is, you know, a certain competitor who's fundamentally being more disruptive to us, who's adopted a very different approach to pricing or has adopted a very different approach to how they launch products or what have you. So, again, allowing for the fact that I do not want to signal any sense of complacency because we're obsessed with competitors, and we even have sessions, you know, just, you know, though Henry's a busy guy and traveling around the world and meeting a lot of our senior clients, we often will have a session just on a particular competitor, you know, with even Henry involved.
So we are definitely focused on competition, but that doesn't remove the fact that I just don't see the landscape competition fundamentally having altered, right? Yeah.
Yeah. No, good. That's good. Thank you. In terms of pricing, there's a question here which asks directly, how much pricing you took in the index business in 2023, and, I don't know how direct you want to be on that.
Yeah.
Maybe, what the outlook for pricing is in 2024, given where inflation is-
Sure.
Early in the year.
Sure. So look, I think and I try to avoid giving numbers because then someone else is giving them in another place. In the quarterly earnings or from our beloved CFO or whatever, we can give you all the facts and et cetera.
Okay.
But I think my higher level observations are the following: We have been in a slightly inflationary environment, and in that context, we had taken some price increases, which were somewhat higher than we have in the past. You know, I don't know whether we will sustain those next year. We haven't yet made the full decision on, you know, they're discrete choices, sometimes by product line. And they can also have very different components to them. So for example, in analytics, there's a lot more usage-driven pricing, which is, you know, whereas in index, we have licensing, et cetera.
But I would say that, overall, you know, allowing for maybe a slightly tougher environment, I don't see our approach to pricing altering significantly, not enough to have a major impact on the numbers. So, you know, so, so based on what we're seeing today, whatever we've communicated previously is going to be-- it's not going to be very different for 2024. It may be lightly different here or there in certain pockets. Again, bar some extraordinary event, and as a certain -- You know, I read a lot of market commentary. I think we are in a, quote, "an interesting environment," where we've had interest rates that are sustainably higher than we thought. That is clearly putting pressure on a variety of, you know, financial intermediaries.
And, you know, it's an environment where we could have a surprise, totally unrelated to MSCI, you know, which could might maybe spook the markets, and in which case, you know, some of the things that I've just said could be a little bit more at the narrower, you know, the less positive end of the spectrum. But generally speaking, you know, we're, you know, we don't see anything at this hour that's radically different than we've had in the past.
Okay. I've got a lot of questions on the ESG business, as you won't be surprised.
Sure.
Maybe, maybe let's move there.
Sure.
Let's tackle this trade-off in terms of the slowdown in net new sales growth that we've seen in the last three quarters. That's been a big focus for the market, obviously.
Yeah.
Maybe if I can ask you, does MSCI see this as structural or is it cyclical or maybe both? And if it is maybe cyclical, which I anticipate your answer might be-
Yeah.
When do you expect that growth to start to recover?
Yeah. So look, so first of all, you know, there's probably a broader dispersion, you know, geographically on this topic than I've seen on any one previously at MSCI, right? So clearly, we're continuing. We've seen much more continued robust demand in Europe than we have in the U.S., and I would say specifically in the U.S., because this has also been, you know, I mean, if we're talking about North America, Canada is actually continues to be a pretty good market for us, pretty ESG in climate. You know, and I would say notably in the U.S., there's been a slowing of launching of ESG products.
We still think there's a lot of opportunity there, you know, over the medium to longer term, and we think that the opportunity in climate is more structural and will present greater opportunities than just purely in ESG ratings. So having said that, so I don't, you know, I don't have a crystal ball, so I don't know exactly how and when this will slow down or pick up. My only observation, and you have to be very, very cautious about these things, and so I say this with a great element of caution, but there is an interesting parallel, which at least in my mind, but I've been doing this for a while.
You know, our index business had, when we were only an index business 20+ years ago, like 1999, 2000, 2001, 2002, you know, we had great years in all those years, including after the equity bubble burst in, you know, from the 1999 bubble into 2000. And then we had a really, really challenging year in 2003 in index. And, you know, it, of course, we were buried within Morgan Stanley there, and no one saw it except for us. Our revenues were not public. But I do believe to a degree, there's an analogy there, which is, I just, I, there's nothing that we see in terms of the institutional investor world that signals to us that ESG and climate is going away in any way, shape, or form, right?
And so, I think what is likely is that notably outside of EMEA, where there's more regulatory pressure, but I would say that even within EMEA, the E element in ESG is dominating more and more. So a lot of the ESG regulation is heavily focused on the E, and the topic of the E or climate change is going to be just as big, a topic or an opportunity, in the U.S., as, you know, as in Europe. And it's growing rapidly in Asia, right? So, I think we will have to see what we learn from the next six-12 months.
You know, we continue to have a lot of demand for this information in a variety, both the high-level ESG rating, but the underlying data and information about ESG controversies and business involvement, et cetera, and increasing demands for climate data from all client segments. So, you know, we're playing it quarter by quarter ourselves. We're right in the middle of that, you know, for the fourth quarter. So we'll have to see where we end up, and typically, a lot of our sales come in very late in the quarter, so I don't want to get queued about that. But it's, you know, it will be, you know, so it's work in progress, and we'll just have to keep you updated quarter by quarter on where we go.
Okay. I wondered if, just picking back up on what you were saying about the E particularly,
Yeah.
Given much of the data that comes out of corporates on the E side isn't perhaps proprietary, and therefore it's a data-gathering exercise. Can you articulate for us what MSCI's competitive advantage is on the E side, and what you're seeing in terms of competitive threat there from others that are bringing new datasets to market, and how that is impacting on your ability to grow through both TAM and pricing?
Sure. So look, you know, I guess as a very simple measure, a good part, in fact, you could argue a large part of the information we have used for equity index historically has not been proprietary, right? So I think even as a starting point, one can take non-proprietary data and make very valuable intellectual property out of it, and I think we have a, you know, 20-plus year track record of doing it. So that's my first observation. The second one is, I think the degree to which this data is sort of clean, normalized, and can be, you know, comparable is overstated, right? So I think there is a lot of stuff that we do to gather a huge variety of data.
In fact, I was just in a meeting with our CTO, you know, just literally our normal weekly meeting, this morning, and we were discussing a lot of the stuff that we're doing with Google in gathering a variety of ESG and climate data. And, you know, look, I don't want to be hubristic about this, but I'm very confident that this is not something that necessarily is that straightforward or that you can kind of, you know, conjure out of thin air. I think there's a lot of technology, a lot of judgment, a lot of sector specialists, you know, by industry, by country, you know, et cetera, working on all of this. So I just think... I just don't think that this is a category which is going to very rapidly become sort of, how should I put it?
Simple or commoditized, and that you can kinda just get the data off the shelf sort of thing. It's just, it is a much more complex category than that. And then finally, you know, coming full circle to my, you know, to my first point, a lot of what we do with the data, and we've actually got some very interesting—we just launched a lot of satellite information related to physical risks, which includes for all categories of assets. And, you know, that, that, that sort of stuff is, it may not be unique to MSCI, but certainly, I think we have competitive advantage in how we use it and how we present it to clients.
When I think about the breadth of the data across ESG and climate, MSCI often talks about the number of issuer coverage being highest on the street. When I've cross-referenced that, I think that is certainly the case. But does that additional breadth, once you get past a certain point, actually mean that it's a major point of differentiation? I'm thinking, you know, once you go past a certain number of issuers into kind of smaller, more niche parts of the market-
Yeah.
Are you able to monetize that additional breadth and coverage, or is that, you know, maybe just?
Yeah.
Does that data only kind of work for a very small subsector of your clients?
It's a good question, and the way I would say it is, it varies dramatically based on the use case, right? So, you know, there are certain, you know, you could call them reporting or regulatory use cases, where the initial concern is, you know, is solely the breadth of the coverage, right? You know, and it's a kind of... I know this is not maybe the best phrase to use, but it's kind of a tick-the-box exercise. They simply have to report on something. You need data on that company. You either have it or you don't, and it kind of becomes a binary yes, no. So that's one extreme of use case, you know?
But the other can be, you know, you know, in quotes, "the other end of the spectrum," which is, someone really wants the best comparable data for a particular company in a particular sector, and then, you know, clearly, that's often, you can call it crudely, people's interest is weighted by market cap, but there can be some who are looking for something on a smaller company. Notably, you know, in Asia, there's a long tail of securities in various countries, and we're trying hard to, you know, to expand our coverage there because people do want to hear about. They do want the information on those individual companies.
The way I would say it is, it's, you know, it depends on the use case, depends on the region, but as a general observation, you know, I would say that we will, you know, we're relatively rational economic agents, so if we're broadening that coverage, chances are there's a way we can monetize it in either one of those use cases.
Yeah. Okay. Maybe bridging into the analytics business, but staying on the topic of climate. The Enterprise Climate Lab product sits within the analytics business from a-
Yeah
- PNL perspective anyway. We recently hosted, Jorge Mina from your side,
Right.
A fireside chat, similar to this, where we were talking about that as a potential growth product.
Sure.
I'm wondering what the growth rate has been on that product, maybe over the last six-12 months, and what you see in terms of where that product is in terms of customer penetration rate. Because it doesn't strike me that many of our clients are particularly at the point where they're really looking at things like Climate VaR, you know, the net zero pathway plan of their portfolio. Can you just describe to us kind of-
Sure.
where that is in terms of penetration and where your customers are at in terms of their staging and their use of that product. And finally, what might be the catalyst for that, you know, growth to accelerate in terms of use of that product?
Sure. So, I think we put that into our firm, our firm-wide climate subscription run rate is roughly around $70 million, and it's growing at roughly 50% year-on-year, you know, with rounding error type of thing. But, you know, maybe just expanding on that, you know, a little further. And, you know, I think that the way... and this goes to a, you know, a higher level point and relates to your core question. I really do think that people are going to have to find ways of incorporating this type of data into their risk and return, you know, decisions longer term, right?
Now, if we link that to some other work, which is very, you know, this is not a big dollar revenue thing, but I'm just framing it in the context of the type of issues we're trying to solve. You know, we'll be bringing to market in the near future within analytics, a much longer term view of expected return and risk in many of our analytics calculators that we've had previously. And I think that we're really... You know, the way I would say it is: the growth of these things is attractive, but I think we're scratching the surface. You know, I think we're really at the beginning of how people incorporate these things into their investment process.
And, you know, we actually clearly hold a variety of asset owner and more broader client events. We do one in Sacramento, you know, I think last month. We had one in Canada recently. And I do think that, you know, and this goes back to some of my initial observations, I think it is still a big question as to how investors incorporate climate specifically, and I'm not just talking about ESG ratings, I'm talking about climate, very narrowly defined, into their risk and return calculations. And that includes, you know, companies who have made commitments to net zero, who may or may not be able to hold to them. It means how portfolios they're invested in are deploying capital related to E investments.
So the you know the broad headline in this is you know even beyond analytics you know there is a huge industry-wide question in terms of how you incorporate this topic into your investment process. And it's you know and this goes back to the sort of secular versus cyclical thing. We are 100% betting that this is a you know a secular thing and that this opportunity is not going away for the foreseeable future and we want to be buying.
In terms of the broader analytics business, and maybe this links to-
Yeah
the climate, the climate products. But, the growth in that business stepped up to around about 6% over the last two years.
Yeah.
Previously, we were running at sort of 3%-4%. Is that all just pricing?
Yeah.
Or is there more to it?
No, no, it's definitely expansion of new clients, you know-
Okay
... across the board. You know, clearly, we've done even, you know, as we've been saying, that equity markets have been tougher. You know, we've done pretty well in equity analytics. It's growing a bit more than average, the overall analytics. I think that the, you know, the larger analytics deals, as we've previously stated, tend to be a little bit slow burn. We're-- I would say we're accumulating credibility, which underpins some of those sales in fixed income. And we have some interesting things in the pipeline right now. I'm not going to go into individual items, you know, in fixed income portfolio management. So, you know, I think that there are a lot of structural opportunities there.
You know, so I think our tech... There's some very in the next year, our technology platform and analytics will evolve to be a lot more flexible so we can, I won't go into all the plumbing of that, but suffice it to say that in the next year or so, we should be able to innovate much more quickly than in the past, in analytics, due to some changes in our platform and its efficiency.... So, so I think, look, I'm cautiously optimistic there that we can keep on the right path. And I think the only thing that, you know, again, in this environment, that would be the slight note of caution would be, you know, client events.
You know, even something like, you know, the merger of UBS and Credit Suisse is a nontrivial thing for us because they're both significant users of these tools. So I don't want to, I don't want to put an excessive spotlight on that one as an example, but what I'm saying is, any market situations where there's some distress or mergers or things closing down, you know, would tend to temper the enthusiasm, which generally I feel.
Okay. I want to spend the last five minutes there on the private asset or other business-
Sure.
-area. I want to focus on Burgiss, if we can.
Yeah.
Maybe could you provide us with a very quick overview of the Burgiss product offering?
Sure.
Maybe what attracted MSCI to purchasing-
Yeah, yeah.
the majority of the business? Where do you think you can take it near term, long term? And maybe, maybe what's the competitive landscape, like in that area?
Sure. Yeah, yeah. So look, at the highest level, and stating it sort of most simply, Burgiss has been a leader in providing transparency to private, private market investors, and you could say, notably, it has been a service to LPs. So it is a, you know, so you could say it's an investor-heavy, you know, client base. And, you know, in essence, in very crude layman's terms, the LPs want to know: What do I own in private markets? What insight can you give me on the risk and return profile of these investments? You know, what are the cash flows? How do I, you know, how do I understand that from a portfolio risk point of view? When am I, you know...
So looking at the total totality of their private assets, you know, holdings, and that entire portfolio and its characteristics. So I think there's a number of things there. One, I think we can, you know, we can just scale up that opportunity with MSCI just by our presence with many more global investors. So, you know, Burgiss was a modestly sized company. In the last few years, their sales had ramped up because a senior person from MSCI, Jay McNamara, actually went and joined Burgiss for a number of years and ran their entire client coverage and client service organization, which really helped to kind of professionalize that and to bring scale.
But that's only been, like, the beginning of that, and we can do significantly more, you know, already, you know, with them under, you know, under MSCI. We also think that there are, you know, a lot of opportunities, and again, I was just speaking to our CTO about this, to make it significantly easier, more efficient, more "modern," in quotes, in the way that we gather the data, clean the data, so that we can scale up the nature of those services and make them more robust. We think there's a lot of opportunities there. And we think there are really critical opportunities in areas like benchmarking, you know, by in each private asset class, whether, you know, in real estate, in private equity, in private credit.
We have a whole workflows, a whole series of workflows going on in just purely in private credit and what value we can add there. So I think there's, you know, and, and clearly, again, ESG and climate are important criteria for investors in private companies as well. So when you look at all of that, you know, we think there's a, there's really a large, a large opportunity. And, and I think that the, the key thing is to modernize the infrastructure, so we can scale up and use our client coverage organization to continue to expand the universe, to continue to create more transparency and to create kind of a virtuous circle about that. Now, in terms of the competitive environment, I still think this is quite a fragmented environment.
There's, you know, there's some, there's clearly elements of what, you know, a number of. There's, there's a number of names that typically pop up, you know, eFront, which is now owned by BlackRock, Preqin, PitchBook, others. But they're all-- And then there's a number of smaller firms that do different workflow. They're all in really quite different parts of the business, providing quite different solutions. So I think we're still at a stage in the industry where, you know, we're definitely not at the sort of mature competitors going head-to-head.
I think really what we're at is we're at a stage where the various people who are a part of this, you know, this world, if you like, will precisely be redefining how we think about the services and products, you know, for private investors, and we want to be at the forefront of that. So we're very excited by this opportunity.
So one last question. How do you feel going into 2024? Appreciate, you know, you still-
Sure.
talking about long-term investments and your planning in that regard, but just kind of your near-term view as to the operating environment, you know, what that looks like for-
Yeah.
-for MSCI.
Look, I probably feel the same that I do every year, which may reflect more my personality and experience than anything else, which is cautiously optimistic. Look, I think we've got amazing opportunities ahead of us at MSCI. We've got incredibly talented people. We've got pretty tough financial management. You know, we've got a wide variety of opportunities, but, you know, no one's going to hand it to us on a plate. You know, we got to work hard every day to optimize our resources, to execute, and I'm confident that if we keep doing that, if we're creative, if we're smart, if we're financially prudent, then, you know, hopefully, you know, we'll keep adding value to our clients, and hence, that tends to lead to creating value for shareholders with a few steps in between. But, you know, that's the plan.
Sounds like a good plan to me. We will leave it there. Beth, thank you. Thank you so much, and thank you all for listening and, for your time today, all the best, bye