Welcome. I'm Chip Merritt, Vice President of Investor Relations for McGraw Hill Financial, I'd like to welcome you all to our inaugural Investor Day. For those of you on the webcast, we're broadcasting here from the Hilton in midtown Manhattan. For those of you in the room, thanks for joining us. We know we've got about 11 states represented. Got eight people here from London, two from Hong Kong. The winner of the most traveled investor goes to Rob Pointer from Australia. Thank you, Rob. We hope we put together a really informational day for you. For the newer investors out there, you'll get a chance to understand how the businesses work. For those who've followed us for a while, we hope that each of the presentations will reveal some things that you didn't know before.
That's really the intent of today's session: to get a sense for the businesses and the growth opportunities that we have before us. A couple logistical things. Restrooms, out the door there in this hallway or out the back. Those doors in the back open as well and they're back there. Refreshments, if you need something, go out the back door. There'll be refreshments during the session. I have the obligatory legal slides to make. Many of the presentations will contain adjusted information, we are sharing this adjusted information with you so you can get a chance to see how management views and manages our operations. If you want a reconciliation of those adjusted numbers to the GAAP numbers, please look at any of our quarterly press releases on earnings days for that reconciliation.
I'm sure a lot of our speakers will make forward-looking statements, things like, I hope, we expect, we anticipate, things may not turn out the way we'd like or that we hope or anticipate. We caution you not to place undue reliance on our forward-looking statements and to see our SEC filings for other risks associated with investing in the company. Lastly, this may be new to some of you, there's new EU regulations out there. If any of your firms are approaching 5% ownership or 10% ownership of our company, first, I thank you, but secondly, please give me a call because there's some obligations you may have and you need to understand. If you're approaching 5 or 10%, please give me a call.
The schedule today, we have anticipated that we've got lots of sell-side guys in the room who can't sit long without asking a question. We've broken it up for you. Doug Peterson, our present CEO, will speak first, then we'll have two businesses. We'll have a Q&A then for just those two businesses. Two more businesses, Q&A for those two more, Q&A for those two, at the end, we'll have a wide-open Q&A for all the businesses and legal questions and questions for Doug and Jack, our CEO and CFO. Okay? Lots of chances, let's save those individual Q&As for the two businesses that just presented. Not on the agenda, but joining us is Paul Sheard, our chief economist. Paul, can you stand up?
If any of you guys have any questions that you'd like to discuss with Paul, he'll be available in the other room afterwards. Just want to introduce you to Paul. Thanks, Paul. Hopefully, you got a chance to go into the demo room prior to this session. Those demonstrations will continue after this main session. From 4:30 to 5:30, roughly we can go back over there have a cocktail, hopefully a Guinness if that's available if you didn't get enough yesterday and get a chance to meet not only with the executives who've spoken and presented today, but also with more importantly the folks who are behind the panels giving deep dives in some of the products that we have. With that, after a brief video, our first speaker will be Doug Peterson. Thank you.
Combined, we are the leader in ratings, benchmarks, and analytics. We are the architects of financial intelligence in a world under construction. We are Standard & Poor's Ratings Services, 1,400 dedicated analysts covering 127 countries, turning knowledge into insight. S&P Capital IQ, a leading provider of real-time data, analytics, and research. S&P Dow Jones Indices, the world's most followed indices. We are Platts, the premier source of benchmark price assessments for the energy, petrochemicals, metals, and agricultural markets. J.D. Power, the voice of 20 million consumers. McGraw Hill Construction, providing actionable intelligence for more than 1 million industry professionals. Combined, our insights help emerging markets emerge stronger. Our essential intelligence not only informs the world but also betters it. Combined, we are McGraw Hill Financial.
Thank you for joining us for our inaugural Investor Day. It's great to see everybody here. I'm going to start with act one and talk to you briefly about the last three years and how we transformed McGraw Hill into a deep analytics global growth company. Throughout the day, you're going to hear from us in the second chapter of our discussions today about creating growth and driving performance. We have a remarkable story to tell you. We want to share with you that journey and how we've made it.
As we went through the last three years, we announced a growth and value plan in 2011, that growth and value plan had specific measurements and metrics and goals and objectives. It was around creating a new company by divesting assets which were better off being managed and held by somebody else. We completed the divestitures of Education, Broadcasting, and Aviation Week for $2.7 billion. Of that cash, along with the cash we generate from operations, we returned $4.4 billion cash to shareholders through share buybacks and dividends. We had a goal, which we exceeded, of achieving productivity saves. We reached a goal above it, we reached $175 million in cost saves. All throughout that time, we formed a new joint venture with CME to form the S&P Dow Jones Indices business, we also completed nine other small tuck-in acquisitions.
The time that we did that, this chart shows you what did that mean for the business. By taking the slower growth, higher capital-intensive businesses, if you look at 2011, including the McGraw Hill Education business and the McGraw-Hill Broadcasting businesses, our growth rate was 2.9%. By taking those out, our growth rate was 8.6%, which helped fuel, through our new position businesses, an 11% compounded annual growth rate from 2011 to 2013. Through that period, we began our journey of delivering exceptional shareholder returns. Our revenue, of course, declined when we sold our McGraw Hill Education and McGraw-Hill Broadcasting and Aviation Week businesses, 22%, in fact. Our operating profit increased by 7% to $1.6 billion in 2013. Our operating margin at 24% increased nine points to 33% across our entire portfolio.
Our EPS grew 14% over that time period, and as you can see, our CapEx and our asset intensity to our businesses decreased the requirements for capital investments. Over that time period, our total shareholder return was over 140%, with the share price itself going up 114%. As I said, we returned $4.4 billion to our shareholders, to you, through dividend and share repurchases, including a special dividend of $2.50 a share in 2012. As we completed that program, we had to start thinking about, well, what about the future? Where are we going to head for the future, and how are we going to take this great portfolio of companies and find a way to generate growth and create value? We took a step back. We thought about the markets. We thought it was important to revisit our vision, our purpose, our core values.
We built a foundation based on our markets and our customers, and through that, talked a lot about our capabilities, our ratings, our benchmarks, our analytics, and the way we serve global capital markets, commodity markets, and corporate markets. Our core values, which come from many, many years across all of our legacy companies and are the right thing to do, of fairness, integrity, and transparency, as we promote sustainable growth and transparent markets. All of this is underlying a foundational approach to essential intelligence being something that brings us all together. Why are we an exceptional investment opportunity? We have great brands. We have deep core analytics. We're truly global, and we're starting from a position of incredible financial strength. Our brands are brands that all of you in here know and use every day.
The bridges, the tunnels, the roads, the rails that you took today to get here were probably financed by debt that was rated by Standard & Poor's. The gasoline and the fuel that was used to fuel the transport that you got here was probably priced from crude oil price measurements that came from Platts. If you came in a car, it's highly likely that it was assessed by J.D. Power in initial quality survey. If these were other types of screens that we're watching right now, you would see the S&P 500 and the Dow Jones scrolling across the bottom of the screen all day as key market benchmarks. At the core of those types of products are deep analytics.
We employ people that use their brains, their intellectual capacity to provide these products and services, keeping up to date of everything going on in technology and analytics and big data to produce these products. People run CapIQ models. They run it the eighth time, the 15th time. I've even seen version number 33 when people are doing an M&A analysis, they keep going back to dig and mine more and more of the CapIQ database to do another run to see what's the right price of this acquisition. People ask every day, why did S&P upgrade or downgrade that bond? Every day we ask the question, where did the market close?
We ask that question, where did the market close, we're asking about the S&P 500 and the Dow Jones, and there's great intellectual capital behind that through David Blitzer, and you'll hear more about this later. We're a truly global company. We have 17,000 employees in 29 countries and 94 global offices. We're already positioned for global growth. 41% of our revenues in 2013 came from our international operations, and we have a plan to grow that even faster. We start our new company with compelling financial advantages. We have strong fundamental recurring revenue through subscriptions. Our margins are high and improving. We have goals to improve them, and if you've seen them improving consistently the last three years. We have low capital and asset intensity, and very importantly, we generate strong free cash flow. Now, shifting to the second part of our story.
Throughout the rest of this afternoon, you're going to be meeting our team to talk about creating growth and driving performance. Let me spend a few minutes on this specific slide, because these are targets that we're laying out for one year and three-year goals that are going to drive shareholder value focused on our customers in the markets. We're setting annual growth goals of mid to high single-digit revenue growth, sustained margin expansion, mid-teens EPS growth, and $1 billion per year of free cash flow. We have an operating model to get there, and we'll talk about that. We will maintain disciplined approach to allocating capital. We will continue to pursue attractive acquisitions, and Jack will talk more about that later. We will continue to fund dividend growth and share repurchases. In order to do this, we have to drive our performance.
We need to have the right approach to managing and measuring our performance. First of all, we're going to shift from a holding company approach to management to an actively managed company. We're completing our portfolio rationalization with the evaluation of alternatives for McGraw Hill Construction, and we're targeting at least $100 million a year in productivity saves. $100 million in productivity saves, not a year, over the three years. We have continued significant recurring revenue. When you look at this chart, you can see that we're targeting mid to high single-digit growth coming off a very strong revenue growth. What's important here is that over 60% of our revenue in our business model is coming from subscription and recurring revenue, giving us a solid base for growth. As we build our model for strategic planning, we look at secular trends in the markets.
We need to understand what's going on outside so that we can plan for the right investments and have the right resources marked up against the best opportunities. For example, in the debt markets, debt maturities over a 3-5 year, 10-year period point to a lot of activity in the capital markets. At the same time in Europe, there is a deleveraging going on and a deleveraging of the bank market, which means that more and more people are having to go to the capital markets to raise debt. In addition, there's questions. What's happening with the LTRO? What's happening with the asset quality reviews that are starting to take place? There are many trends in the capital markets that we look at very carefully all the time. There's an infrastructure requirement around the world.
S&P published a report at the end of January, which showed that there's a $57 trillion requirement for infrastructure financing over the next 17 years. It's likely that there's a $500 billion gap in that financing requirement that will likely come from the private sector, from insurance companies and pension funds. There will be a requirement for analytics and data and ratings in that space. Finally, in the commodity world, there's a requirement all the time for more and more transparency and benchmarks in the very fast-moving and volatile commodity world, especially after the post-LIBOR world.
As we look at all of these opportunities for our customers, taking into account market trends, our values, and our capabilities, we put in place a strategic planning model, which we're using in our organization that looks at where we're going to allocate capital and how we're going to build businesses accountable. Our new model looks at our growth across different market and different product segments. We look at our core markets with our core clients. How can we get more penetration? How do we think about pricing? How do we think about getting more clients like the ones we have? We look at extending new products into our existing client base. We look at extending into international markets. We want to have a way to understand where we can grow internationally profitably.
Of course, in this day and age, with technology moving as fast as it is, with the users that we have upgrading their needs and their understanding all the time, we have to look at disruptive innovation and all innovation. How do we get there? We get there through active management to deliver performance. We're shifting from the operating model of a holding company to an actively managed company. That means that there's metrics, there's a way we drive our business, that we allocate capital. Very importantly, that company, which has ways that we're interrelated across the group, drives that active management through operational excellence, customer engagement, and great talent. What is operational excellence? For us, it means there's a data flow, a workflow across every one of our businesses that is similar.
On this slide, you can see the depiction of that workflow that starts with acquiring data, mining it, protecting it, translating it, analyzing it, doing analytics, editorial, benchmarks, innovating, product development, and models, then distributing it and delivering it, whether it's through Cap IQ and our own proprietary channels, or we do it also through third-party channels. In order to deliver that model, we have key enablers. We have technology. We have a technology and data committee across the entire company that's facilitating our technology growth. Risk management is critical for us and becoming more important all the time, especially for our own businesses and also as a business opportunity. Don Howard, who's here today, is on our Executive Committee and runs our risk management area.
Don has over 30 years of experience in risk management as a regulator, as a banker, and in risk management in banking, securities, and insurance. Our global support network is also important, that we leverage that across the group. Our media relations, our public affairs, our government relations. Ted Smith runs that group with over 30 years of private sector experience and public sector experience, taking advantage of our knowledge and our scale in that area. We won't exist without our clients. It's our clients that fuel our business, and it's our clients that we all think about every day. I wonder how many of you would have thought before you came here today that over 40% of our revenue comes from the corporate sector. In order to engage with our clients, we have strong outreach. We have many ways we do that.
We deliver our data through data feeds, through PDFs, through information that goes directly to desktops, through face-to-face communications, through the type of information you see here. One of our key thought leaders is Paul Sheard. Paul Sheard is our Chief Economist, and Paul Sheard is an expert in macroeconomics in Japan, in Asia, and especially in central banking. He can talk to you more about the taper than anybody I know. Paul leads a team of economists, of researchers and quants around the globe to ensure that we are engaged in the most relevant topics in the world, as well as translating that and taking it back to our analytical businesses. Finally, the foundation of our business and what truly fuels our business is great people and great talent.
We've taken this business model that we've talked about, which starts with a vision, a mission, and a purpose, our essential intelligence, translated that into a strategy based on the needs of our customers, changes going on in the market, secular trends, turn those into specific business strategies, taken those into scorecards that are relevant to our teams across the globe. We have a great partner in Human Resources, John Berisford, who has over 25 years of experience in human resources management. In particular, he's putting a major focus on leadership and development, ensuring that we have the best talent deployed across our businesses everywhere in the globe. For the rest of this afternoon, you are going to be meeting our best talent. You're going to be meeting some of our top leaders in the organization. This afternoon, you'll have people on the stage.
You're going to listen to some of their presentations, have an opportunity to do Q&A. I hope everyone has a chance afterwards to step across the hall to learn more about specific products and capabilities that we have. Also look at the people that are there. The people who are there are also some of our top talent who will be listening to you, and you can be learning and listening to them. With that, let me turn it over to the President of Platts, Larry Neal. Thank you.
Today, we provide professionals around the globe with oil news, commentary, market data, analysis, and thousands of daily price assessments, a term we use to refer to the market value we publish for commodities. Our price assessments are used as a basis for pricing spot transactions and long-term contracts to identify patterns in supply and demand and to protect against risk. Market participants choose to adopt many of our price assessments as industry-standard benchmarks. A key distinction here is that Platts does not set oil prices. We provide price assessments for the market to make its own judgments as to oil's market value. As a neutral market observer, our independence means we have no vested interest in the price or value of oil or where the market is heading.
Platts' source of revenue comes from subscriptions to our range of market data, assessments, news, and analysis services, licensing our assessments for use in financial instruments and from conferences and events.
Well, good afternoon. It's a pleasure to be here with you this afternoon and have an opportunity to talk to you about the Platts business. At Platts, our focus is to bring transparency to the world's commodity markets that by nature are not inherently transparent. We're a leading provider of benchmark price assessments, news, analysis, and analytics covering five major commodity sectors: petroleum and the related refined petroleum products, petrochemicals, power, which includes natural gas, coal, and electricity, metals, both ferrous and non-ferrous, and most recently, our entree into the agricultural market. We publish more than 12,000 price assessments each day that form the basis for more than 1,400 exchange-traded futures contracts. It's estimated that our price assessment for North Sea crude oil, Brent, comprises and is the benchmark for more than 60% of the world's crude oil.
In the past three years, we conducted and completed three important acquisitions that extended our capabilities. In 2011, we acquired Bentek Energy, a leading provider of analytics in the North American natural gas space, strengthening our position in North American natural gas and giving us a footprint of capability and analytics to extend into other sectors. Lastly, in 2011, we completed the acquisition of Steel Business Briefing, solidifying our leadership position in steel and in iron ore in particular. In 2012, we completed the acquisition of Kingsman, which established a foothold and a leadership position in the sugar and biofuels market, and provides us with a platform by which to extend further into the agricultural sector. For the discussion today, I'd like to focus a bit on the price assessment side of the business, as that's the major driver of growth for the Platts business.
What we have depicted here is the supply chain for petroleum products. Similar supply chains exist across all of the commodity sectors. If we look at the supply chain from points of production and refinement to distribution, ownership of a commodity as it flows through the supply chain changes hands and changes ownership throughout that process. It's necessary as the ownership changes hands, for a market price to be established to facilitate that transfer of ownership. However, unlike regulated financial markets, the commodity markets have no ready mechanism similar to an exchange that allows for a price to be discovered and a transaction to occur. The vast majority of commodities trade as private bilateral transactions.
This puts a premium on the availability of a price assessment, such as those produced by Platts, to form the basis for the transfer and trade that occurs as commodities flow across global supply chains. Platts publishes more than 12,000 daily price assessments to reflect the global complexity of production, distribution, and trade flow across these various commodities. New needs and new forms of trade flow are occurring constantly, creating demand for more and additional price assessments. If we take the recent trends of increased consumption of energy and materials in Asia, particularly in China and India, this is creating demand for price points that reflect the flow of trade into these regions.
If we look at the explosion in supply of petroleum, natural gas liquids, and natural gas in the U.S. as a result of the technology to extract these materials from shale in North America, this is creating a vast new source of supply, which again creates a remapping of the trade flows of commodities and creates demand for price assessments. We serve a variety of customers across these global supply chains, from producers to processors to end users. Basically, anyone who has an exposure to the price of a commodity and has a need to manage fluctuations in the price of the underlying commodities. These include integrated major oil companies, national oil companies, mining companies, steel mills, all the way through to manufacturers and airlines.
In fact, we serve more than 10,000 customers across 170 countries, making us the most global of the McGraw Hill Financial businesses, with 60% of our revenue being sourced outside of the U.S. We serve these customers from 20 Platts offices around the globe. I want to spend a little bit of time on talking about how the use of price assessments evolves in the marketplace. I think this sets up an important understanding of the future growth potential for the Platts business. In the very early stages of using assessed prices, these are used as a basis for negotiating fixed-term, fixed-price contracts. Much of the industry, if you rewind in time, operated by setting up fixed price agreements for a fixed term and a fixed amount of supply of that commodity, which all works well and good when there's very little volatility in the market.
This mechanism of having locked-in fixed prices does not allow for management of price fluctuations and risk and exposure due to price volatility. As the market begins to trust published prices and assessed prices, such as those from Platts, they begin to utilize those as the basis for their contracts. The market evolves to establishing contracts where the price that's referenced for settlement of that transaction is a floating price that references a published price from Platts. This, in addition to the creation of a futures product that references that same published price, allows for an active derivative market to exist for hedging to occur of any fluctuations in price throughout that supply chain. This provides customers with a ready mechanism to manage price volatility, an ever-increasing challenge in the commodity markets today.
The other point worth noting is the phenomenon of what happens to price providers, such as ourselves, throughout this evolution. It's often characteristic that in the early stages, there are many price providers offering price assessments to the market. As the market begins to rely on certain price assessments that they feel best reflect market value, they coalesce around one or two key providers and in effect, create a network effect where all of the trade of that commodity exists referencing that particular price provider. If we look at where each market is in its stage of evolution, if you look at the upper left-hand corner, you can see that natural gas and petroleum products are very well established in their use of these floating price systems and actively hedge against price risk.
This is best reflected if you look at the chart on the right, where we're illustrating the ratio of notional financial derivative value traded to the underlying production value of the commodity. In the case of natural gas, the notional value of derivatives traded is 50 times that of the value of the underlying commodity. In oil, it's 10 times that. If we look at some of the other markets that are much earlier in their evolution towards using these types of pricing systems, and we look at iron ore and steel in particular, you can see that it's a fraction of the underlying production value.
If we look at the lower half of the chart on the left-hand side, you can see that agriculture, coal, iron ore, I would add LNG into that, petrochemicals and steel, are all markets that are still in the early phases of evolution of using assessed prices. This gives us great belief in the future potential of these additional sectors of the business. Our strategy, as a result, is to establish Platts price assessments as the benchmark across the whole variety of physical markets. Increasingly, we deliver our data and our information to customers in the form of market data feeds. These feeds are deeply embedded into the front, middle, and back-office systems, such as risk management systems, invoicing systems, and transfer pricing systems that our customers utilize.
As you can see in the chart on the right, market data feeds represent the largest portion of our product delivery, and by far the fastest-growing portion of our product set. In addition, we deliver real-time information that includes intraday market news and commentary, live bids and offers, and intraday transactions in the markets. As well, we deliver content in the form of newsletters and reports that can include a whole range of comprehensive information covering price data, company news, M&A activity, and changes in legislation. If we look at how the business has performed over the past several years, you can see we've had very strong mid-teen double-digit growth in our top line. In addition, I think it's very important to note that the vast majority, approximately 90% of our business, is recurring in the subscription base, and we have renewal rates in excess of 90%.
On the right-hand side, you can see that petroleum continues to be the largest segment, roughly two-thirds of our revenue mix, followed by power and gas. While petrochemicals and metals and agriculture are still a relatively small portion of our contribution, the growth rates of these are exceeding the average growth rates of the business and are quite healthy. Just to comment on two fundamental trends that underlie both the current growth that we've achieved as well as the future growth that we can expect. Again, price volatility and the need to manage that price volatility-based risk continues to be a major driver. That's evidenced and has existed over time, and we certainly fully expect that that trend is likely to continue. We can see that through the increased use of commodity futures that are based on underlying published prices, as shown in the upper right-hand corner.
In addition, the demand for energy and materials by emerging economies and developing economies, combined with increased trade flows, creates constant need for new assessments to be created. As we look ahead, we see significant opportunities for growth. We're going to focus on continuing to strengthen our emerging benchmarks. We're investing in our web-based capabilities to provide even more flexibility and capability for customers to integrate our content and our price assessments into their internal systems and into their workflow needs. We're investing in building upon the Bentek acquisition and creating analytic capabilities that provide supply, demand, data, and insights across other sectors and other regions. We're expanding into new commodity sectors. In particular, building upon the strength of our position in the sugar market, we will expand into wheat, corn, soy, and other agricultural commodities, as well as into dry bulk shipping of those commodities.
In addition, we're relocating the headquarters of Platts to London to better reflect and be able to manage a truly global business. I will be personally relocating over to London in a few weeks to lead that effort. We're investing in developing world-class price reporting systems and data operations to fuel our future growth and capabilities. We actively engage regulators around the globe as their interest in both the commodity markets and the use of benchmarks increases. To sum up, we're very pleased with the results that we have achieved to date. We feel very good about the underlying fundamental trends in the business and the opportunities for future growth and expansion. We're investing in expanding to additional sectors and to providing additional capabilities to our customers, and are very pleased and excited about the progress and the results we believe this can produce. Thank you.
With that, I'm going to turn it over to Alex Matturri, the CEO of S&P Dow Jones Indices.
Thank you, Larry. Good afternoon, everybody. Today, I'd like to give you a little bit of a overview on S&P Dow Jones Indices. We are the largest index provider in the world, certainly in terms of both benchmarked products that are used for investment performance. Many of you that are active managers use our benchmarks to measure your own portfolios. Also as importantly as the basis of investment products. There is over a million indices that we calculate on a daily basis. Clearly, people know the S&P 500 and the Dow Jones Industrial Average. These are our iconic brands that everybody knows. Our product offering is much broader than that. We actually have offerings both in U.S. equities, global equities, strategy indices, which people nowadays also refer to as smart beta or alternatively weighted indices.
Fixed income, which is an area that we see tremendous growth potential, as the market is going to go through some pretty dramatic changes. Also in commodities with the S&P GSCI, which is a leading benchmark used for trading of commodity index products. Finally, we have our economic indices. These include the S&P Case-Shiller, which really defines prices of housing in the U.S. Most recently, we launched the S&P Healthcare Economic Composite Index, which we think someday will allow people to hedge healthcare cost exposure in the marketplace. Now, the S&P 500 alone is clearly one of the most used benchmarks with over $5.7 trillion in benchmark assets and over $1.6 trillion directly indexed to that. In addition, we also have the leading volatility-traded products with the VIX that trades on the Cboe.
Of course, futures and options that trade on the CME, which average over 2 million contracts every day. That's a little bit of what we're about. What about what other people think of our business? As you can see, we win many awards for innovation. Innovation is a key part of our strategy. We need to continue to develop new concepts that investors can use, both as benchmarks and also as a basis for investment products. As you can see, we have a very global business, with customers in 69 countries and people on the ground in 18 different offices worldwide. In any place where there's a financial marketplace, you'll find some of our staff so that they can be close to our customers, whether they be the product issuers or the asset managers that are using our indices.
Also importantly, you'll notice that we have many exchange relationships, 13 in total, including the CME and Cboe here in the U.S., just as importantly, in many of the new emerging markets. We look to use exchanges for two reasons. Number one, they're a good way for us to commercialize their own content outside of their home market. Through our distribution platforms, we could actually take their indices and make sure that when people are thinking of how to invest in Canada, whether they're sitting in Japan or whether they're sitting in South Africa, they're going to think of the S&P/TSX 60. In a global business, it's very easy to manage this sort of flow when you have the right infrastructure. Another important part of our exchange partnership is that these exchanges also give us the inroads into the local marketplace.
Especially once you get outside of the U.S. and Europe, exchanges are still the dominant player in the world capital marketplaces. If you go to any of these markets, the exchanges are the pillar of the local investment community, and being associated with them gets us into with the local asset managers, the knowledge of the local regulators, understanding of the local marketplace. In that case, we're able to cross-sell our existing global products into those local markets also. As you will see, our revenue is about 80% in the U.S. and 20% or so internationally. That's not really truly reflective of our actual revenue stream. The reason is that many products are now accessed all over the world out of U.S.-based customers. Our largest customers in the ETF space, for example, BlackRock and State Street.
They're U.S.-based customers, regardless of where their ETFs are traded, they're accounted for as U.S.-based revenue. More and more nowadays, investors all over the world have easy access to U.S. marketplaces, whether they're trading futures on the S&P 500 out of Tokyo or accessing ETFs out of Latin America that are traded here in the U.S. How do we make money? We make money in several different ways. We look at the world really in terms of how we distribute our indices. The biggest category really is ETFs and mutual funds, where we get paid basis points for assets under management. As assets grow, our revenues continue to grow.
Similarly, in over-the-counter and derivative structured products, whether they be retail structured products out of Europe, OTC trading here in the U.S., we get paid, again, based on the assets underlying the notional value of these contracts. In some cases, it's pure basis points. In some cases, it might be blanket agreements so that dealers could trade some swaps, for example, based on our indices very easily. Third, we have listed derivatives. These are options and futures that trade on exchanges. Primarily the CME and the Cboe, but also in Australia, Toronto, in India, in Brazil. Our products trade there, and every time somebody trades a derivative contract based on one of our indices, we again earn some revenue. These three categories account for about 75% of our revenue.
We like this approach because as our customers become more successful, as their assets grow, as their trading volumes grow, our revenues also grow. It gives us an incentive to be very supportive of our customers. The final categories are what we refer to as data and custom indices. Data is either the terminal charges to receive real-time price feeds on the S&P 500 and the Dow Industrial Average and some of our other leading real-time indices that you'll see in your Bloomberg terminals. We're also on your Reuters terminals. Also the underlying constituent data that becomes necessary for you to measure performance of your portfolios against our indices, or for index fund managers to actually know what needs to be traded on a daily basis to maintain the index.
The final category is custom indices, this is an area that we think there's going to be a lot of opportunity. Here, we can either customize one of our existing indices. For example, you could take the S&P 500 and exclude all tobacco stocks. Very popular with church groups, for example. Also for people that develop their own ideas, their own intellectual property, and they need an independent calculation agent. This is becoming more and more important as people understand the conflicts of interest that could exist if an asset manager is also calculating their own index for use in products or worse, in the case of things like LIBOR, where people were actually trading, manipulating the indices themselves. As you can see, we've had pretty strong growth over the last few years with a 24% compounded annual growth rate since 2011.
That, of course, includes the acquisition of the Dow Revenue stream, which half came in 2013, and the other half was added in last year in 2014. Even without factoring in Dow, our growth rate over these past three years has been about 8% compounded. Our growth rate last year alone on an organic basis would've been about 12%. We're able to do this at very high margins in the 60% range. As you can see on the right-hand side, same product split that I showed you earlier with about three-quarters of our revenue coming from investment products that again, go up and down in line with our customer success. What have been some of the underlying drivers of our business? Clearly, we've benefited from the growth of passive investing.
In passive investing, the definition of an index has really grown tremendously, and there's still plenty of room for this business to continue to grow. We estimate that there's about 26% of retail mutual funds or institutional mutual funds that are held as either index funds or ETFs. Again, while there has been a lot of growth there over the last 10 years, still plenty of opportunity to continue to capture market share. Clearly, ETFs have been a tremendous success story over the last 10 years with assets under management globally now approaching $2.4 trillion. Tremendous growth of 27% annually over the past 10 years. In this marketplace, we have over a 30% market share with over $660 billion in assets under management tied to our indices as of the end of last year. Even here, we see a lot of opportunity for continued growth.
Most of the ETF assets are still sitting in the U.S. In some cases, as I said, it's foreign investors that are investing in U.S.-based products because of the liquidity, the transparency of our marketplaces. There's still plenty of opportunity to grow in Europe and in Asia, where the underlying factors that are driving the success of ETFs are only starting to develop. These are all the markets that we're operating in today. What's going to drive our growth strategy going forward? Importantly will be the development of additional indices. Last year alone, we created almost 400 new indices. The question might be asked, do people really need that many new indices? As you can see, the definition of an index has changed significantly. When most of us were in business school, we understood that an index really was a representation of the market portfolio.
Today, an index is really anything that can be developed into a quantitative strategy that has rules based around it that needs to be in a transparent fashion. Even active managers nowadays may be trading sector SPDRs. They may be investing in thematic new ideas. Again, there's opportunity to continue to grow. We will also continue to expand our business globally, especially in emerging markets, especially in higher growth markets, either through our exchange relationships or with native business growth in those marketplaces. Just in this past year, we developed new offices in South Africa and in Mexico City. We continue to see Latin America as a marketplace that's got potential because, again, it's still very early days in terms of the sophistication of their investment knowledge. We will continue to look at strategic partnerships with exchanges.
As I mentioned, we are the largest provider of exchange partnerships, and we see that as a good way to continue to expand our footprint globally. Finally, we will be investing in our brand. The S&P brand, the Dow Jones Industrial brands are known all over the world. We have a strategy that we call Build From the Core, which is to take a core index, something like the S&P 500, and continue to build new versions of it. Originally, we had growth and value versions of the 500 and sector versions of the 500. These all became bases for products and index funds. More importantly, we can start tying up new concepts. Last few years, we've had a lot of success with a low volatility version of the S&P 500, minimum variance versions of this index.
We can take the same concept and apply it not just to the 500, but to many, many other products that we have, both at our own and with our exchange partnerships. Why is this strategy important? Because while many people could develop a similar concept, they can't develop that same brand. Okay. Anybody can develop an index that maybe looks like it represents a U.S. marketplace, but it's not going to be the S&P 500. We will continue to develop new concepts that we could apply to these brands and to get this network effect that strengthens the core brand. One of the things that has made some of the ETF-type indices very successful is that there's very liquid futures markets.
One of the things that made VIX very successful was that index options traded on the S&P 500, and they in turn became successful because there are futures that traded on and people indexed to it. This network effect can drive growth going forward. You'll see us continuing to advertise and educate the marketplace. We think it's important that people understand the use of indices. While we have both active and passive customers, we think knowledge is very important to getting people to understand our products and take us to the next level. Finally, continuing to manage our indices in light of the future regulation, potential regulation of the index business in light of LIBOR.
We've always operated very much as if we're regulated with transparency around our methodology and governance, chaired by David Blitzer and the index committees that are very much walled off from the commercial side of our business. This is going to be more and more important going forward as people have come to appreciate the risks of when you don't have independent indices used in financial products. With that, this has been a brief overview of our business. I'd ask that Chip and Larry come back up here for our first Q&A session.
All right. A couple of ground rules, please. Unlike the investor earnings calls, let's really keep it to one question, if we could. Please, for the webcast, if you could state your name and your company's name prior to asking your question. Okay? Let's see. Microphone, folks. Okay. Sorry. Right there.
Doug Arthur, Evercore. Larry, I think it was about a year ago that the EU started a probe on oil pricing. It was sort of unclear if Platts was a part of the discovery or actually a focus. Any update?
This occurred, there was a sort of fact-finding and information gathering that took place May of last year by the EU, collecting information from ourselves as well as a handful of oil companies that are active in the North Sea. There's been no activity since that. We don't believe we're a substitute to that investigation. There's been really no interaction or follow-on requests from the EU following that initial information gathering.
Okay.
Yes, sir. Here. Manav.
Hey, this is Manav Patnaik with Barclays. Alex, you mentioned that your share of the entire indices market, you put it was 30%. Could you help us elaborate sort of the competition out there and what the need for consolidation or just your desire maybe the consolidation in that space is?
Sure. Well, the market share of the entire industry is kind of hard to measure because many customers will take indices from ourselves and certainly some of our competitors. The 30% market share that I was referring to was of the ETF marketplace, where we're the number one provider. Certainly as far as consolidation, it's something that we think that over time we'd be interested in looking at potential businesses that become available, but we're looking to grow the business both organically and potentially inorganically.
Yeah. Way in the back.
Thank you. Craig Huber Research. Question on index business. You talked about the opportunity long term for growing more into fixed income. Can you just elaborate on that, please?
Sure. The fixed income index business right now is dominated by bank-owned index businesses that were set up initially to drive trading to their trading desks. If you wanted to measure the index, you wanted to track it exactly, you were forced to trade with that firm's trading desk to get the prices that was used in the index. We think that post LIBOR, that model is going to have to change. There's too much after, as we saw from the LIBOR situation, where people could potentially manipulate prices that are used in an index, especially if they're turning around and have a vested interest in products or creating swaps on that same index. Firms like ourselves, and certainly we're not the only one, we're independent providers of indices.
We think that there's going to be a movement, and again, it's been in the papers, rumored in the papers, that we think some of the banks may choose to get out of the index business, which will allow firms like ourselves to continue to expand. Right now, we actually generate not a substantial amount of revenue from fixed income indices and products, but we think that that's one of the areas in terms of our asset class coverage, where there's a tremendous amount of growth potential.
In the middle.
Thanks. Alex Kramm, UBS. This is for Larry, sorry, it's a two-part question on natural gas. One in the Basically, the outlook for that part, which I think is 25% of Platts' business. In the near term, I think natural gas has been super volatile, maybe you can just elaborate what that means in the near term, do you see a lot of new subscriptions coming in? Are people really interested in the market, and do you see something coming out of that? In the long term, I think there's a lot of different prices around the world. Very cheap in the U.S., very expensive in Asia. We're talking about LNG and things like that. What does that mean for Platts long term?
That looks to me like a big long-term more prices, more new benchmarks for you, but just maybe elaborate on that trend in particular.
Sure. I think I may have counted three parts, so let's see how well I do at remembering what part. I think overall, a couple of things about the business and volatility in general. We're not really impacted by short-term swings in volatility, right? We're a subscription model. We generate recurring revenues on that basis. It does speak to the underlying health of the industry. When we see periods of low volatility and low price levels for decent periods of time, as we've seen in the U.S. natural gas market, it does start to impact the industry. There's less trading. There's fewer players. There's players that are exiting. What we look for is the long-term health of volatility.
I think the main point, though, that you've pointed out that we see as well, is the price discrepancy for natural gas around the globe between the U.S., Europe, and Asia is very significant. That's creating what we believe will relatively soon be an export market for the U.S. That should begin to move prices in the U.S. to reflect a better balance of supply and demand and mobility of gas around the world. It's going to be a period of time before the volumes are significant, but even once marginal delivery starts to occur, we believe that'll start to equalize prices and probably introduce some volatility into the market. An exciting long-term trend, I think, for the market and for the U.S. in natural gas.
Did that get all four parts there? All right. I can see the front row. Peter?
Yeah. Larry, sort of related to that. Oh, it's Peter Appert at Piper Jaffray, sorry. How do we think about the scale of the market opportunity? How big is the market for Platts? How do you get there? Do you have to do more big acquisitions? I'm particularly interested in the ag market, if that could be as big as the oil market is currently. Thanks.
It's a great question. It's a tricky thing to assess, Peter, because there's a couple of different factors. We can look at the aggregate value of what's produced. It's also what's transported and shipped. If it's put on a ship and moved, the farther it's moved, the more supply and demand dimensions come into it and the more the need for price assessments from that occur. What the fact is we tend to look at are what's the underlying production value relative to other commodities, how many players are active in it, how active are the derivative markets now and likely to be. These are dimensions that allow us to get a sense for it.
I would just say all of these markets are large, complex global markets that we see over time evolving to utilize the tools and capabilities that are utilized in the oil and gas markets to great effect. What we're excited about is for the long term, these large markets, we believe, will evolve to utilize these systems as just a better way to manage price risk and volatility. To put a real dimension on it is tough. The second part of your question around acquisitions, we're always looking at and very interested in acquisitions, particularly those that can tuck in, where someone's got a benchmark position established.
There's a big first-mover advantage in this market that if once you get the share of mind and you're embedded, as I described, into the contracts and into the fabric of the way the industry trades, that's a difficult position to unseat. Wherever we can work with a firm or acquire a business where they've established that foothold, we're real excited about pursuing that type of opportunity as a way to continue to expand the presence of the business.
Okay, thanks.
Jane, the back there.
Follow-up question from Alex Kramm. With the shale gas-
I'm sorry, your name is?
It's Jonathan Liu from Canaccord Genuity.
Thank you, Jonathan.
With the shale gas revolution, are producers and users of gas still seeing Henry Hub gas as a adequate benchmark? Are you actually seeing another potential price point coalesce for shale gas as distinct from Henry Hub gas?
I think it's a bit soon to tell. I think both. You take natural gas liquids, you take petroleum, and you take natural gas as well coming out of shale. I think as we see those flows continue to increase and map toward different locations and head toward the West Coast and the Gulf Coast, we may see more of that as a benchmark emerge. I think for now, Henry Hub's pretty well established as a highly liquid available benchmark. Things are changing. We're certainly watching the space carefully. We're very active in producing investments that reflect these shifts. Whether or not the market fully adopts these, that's something we have to wait and see how the market evolves on these.
Our view is we always want to be there with a solution for the market if that's where the market wants to move in terms of their use of a price assessment.
Okay. Bill?
Hi, Bill Bird from FBR. Alex, can you talk about what you're seeing competitively on pricing and how you see pricing developing in your market? Thank you.
Well, I think really this relates to what's happening in the ETF business. I don't think there's a lot of businesses nowadays that don't see a very competitive environment. We've always had, I think, pretty partner-friendly pricing policies to make sure that our partners are comfortable. As I said, our pricing model, without getting into a lot of details, involves things like price breaks as assets continue to grow. In terms of how the ETF providers are looking at it, certainly we see the world as premium branded products and lesser branded products. Premium branded products, again, continue to get very, very high pricing. These are products that are not substitutable. Where there is a little bit more competition, I think, is more on generic type products.
I think a lot of the brands that we have, a lot of the products that we have fit squarely into that premium category. Way in the back?
Yes. Tim McHugh with William Blair. Two questions on Platts. Directionally speaking, what type of growth is still achievable in your most mature part of that business, in petroleum, if we wanted to think of it that way? If we thought about either historical or kind of future growth in terms of number of customers versus growth with existing customers, can you help us how we should think about that?
Sure. The second part of your question is again with the core business?
Overall.
Overall. What I would say is we've continued to see the core set of customers and the core business of petroleum to be a major source of growth. That's really reflected by the increasing use of prices within the firms. As I mentioned in the presentation, particularly in risk management systems, just in general, embedding all of this data into the various systems that they utilize. This is just broadening usage. Many of the large customers are the same customers. We're not seeing new major integrated oil companies popping up, we are seeing increased use of our assessments in various forms, and our ability is to capture revenue growth as a result of that increased use. That we're quite encouraged by.
In terms of overall market expansion, we continue to bring on a significant number of what we call new logos and new customers that are new trading houses, various players that are not major producers or consumers necessarily, but are intermediaries in the business in one form or another. That continues to be a source of growth from a new client set. Certainly when we get out of the more mature markets like oil, those are much more of a green space for us in terms of customer sets that we haven't penetrated before. We'll take one more question from Hamzah in this session. These two folks will be back at the very end. Hamzah?
Yeah. Question for Alex. You spoke about consolidation in the market within indices. Maybe help us understand how we should think about synergies from an indices deal. How is equity different versus fixed income? How much incremental capacity do you have in the JV before you need to add headcount? Maybe help us understand that dynamic. Thanks.
Sure. Well, for someone like ourselves, where we're already calculating fixed income indices and equity indices, we think we have the platform in place that's certainly necessary to grow organically. In the equity space, depending on the types of indices, it is a very scalable business. When we went through the Dow acquisition, we literally took all of the Dow indices and brought them onto our platform. Our platform is fairly new, it's very robust. It allows us to handle multiple numbers of indices both in real time and on an end-of-day basis. At some point, you do start needing to add people. It's index managers that'll manage the actual daily process, but also as you continue to add customers, you need to have the customer relationships. When you get into some of the other asset classes, again, the technology's a little bit different.
The customer base is a little bit different. Something like a fixed income merging with an equity type business, again, there's less scale, but even there, you're still dealing with a lot of the same customers and a lot of the same infrastructure.
Great. Alex, Larry, thanks. Next up is going to be Fin O'Neill, the President of J.D. Power.
Dean ranks highest in member satisfaction.
Among commercial health plans in the Minnesota, Wisconsin region.
By J.D. Power and Associates.
Not once, not twice, but four years in a row. Gotta love Dean. Take the Silverado HD with the highest ranked large, heavy duty pickup and initial quality in the U.S.
People screaming out more and more, because I create the feeling that keep them coming back. Yeah, I create the feeling that keep them coming back. Chapter eight, when I get it on the floor. Know y'all been patiently waiting. I know you need me-
The newest member of the Quicken Loans family. J.D. Power and Associates has ranked Quicken Loans highest in the nation in customer satisfaction. I say family because we've been blessed with this honor for three years in a row. Who's got J.D. Power?
They really want more. Oh, sweetie, I got it.
Well, 200,000 commercials on TV and cable per year, 2 billion print ad impressions. It's no wonder that American consumers have an aided awareness of the J.D. Power brand of over 80%. The question we ought to ask is, why do companies promote the fact that they are number one in our studies? Well, really, it's about the trust that's been built up over 46 years. Our core business is not the commercials. Our core business is what we call syndicated studies. We design, we field, we analyze, then, and only then, do we publish and sell all at our own expense, then we get the revenue back. It's that core data that we provide to the industries that we serve that provides the value that has built the trust over time. I'll tell you a little story. We didn't start out with the commercials.
16 years into the business, 1984, Dave Power, the founder of the business, is sitting, watching the 1984 Super Bowl. The screen goes black and up scrolls the words, "According to J.D. Power, Subaru is second only to Mercedes-Benz in vehicle quality.
That was the first commercial. Our core is all about the research, the syndicated research. That's allowed us to expand through a number of industries. There's energy, there's telecom, hospitality. Our core focus is automobiles, financial service, and insurance. We've now expanded globally. We do that syndicated research in 16 countries and four continents around the world. In fact, it may surprise you that we are the largest business for McGraw Hill Financial in China. We have become the benchmark in many industries. Our metrics around customer satisfaction not only allows companies to compare themselves to how their competitive set is doing, but also to establish KPIs within the industry, within the company, I should say, and tie compensation to that. A great example is from the automobile industry.
Some of you may, in fact, have taken the IQS or Initial Quality Survey here. What we do is survey new car owners in the first 90 days of ownership about the quality of their vehicle. It drives great metrics. The OEMs can't get enough of it, and they integrate it into the manufacturing process. If you go to General Motors factories around the world or Mercedes-Benz, you go to Mercedes-Benz, where they build the S model in East London, South Africa, or Hyundai. You'll see IQS as a metric. We are all about benchmarks. We help our clients measure and understand the drivers of customer satisfaction that are clearly tied to growth and profitability. That, folks, is essential intelligence. In an economy where consumers drive 70% of the economy, what do companies need to know?
They need to know what motivates the consumer, what drives their loyalty, what makes them advocates of the brand. I personally can't think of more essential intelligence than that. When you look at our business, you can see on the left-hand side there are three buckets that it fits into. The first and biggest is research. It consists of the syndicated research, which we fund directly, which I talked about, the ad claims, which come from those clients that choose to promote the fact that they were number one in our surveys, and then something we call proprietary or tracking research. Essentially, that's a business where clients come to us and say, "We want you, J.D. Power, to do the research because of your benchmarks or because of your expertise." We take the sample from them, we do the analysis, and we provide the results to them.
That's not published. That is contractual with the client. It's a sizable business across industries and around the globe. The second bucket is the Power Information Network. We have a sample outside if you'd like to see it later. J.D. Power captures 30% of all the new and used retail car transactions at franchise dealers in the U.S. and Canada every day. That's a powerful database. It's used by the industry to understand demand, to understand pricing with incentives. Imagine that you are a Toyota executive, and you've been so rash as to say that the Camry is going to be number one in the mid-size segment. Sales velocity is slowing, inventory is piling up. Let's say you got 60 days, and for the Camry, that's about 60,000 units on the ground.
In the automobile industry, decisions are made in $500 or $1,000 increments when it comes to incentives. You're looking at a $60 million decision. You don't want to make that based on some anecdote. You want to know what's going to give you the maximum lift for the minimum investment, and that's where we come in. This is what our analytics on top of the PIN database provides. It's powerful stuff in the automotive industry. The third category is data-driven consulting. Essentially, we've built domain knowledge around what drives customer satisfaction. That allows us not only to help our clients measure and understand, but to integrate these benchmarks into their business, into their workflows, whether it's customer satisfaction benchmarks or even the IQS benchmark, the one that I gave you the example of. That's integrated, becomes part of the fabric of how they do business.
All of this has led to some solid growth. The top line would even be higher if we hadn't exited certain businesses that were for us unprofitable, like forecasting. We have changed the product mix. It's a much richer, higher margin mix. The bottom line has grown substantially. We also wanted you to take a look at the profile of our business. About 60% comes from the automotive market globally, another 15% or so from financial services and insurance. The rest from the diversified group of businesses that we serve. You remember I mentioned energy, telecom, et cetera. Global growth is important to J.D. Power. Our growth is increasingly coming from abroad. You can see that right now, 41% of our revenue is sourced from abroad.
You can also see from this map that we are situated and do our syndicated research in economies that are critical to the automotive industry: China, the U.S., Brazil, India, Germany, Japan. We're right there with the metrics. That's important because it gives us confidence in our future growth. The U.S. automotive industry, by all accounts, has recovered. Transaction prices are at all-time highs, rebates or incentives are under control, inventories are well managed. Europe is now starting an upturn. It's leveled, and it's returning to health. The center of gravity in the automotive market has clearly shifted to Asia. The big story there is China. You can see that China is growing at about a 7% CAGR over the rest of the decade, compared to 4% for the U.S.
By the end of the decade, China is going to be twice the size of the United States in terms of automobiles sold. We have to ask ourselves, "Why can't our automotive business in China be twice the size of our automotive business in the United States?" That's not an idle question, because we've had great growth in China over the past three years. You can see from the CAGR, great growth. That's not based on some negligible starting point. As I mentioned to you, we are McGraw Hill's largest business in China. We have consistent, profitable, double-digit growth in China. It's based on basically the same model as the United States. We do syndicated research, proprietary research, and data-driven advisory services. We're well-positioned, we think, to grow with the Chinese automotive market. We've got global credibility with the foreign managers of the joint ventures.
We've been there 15 years. We've got credibility with the Chinese. In fact, the managing director of our business over there has 1.5 million followers on his tweet. It's amazing. We think there's a tremendous future there. We're about growth. We think the growth is going to come from our core. Our core drives the growth. We're going to continue to invest in it, to strengthen our studies. We're going to scale them globally. We see that now with IQS in the global auto market. Auto manufacturers want to look at their platforms globally. We're going to invest in our Power Information Network. I talked about pricing information, demand assessment. It applies in a variety of areas. You can look at your competition. You can look at your competition in terms of how effective their new car launches are. This is detailed, granular information you can get.
You can think about combining PIN data, which is real-time, real car purchasers, with other datasets, household datasets, or online behaviors. Think of perhaps the impact that that could have and the knowledge it could give in the advertising ecosystem. The growth in China also is not just an auto story. In the larger scheme of things, it's about a growing middle class. It's about growth, not just in the tier 1 eastern cities, but in the west, in the tier 3 and tier 4 cities. We see opportunities to expand beyond automotive into adjacencies, like financial services and insurance, as that middle class grows. We also see an opportunity to deepen our penetration in financial services and insurance here in North America. We get further penetration to go with our benchmarks. We see opportunities for proprietary engagements.
With the huge wealth transfer, the incipient wealth transfer that is about to occur, we see opportunities in wealth advisory. The industry has no shortage of transactional data. Understanding what motivates a customer is critical. If you want to win in the investment game, how do you understand the factors that drive trust between an investor and an advisor? We see great opportunity for us in financial services and insurance. We're also confident about our ability to execute. We're quite a well way along now our efforts to standardize and automate our research process. What we've been able to do is drive efficiencies, lower costs. In the process, improve the quality of the deliverable to our clients. We've also been able now to combine disparate data sets with our voice of customer data.
When we engage with a client in a proprietary engagement and we are surveying an ongoing rolling basis, their customers, that same customer is probably on social media rating the client. They may be calling the 800 number, there may be unstructured data in the client's CRM systems. Pulling that data together, making sense of it, trending so they can pull insights out of it, and at the same time, close loop resolution so they can recover a customer gone bad. That's a great opportunity for us. We have the ability to do that, and we see more and more of that. We can execute on that. Another thing that is important, I think, and be a future opportunity for us where we can execute is looking at customers across industries. The customer's expectations are not based upon his experience in a particular vertical.
What she's likely to think about is the sum of all the experiences. If you are a Mercedes-Benz executive, you certainly want to keep your eye on Lexus and BMW if you want to be best in class in the luxury segment. Your customer, where do they stay? With all due respect to the Hilton, Four Seasons, right? Or the Ritz-Carlton. Where do they shop? Neiman Marcus or Nordstrom. What influences their expectations? What do you have to look at not only to keep up with BMW, but to understand how your customers' expectations are rising and what you need to do to raise the bar? We think there's great opportunity, we can execute there. We feel great about the growth. We feel confident about our ability to execute. Boy, we have a great brand. Thank you very much.
Now I'd like to introduce Lou Eccleston, Capital IQ. Lou.
What you've just seen, which is just over the horizon, is a very powerful set of new capabilities in S&P Capital IQ, built on what is already a leading and very strong data mining franchise and company research. It's built in a new design application language, it makes what's possible now the ability to really drive technology-driven product innovation. Not just make it possible, but actually allows us to set a new standard in doing that. If you didn't get a chance to take a look at some of these offerings out in the other room, please do so afterwards. These are things that we'll be rolling out through the course of 2014. When we look at the financial information industry, we see opportunity in a few really clear ways.
Particularly in recent history, there hasn't been a lot of what Doug referred to as step change or disruptive innovation in the business. If you look at the larger players in the business, what you see is incremental improvements, enhancements to a product and offering, but really what they've done is try to protect revenue. You look down at the lower end of the marketplace, and you see lots of good ideas and innovation in some of the early-stage companies, but very hard to get impact, to have impact, and to get a foothold and grow without scale or brand. That, in fact, gave us some really interesting opportunities for acquisitions in 2012. On top of that, you have not seen a lot of technology-driven innovation.
If you just think about some of the technologies that are out there in other industries, but not really prevalent in the financial information industry, things like gamification or really using data science or visualization, things that really drive new capabilities, you haven't seen much of that. This is where we're focused. I'm going to talk about the opportunities in the marketplace, but where we're focused is on really looking at technology-driven product information that focuses on unmet needs in the marketplace. What I want to do in the next few minutes is look at the foundation that we've put in place, the investments we've made, what are the opportunities we see in the marketplace, and what will be the drivers of that growth. We put everything together in 2011 in what we like to call a billion-dollar startup called S&P Capital IQ.
We immediately got to work saying, "What are those needs in the marketplace? Where can we focus based on our capabilities?" We built the foundation. We looked at technology. We looked at data. We invested in strategic acquisitions, three in the first six months of 2012, some of those opportunities that I talked about. We acquired lots of talent, particularly in the area of technology, product, and sales. You see this in a lot of other industries today where a lack of talent actually slows product innovation and growth ultimately. At the same time, we've been working over the last few years to really rationalize our portfolio. Let's focus on the core businesses, the most important businesses that are going to drive growth, we've worked hard to get a very simple business model.
We started with what were literally hundreds of products, today this is our model, three business lines selling to five core segments. In those boxes, you see some examples of the products that make up the business lines. We're still working through some of that rationalization, we've made a lot of progress in simplifying our business model. If you look at this slide, what this represents is the breakdown of the business mix in both the line of business and in the market segment. Now, what's important, I think, if you look at this slide as a takeaway, we're going to talk in more detail about each of these business lines, if you look at the investment management segment, for example, you see that we've already got a big chunk of our business sitting in investment management. This is important for several reasons.
As we build analytics and applications on top of that data mining franchise, it's very important that the stronger the data franchise you have, the more likely you are to get quicker growth in that business. Not only do we already have a great base in Investment Management, which is not generally known around Capital IQ, but that's the strongest growing segment that we've got, along with Corporates, actually. You've got a big segment, you've got a strong foothold, and you've got a lot of growth potential in that marketplace. That's about, we think, about an $8 billion spend or so in addressable market in the Investment Management segment. You'll see more of this as we go forward on the presentation. You take that another step, and this shows, at least illustratively, this Investment Management segment relative to the other segments.
More importantly, this starts to get to the opportunity that we see in the marketplace, and this is probably one of the most frequent questions I get when Chip and I do a meeting with all of you is, how are you going to grow? How are you going to grow against these big guys? What's going to be the method and the strategy? If you look at that chart on the right-hand side, what you see is something that I think is revealing to folks who think of the business as it's all owned by the big guys. It's all owned by the names you know. When in fact, the reality is that less than 60% of our addressable marketplace, and by the way, as you notice there, that's off trading floor.
We don't view ourselves as playing in the trading floor market at this point in time. About an $18 billion market, and somewhere around 40% of it is actually in the hands of a large number of smaller players. That's a really interesting point because the question I get a lot is, we don't have to displace Bloomberg, Thomson Reuters, and others outright to grow. You're going to see an example of that in a minute. Those bullet points and summary on the bottom are really important about the opportunity we see in the marketplace, and then how we're going to look at unmet needs, and I'll give you an example of that, and then use technology-driven product innovation to go get that market share. We are in a large market, little disruptive innovation. It's a fragmented market.
A large portion of that goes to a multitude of smaller players, and the growth is possible without having to displace the largest competitors. We obviously compete with them, and we compete in different areas with different kinds of competitors. This is not an outright one-to-one head-on competition for us to grow, and that's especially important when you think about being able to hold price points and generate more value in your products. We have been able to not just grow or build for the future, but grow as well. When you look at this, you see 7% on the top line.
What's really important here is not just that top-line 7%, but if you look along the side, you look at some of the growth rates, it gives you some insight into the business, particularly when I talk about having to rationalize the business and focus on those areas of growth going forward. In particular, look at the 9% for the desktop and the enterprise, one of our three components. 9% growth in those core markets is among the highest growth in the industry from any of our competitors. We've been able to do that as we've built the foundation for the future. I think that's a very important point in how have we done in the first three years that we've put these businesses together to create S&P Capital IQ and what might that hold for the future.
We've had good growth in S&P Credit Solutions, which has been the sale of ratings intellectual property, I want to talk about that some more in a minute. Our challenge has not even been in Markets Intelligence, but actually in the equity research business. That's where we focused a lot on rationalizing and getting our costs where we want them to be. Let me spend a minute now talking about the three major lines of business to give you some insight into that. When you think about Markets Intelligence, there's three components to it. The first component is Global Markets Intelligence, or GMI. That business is a market analysis and commentary business that provides content for the Capital IQ platform, lots of branding. You'll see them on CNBC very often, pretty much daily. On top of that, they run a non-discretionary advisory business.
It's not the index business, but it's similar in a sense that it's intellectual capital-driven, it's got very high margins. It's very small today, but it's growing. They have today about a $30 billion pool of assets that are against the portfolios that they create. Keep that in mind because it'll be important in a minute when I talk about what we've done with equity research. The second component of this is leverage commentary and data. They are the leaders in leverage loan commentary, data, and analysis. Those two businesses together are high growth and high margin, we're investing in those. Our challenge has been in equity research, which has been a traditional stock-picking business. What we've just done, if you noticed our announcement a couple of months ago, is we combine that with GMI or Global Markets Intelligence.
What we got out of that is we took all those portfolios, all that quantitative modeling and work that was done to create GMI and give a qualitative foundation to our analytic pool. We have not moved away, very importantly, we haven't moved to a Morningstar model or anything like that, but we have not moved away from qualitative analysis, but we've given a qualitative underlay with a foundation that looks at quant modeling first. That has allowed us to reduce our analyst pool by about 50 headcount. That's a giant step in getting the equity research business into line where we want it to be profitability-wise. I think we're in the process of turning around that line to high growth, high margin lines there already, and then equity research bringing that in the same. Secondly, let me talk a little bit about S&P Credit Solutions.
By the way, as I mentioned, doing things like bringing GMI and equity research together and leveraging all those capabilities, that's a great example of when Doug talks about active management and leveraging MHFI and all the capabilities of MHFI, that's a great example of that. Here's another good example of it. When we talk about evolving what has been IP sales of ratings information into S&P Credit Solutions. If you think about that concept, taking that to the next step, now what we're saying is we're going to dedicate existing resource. We're not going out and adding a lot of headcount to do this, but really focusing in a dedicated way on the monetization of ratings IP, but even more so, really focusing more than ever before on how do we leverage the IP from ratings and the IP from Capital IQ together.
The goal here, the headline on this, is that we're trying to take advantage of one of the we think ratings has in MHFI, and that's the power of S&P Capital IQ. We're going to really focus on this, really dedicate this, and our goal is to drive not just growth in ratings IP, but also growth in revenue for MHFI. The third line is our biggest part of our business and probably the biggest area of growth, and that's the desktop and enterprise solutions. I said you've looked at this business growing 9% in the last three years. Very strong relative to our competitors. I think one of our main competitors announced a 7% growth rate today in one of their sessions.
You can get a feel for the kind of growth rates we've achieved as we start to roll out some of the new solutions. Again, this is about analytic innovation. This is not about retooling. This is about technology-driven product innovation based on needs that are not out there in the marketplace. Let me just give you two examples that are bullets on here. The first one is an acquisition we did, which was QuantHouse, which gives us really leading technology in the world of feeds, enterprise solutions or feeds. That goes from ultra-low latency all the way through to batch processing. What we did as we inherited all these different products and different feed products, we said, "We're not going to migrate technology. That's a black hole.
That's a way to get yourself in a lot of trouble." We picked the best technology we could find out there, we migrate our data to that superior technology. When you've got the ability to come in with a web-based feed, which can deliver all sorts of data at all sorts of speeds, you actually lower the cost of ownership and increase the value that a client gets out of it. Therefore, you'll see us with wins against major feed players like IDC or like Thomson Reuters or Bloomberg. The way we're doing it is with our proprietary data and superior technology and with a sales organization that really knows how to go out and sell it. That was a need we saw in the marketplace. Lots of old technologies in the feed world out there. The second one was around portfolio risk.
We said there's an issue out here in the marketplace, and many of you live with this in your organizations. Risk is no longer a back-office operation, obviously. It's not even just a middle-office operation. It's got to be in the front office. It's got to be real time. It's got to be along with your portfolio decisions and your buy and sell decisions. When we looked out there wasn't anything that offered that in a really true commercial sense. We said, "All right. We don't want to compete with FactSet and portfolio. We don't want to compete with RiskMetrics and risk management. What do we do?" We looked all over, and we found the most talented group we could find with the best technology, which was R Squared in Toronto, and have built that out.
Today, instead of coming out with a me-too product, which competes on price, we actually have the only true commercial solution out there that is both portfolio and risk management and credit analytics as well in real time, multi-asset class, and web delivered. There's 2 versions of it. There's a version that is the firm-wide version, which we'll integrate throughout the entire firm, or what you can see across the hallway is a desktop version, which took some of the best applications of portfolio risk and put it into the Capital IQ desktop, all nourished by Capital IQ data. Just some examples of how we've really focused on not just the market, what are the opportunities to go after that fragmented market, and the key then was to offer things that others don't.
If you just focus now on the desktop, early on, it was obvious that the current graphical user interfaces were obsolete. You can't just keep adding tabs and lengthening your navigation bar. It gets very clear as you keep adding data and adding content, and that's what a lot of our competitors do. We actually make your problems worse because we add more stuff to the desktop or the things you're looking at, and you can't find it. If you even just think about some of the common problems that firms like us have, it's usage. Whether you go to Capital IQ or Bloomberg or Thomson Reuters, FactSet, you're going to find that a very small % of what they offer makes up for the maximum amount that people use. That's a problem. It's a problem with retention. It's a problem with cost, what you can charge.
We said, we've got to make this change. We immediately set up an innovation lab and started building what we think will be the language of the future, the application design of the future. We actually ran a very large RFP process and worked with frog design, which, by the way, happens to be the firm that wrote the Apple design language. Swipes and double fingers and all those things, and that's what you see here and you saw in the video and you saw if you went next door, and hopefully you will afterwards if you didn't get there yet. You see a completely new design language. It's not a user interface. It's not what some other folks have done. We actually changed the way we build applications, which will change the way clients can use the data.
We believe this not only is going to create some great new capabilities, but it will create some barriers of entry in certainly the next, we think, couple of years. I don't know, maybe somebody's working on one of these as well, but we know we're out with it first, and it literally will change as you and you'll see it, especially if you're a user of Capital IQ today. You're going to start to look at some of these new applications and this new design language and realize there are things you can do in one view that would have taken you many pages to do otherwise. This idea of exposing more data, managing data, being able to understand what's going on in the world and make decisions is actually a competitive advantage, and you couldn't do it with tabs and navigation bars.
You had to step back, you had to take a chance, and write something brand new, and that's what IQ Language does. Once IQ Language was built, what we'll be rolling out in the desktop through the course of this year are many new capabilities. I say capabilities, not products, because these are things that add into the desktop. What we're looking at is simplifying the whole decision for a client around what you can use, how to buy it, how to leverage it, and there's a series of capabilities. For example, Create, you see up here, focuses on collaboration. All of a sudden, you're going to see things like live chat, video chat, building teams, dragging from Outlook over. Things you've never seen in Capital IQ, by the way, and you don't see in other services either.
That's been the goal, but it's existing technology. If any of you read the Steve Jobs book, the quote by Salvador Dalí that says, "Good artists copy, great artists steal." The technology's there. It just hadn't been used in this way. That perspective, we think, is going to give us a real edge, and we've been working on this stuff for close to two years now and are on target rolling it out as we go through this year. We think that, again, is going to give us an edge, and also, hopefully, allow us to raise average price per user as we go forward. We'll have to wait and see, but that's going to be one of the things that we'll target. Value is where we want to stay. We're never going to be the most expensive.
We don't want to be the cheapest, but we don't want to compete on price. We want to compete on value and offering things that others don't have. You'll see a lot of these if you walk next door. We're always open to stopping by or having you stop by and showing you these. These things are live. It's not just a video. These actually work, and we can give you demonstrations, and would love to show it to you. We're very excited about being on target to roll these things out as we move through the year. Just in summary, to wrap up, these are all things I've talked about here. I've mentioned a lot of these things, but this idea of leveraging capabilities and talent is very important. I think you see it in other industries. You'll see it in consumer industries.
You see it in healthcare. You see it in a lot of industries, but you don't really see it a lot unless you see it in the small startups, and it's very hard to scale those things. We're not the biggest player by any means, but we have scale. You've heard the position we're in. These are things we're really going to try and leverage. We've expanded our position around the world. We've got some really interesting partnerships we've built out. I've talked about driving the monetization of ratings, very important to us. IQ Language is launched, and we're investing in proprietary cross-asset class research, which I talked about with Markets Intelligence. On the right-hand side, the infrastructure's been a big focus for us for two years.
You can see people we compete with, if they don't get the infrastructure right, it causes you a lot of problems. You can't build on a house of cards. You got to have solid infrastructure. It's got to scale. The last point is just we've got to foster a culture of innovation. We believe, and I referred to us as a billion-dollar startup, that you really need to be an incubator of innovation. It can't just come from small companies that start up, because ultimately they need to scale and get big. You have to be big, and you have to be innovative as well. We build that into our DNA and the way we think about the business. With that, I appreciate your time, and I'm going to invite Fin and Chip to come back up for a Q&A. Thanks.
All right. Thank you, Lou. As we get the microphones around the room, we are ready for Q&A. Up here in the front, Peter? Yeah, here it comes.
Lou, you outlined a lot of exciting stuff, and I'm wondering if you can help us translate that into financial metrics or profitability metrics. I ask this in the context of understanding that your margins are depressed because of all the investment spending you're doing. As I look at your performance versus peers, your operating margins do lag pretty significantly some of the pure plays. What's the opportunity to close that gap? What's the timeframe to close it?
Yeah.
Thanks.
I think the way to think about what we've done the first few years is the investment we've made in preparing for growth. The fact that we went out and did three dilutive acquisitions in six months on our base of business and have really focused heavily on building and still got 7%, on top of the fact that we've had an equity research business that has really dragged down our earnings. I think if you put all those things together and think about where we can go in the future, you look at the size of the market, and you think about we're just rolling these things out now. I think 2014 is kind of an inflection point, but maybe not the point, because you've got to get these things out in the marketplace.
If we have everything out commercially available, call it by September of this year is our target, and things will come out at various times, 2015 will be your first real full year of having those things out in the marketplace. I think you need to add all those things together and take a look at the market and understand what else is going on out there. The fact that we've been able to achieve some of the highest growth rates in desktop and enterprise before we've rolled out IQ Language and the new solutions is a good indication.
Great. Get the microphones around. In the back. Remember, name and company, please. In the back.
Craig Huber Research. A question on J.D. Power. For your Chinese operation, can you just ballpark for us how much of your revenues come from China and also what the margins there look like versus your consolidated margins? Just a corollary question is, outside of China, why has your revenues been lagging at J.D. Power? Is it economic driven or is it something else? Thank you.
Just whatever color you feel comfortable.
Okay. With regard to China, it's in the high teens in terms of percentage of our business. With regard to the revenue lagging, actually, maybe I didn't make the point as clearly as I might otherwise had. We have also exited certain businesses and engagements that might have made sense at a certain time, but we couldn't drive the kind of profitability that we need. The consequence would be that our organic growth, if you discounted that, would be in the very high single digits.
Okay. There.
Yeah. Is this on?
Doug Arthur, Evercore. Finn, just as a follow-up on China, you talked about the great growth opportunities. What are you seeing there competitively in terms of who's in the market and what kind of share do you have, or is it sort of disparate at this point? Actually, if you could then back up and talk about kind of the competitive dynamics of the U.S. market as well, it'd be great. Thanks.
Okay. With regard to China, certainly Ipsos and Nielsen are there. We see them in some of the proprietary work. We do not have any direct competitor in terms of benchmarks. Indigenous Chinese, there was a company that grew to form in China, called themselves the J.D. Power of China. We actually effectively countered that. There are some Chinese companies that do tracking, such as SinoTrust, and they do it at a low cost, but they don't bring the benchmarks or the analytics that are required by the executives of the OEMs in order to make the kinds of decisions on allocation of resources to customer satisfaction that they need. We provide the superior value there. Here in the United States, we have competitors in niches. With regard to our benchmarks, there are no direct competitors, but you all know NPS out there, Net Promoter Score.
In retail banking, it's big. The challenge, of course, with NPS is that it's thumbs up, thumbs down, and then whatever questions you have behind it, but can you include the diagnostics that you need in order to do something about the drivers? That's where we compete effectively against NPS. In tracking proprietary work, there are some SaaS-based platforms like Medallia out of Mountain View, California, that compete with us. Again, we believe we have the benchmarks and the analytics. We run into Nielsen in some places, but effectively, it's not a full-on competitor that offers. There's no competition, we believe, for PIN.
David?
Yeah, question for Lou.
Oh, name and firm, please.
David Reynolds, yeah, from Jefferies. Sorry, Chip.
No worries.
Question for Lou. Lou, I think you mentioned you exited 50 equity research heads. How many does that leave you in the business today, and do those guys feel safe?
One question at a time. The size of the group, if you look at it that way, once you combine it with GMI, is not 50 heads down. It's maybe 15 heads down, right? We tried to leverage into a new operating model. That was the whole point, not just a cost reduction. This is a business that we've got a lot of very important clients for. There's a lot of reliance on it, and we tried to morph the whole operating model in. The fact that they're still together with GMI means we didn't just cut that line of business to leave it out there. That's an important point in your comfort question, right? The second part of it is really around what can they now do and how do they perform.
If you think about the core that's there, all the team leaders, all the leaders that were the ones that had the meetings with clients, that did the media work, they're all still there. What we really changed was the artisan, bottom-up, fundamental data element by element work and gave them that quantitatively. Remember, it's all Cap IQ driven, right? What we really did, we had equity analysts that weren't even using Cap IQ. To do their work. What you've done is mobilize all of Capital IQ, all the modeling work that was done in GMI that has billions of assets against it. You can have a lot of confidence that it's being looked at very closely in the marketplace, a lot of transparency on the models.
We actually think we've enabled that core group that's left to do a lot more than they ever could. Over time, we would not be the slightest bit surprised that actually the return out of the STARS models not only maintains the same but improves. We've actually tried to create a better model, ultimately a better product, and all we've eliminated is the artisan component of building a model, step by step, by each individual.
Great. In the middle.
Sure. Andre Benjamin here of Goldman Sachs. This is a question for Lou. Hopefully, I heard you correctly, but on the buy-side product for Capital IQ, I thought I heard you say that you weren't looking to go head to head with FactSet and RiskMetrics, but were more trying to carve out your own specialty area there. If the market's not going to grow that dramatically, and you're not taking share from them, where is the revenue opportunity going to come from?
Yeah.
Who is actually going to be-
Yeah
Why not try to go head to head with them?
Yeah, no. Andre, what I meant was, I didn't say we don't compete with them, but what I don't want to do is go head to head by replicating their product and competing on price. That was really my point. While we obviously do wind up competing with them, and a lot of others in certain areas, the key to the whole thing is to have something that they don't have. Because in the end, that's going to be the difference. If I only come in, if I look at FactSet or anybody else, and all I want to do is replicate what they've got, the cost of switching or the pain of switching is so high that you've got to be a lot cheaper.
The only way you actually can come in and win business, and it could be from a competitor, it could be from others. For example, in the firm-wide risk management system, when we go into there, we're competing with probably 6, 7 firms. None of them will be big names. On the other hand, you could go into an investment banking unit, where you're competing head to head with Thomson Reuters or FactSet. We're not afraid to compete head to head. We do all the time, it's not your business strategy is to go replace them. Your business strategy is to have something that they can't get anywhere else that's going to make a client money, even if they keep FactSet. That's your ultimate win. The reality is, of course, you do compete head to head with them, it's not your strategy.
In the back. Last question for this round, I guess that's Tim.
Tim McHugh, William Blair. I guess 2 questions, Lou. One is, you talked about not wanting to replicate or just copycat what others are doing, seems the market for everyone copycats what someone else is doing. I guess, just from a multi-year perspective, how long until you have to go through another round of innovation-
Yeah
to try and stay ahead before others just copycat what you've talked about today?
Yeah.
Secondly, I guess along those lines, how critical is eventually getting price, or getting price increases for some of the innovation to margins eventually climbing here?
Well, the innovation is the need is perpetual, Tim. It's not next cycle. It's not like we rest now, right? The first version, there's a software element to this thing now, right? The first version is only as good until the next release. You're constantly going to be doing that. If you go in our innovation lab today, you'll see innovations that'll be rolled out in 2015 and 2016 already in the process. That's what I meant by incubator of innovation. It's got to be there. I think your firm did a really interesting survey, right? Where you went out and interviewed 1,900 users. We were really happy to see where we came out, which was the winner on return on investment for value. That's where you have to stay, right? That's where we need to be.
Not cheap and not really expensive, but in that value category. The second part of your question is, as we add all these things in, we clearly have to get paid for the new capabilities. You want to get paid based on value provided, not just price increases. The strategy of a price increase over time without changing or just going for volume discounts, it's a short-term strategy. We absolutely hope to be able to increase prices, but it'll be based on the value we deliver out of that. There's not just increased market share, but there's also increased price points in the existing client base.
Okay, great. Now we're on to the next round of companies. There's refreshments in the back if you need to take a break and run back there real quick. We're going to continue with the program with Neeraj Sahai from Standard & Poor's Ratings Services.
Good afternoon. I don't have a video, but I promise I have a good story. Over the next 15 minutes, I'm going to give you an overview of our ratings franchise. I've been in this job now for just over two months, and I'm even more excited about it today than when I started. Why is that the case? Because Standard & Poor's has an incredible platform. It has a very strong track record, and it is superbly positioned to exploit the macro tailwinds to benefit its clients and its investors. Let me elaborate. At the end of 2013, we had over 1 million credit ratings outstanding that covered virtually every category of issuer, virtually every fixed-income asset class.
Because of that, our expertise is unquestioned. Our brand has instant recognition. Independent research, which has been carried out by us, clearly shows that agency selection is based on investor preference, it's based on sector and industry knowledge, and it's based on agency reputation. Against all those criteria, we stack up very well, and this is one element of that. We are global. There are two aspects of our globality that I would like to highlight. First, we cover issuers and products in over 125 markets across the world. Our analysts are resident in 25 countries. Our broad coverage gives us earnings diversification. It allows us to establish connections and discern trends that would otherwise be less evident. Because of our coverage model, our analysts have deep local knowledge, and they're able to service their customers in their language and in their time zone.
That's a very important aspect to keep in mind, not just for today, but as we think about the future and the ability of this franchise to grow across the world. At the end of the day, ours is a people business. We spend a lot of time and considerable effort in hiring the best talent. We also spend a lot of time and a lot of effort in providing them ongoing training so that they remain at the top of their game. The three examples on this page or on this slide demonstrate that our people are well-known. They are resident in all major markets across the world. They are extremely seasoned, and you see them on television all the time. Beth Ann Bovino, for example, was recognized by Wall Street Journal as the most accurate economic forecaster for 2013.
Doug, in his earlier presentation, mentioned about Paul Sheard, who's sitting here. These are just a couple of examples of the talent pool. They are not just great individual talent. Through our processes, they talk to one another, they connect with one another, they share knowledge to create the best insights possible. We don't rest on our laurels. Just because we have a great platform, we continue to innovate. Hopefully, some of you saw our Credit Scenario Builder, which was being demonstrated in the room next to us. That tool uses visualization technologies and allows users to overlay their assumptions on a credit criteria and do sensitivity analysis and see how things would change should their assumptions be different from ours. Similarly, our aging study. It allows users to assess and compare the impact of aging on public finances across 50 markets.
At the end of the day, a great platform is only worthwhile if it produces good financial results, and we do that. If you look at our performance from 2011 to 2013, our revenue grew at a CAGR of 13%. During that same time period, we expanded our margin by 250 basis points. Another interesting aspect to note is that in 2013, our revenues exceeded our pre-crisis peak. Our 2013 revenues were at a historical high. Within this, there's however one important attribute to note, that the mix has changed over the years, and the slack that came from structured finance was taken up by corporates. That's something I will talk about a little later. While we've grown revenues, we've grown them keeping productivity in mind.
If you look at the same time period, our revenue per employee has grown by nearly 14%, and our margin per employee has grown by 17%. Productivity is going to be a very important part of my business model. I plan to focus on it. I plan to leverage technology. I plan to use data mining tools. I want to streamline workflows, and I want to leverage all of them to become even more productive going forward. Another interesting aspect of our earnings is its diversity. Earlier, I mentioned about the globality and the fact that we cover issuers and products across the world. That gives us earnings diversification. So does the fee mix over here between transaction and non-transaction. For instance, in 2008, the issuance market dropped by 70%, but our revenues just dropped by 26%.
That gives you some idea that during bad times, this gives us good cushion. If you look on the left-hand side, I mentioned earlier about the corporates versus structured finance. Arguably, earnings from corporates are less volatile than in structured finance. That too should give us lower volatility. Equally importantly, we have a great blend of international and non-international revenues. Like any enterprise, we are not immune to market changes and market volatility. Hopefully, this diversification gives our earnings and our revenues a lower beta. A great platform and a good track record don't guarantee future success. They are just necessary conditions. Why should we be optimistic about the future? One of the questions I asked myself early when I started in this role is, in the backdrop of the Great Recession, what's happened to the demand and appetite for ratings?
A research through Greenwich Associates shows that actually the demand for ratings has gone up 2x from 2011 to 2014. These ratings are used in a variety of ways. Another research showed us that actually the quality and demand for our ratings stacks up very well, very strongly versus our peers. I mentioned about ratings being used in interesting ways. Let me give you an example. A national supermarket chain in the U.S. used two agencies to rate its debt. As its debt matured, it really didn't have the need for ratings. However, its real estate group realized that ratings helped them negotiate better leases. Because of that, they decided to retain ratings, but just from one agency, and that agency was Standard & Poor's. The reason? Because our analysts connected with them better, understood their needs better, and had a wider and deeper understanding of the marketplace.
Let's look at some macro variables. The demand for debt continues to be high. Why? Still it's a borrower's market, as interest rates are relatively low, and there's a thirst for yield. You can see that fact borne out in the 24% increase in new corporate issuers we saw over this time period. Similarly, we expect refinancings to grow both in investment grade and spec grade. However, because a lot of refinancings are brought forward towards the second half of 2013, we expect that growth to be tempered during this period. There will be growth. Similarly, another important aspect is actually de-leveraging and disintermediation. De-leveraging is happening. It's happened, obviously, in the U.S., it's happening in Europe. That will drive the structured finance market, it'll drive traditional debt, and it'll obviously drive the syndicated loan market.
I think if, in today's Financial Times, there was news about the fact that a lot of the growth in the high-yield bond market in Europe has been driven by the lack of supply from bank credit. I think the demand for credit is unabated, but the supply from the banks will continue to come down. The demand and supply gap creates the opportunity to raise traditional debt structured finance in the capital markets, which sort of creates opportunities for us. Having said that, there are risks on the horizon, and we can't ignore them. We know the risk trade is on. All of us have been seeing that covenant-light loans have gone up. Secondly, loans have gone up, PIKs have gone up, toggle PIKs have gone up, and the spread is not as wide as it can be.
If there's a hiccup in the economic environment, that could and will have an impact. However, the diversity I talked about earlier should give us more cushion than others. Secondly, there are legal things on the horizon, and they are unpredictable. Ken, later on, will cover them and give you more color on that. In summary, we have a great platform, a great track record, an excellent environment to operate in, and we plan to use all of them to actually create growth and drive performance. Our growth will come from growing our core, which should do a good job in any case, of expanding across asset class, expanding across geographies. While we do that, we'll focus on performance, too. We'll deliver that with customer excellence. We'll focus on productivity.
At the end of the day, we'll do it with the highest level of integrity and the highest level of quality. Thank you. With that, I would like to welcome my colleague, Roopa, who will give you an insight into our franchise in CRISIL. I've had the opportunity to be in India a short while ago, and Roopa runs an incredible franchise there. Not only is she a great manager, she's renowned in the Indian marketplace and is very well-known as a top-rated CEO in that market. With that, Roopa, welcome.
Thank you, Neeraj, and good afternoon. I'm very pleased to be here today and to have the opportunity to introduce CRISIL to you. CRISIL is a company incorporated in India and listed on the Indian stock exchanges. McGraw Hill Financial has a 68% shareholding in the company. We are a company with a unique business model. We are deeply embedded in the local markets in India, and we also have a range of global research and analytics offerings, which actually leverage the India advantage. We are India's largest credit rating agency. We rate rupee-denominated debt. Our ratings cover India's largest financial institutions and corporates and go down all the way to the smallest of enterprises. We are also India's largest independent research house. We provide research and analysis on the Indian economy, on Indian capital markets, industries, and on companies.
We are the largest provider of high-end research and analytical offshore support to the world's leading global banks. What does all this add up to? It adds up to a company with a strong financial profile characterized by high growth, high margins, no debt, and strong cash generation. Since the time McGraw Hill Financial acquired a majority stake in CRISIL in 2005, our revenues have grown at a compound annual growth rate of 32%, and we have operating margins now approaching 30%. This chart shows you how CRISIL has grown since McGraw Hill acquired a majority stake in 2005. In that year, we had revenues of $21 million, and we ended the year 2013 with revenues of $189 million. Our market capitalization too has grown significantly at a compound annual growth rate of 38%. In 2005, we had a market cap of less than $100 million.
That increased to $1 billion by 2010 and is currently at the level of $1.3 billion. From being an India-focused credit rating agency, CRISIL embarked on a strategy to diversify our business. Consequently, today, we are a globally diversified analytical platform with a significant proportion of our revenues coming from within India and also from outside of India. The first piece of our business is ratings. Here, we have three offerings. For India's largest 1,200 companies, we provide them with bond and commercial paper ratings. Today, 65% of the bonds outstanding in India are rated by CRISIL. For the next tier of 15,000 companies, they mainly approach us for getting their bank loans rated. Banks use these ratings to decide how much to lend to these companies and at what rate to lend to these companies.
Banks also use these ratings in order to calculate their capital requirements under Basel II. We have the simple credit assessments which we provide to 50,000 small and medium enterprises in India. 20,000 of these firms have a sales turnover of less than $1 million. Today, a small and medium enterprise in India can come and get a rating from CRISIL by paying as little as $175. 30 banks in India have announced interest rate rebates to SMEs linked to these ratings. We believe that these ratings are playing a very important role in enabling better access to funding for small and medium enterprises. Let's now look at the second piece of our business, which is the global offshoring business. In the global research and analytics business, we have research centers in India, in Argentina, in Poland, and in China.
Our customers include all 14 of the top 14 global investment banks. What do we do for them? Firstly, we support them in their equity research. Today, CRISIL supports equity research on 2,400 global stocks, which represent 88% of global market cap. We also support the banks in their trading activities, for instance, sales and structuring, and also middle office support. By way of example, CRISIL annually reviews 20% of the outstanding exotic derivatives globally every year. Under the Coalition brand, Coalition is a firm which is based in the U.K. and which we acquired recently. Under this brand, we provide analytics to global investment banks on their competitor and on their clients. For instance, we would provide revenue analytics, we would provide risk-weighted asset-related analytics, and we would provide analytics to the banks on the spends or the wallets of their clients.
The Global Analytical Centre, which you see referred to in the box here, comprises 800 analysts who exclusively support Standard & Poor's ratings analysts and help them carry out their activities and analysis relating to ratings, research, and data management. Our third piece is the India research business. Here, we provide research on 72 different industrial sectors, and we are also India's largest provider of valuations for fixed income securities. Our customers here include the banks, the corporates, the mutual funds, insurance companies, foreign investors into India. Today, 90% of the banks in India subscribe to CRISIL research. Why did CRISIL embark on this diversification strategy? For three main reasons. Firstly, we believed it was very important for us to have revenue streams other than ratings in order to ensure that business pressures did not get in the way of the independence and rigor of our analysis.
Secondly, diversification provided us a platform on which to grow rapidly. Thirdly, diversification also helped us create attractive career opportunities for our talent pool. Consequently, from a situation in 2003, which you can see displayed at the bottom of this chart, where almost 100% of our revenues came from within India, 10 years later in 2013, we've moved to a situation where 60% of our revenues come from outside of India. However, on a secular basis, as the Indian economy picks up from the relatively lower growth that we've seen in the last couple of years, we believe that this mix will be a more balanced 50/50 over a longer-term basis. Within India, CRISIL is present in 180 locations. Beyond the top six or seven cities, this represents our positioning to access the vast number, the thousands of small and medium enterprises that we rate.
Outside of India, our research centers are located in Buenos Aires in Argentina, in Wrocław in Poland, and Hangzhou in China, and we also have sales offices in the U.S., the United Kingdom, and in Singapore. This chart shows you how our revenues have grown between 2011 and 2013. They've grown at a CAGR of 16%, and U.S. dollar-denominated revenues in 2013 were $189 million U.S. Looking ahead, we believe that there are several structural features in the Indian economy that will be important drivers for CRISIL's growth in the future. Firstly, the economy itself. Despite the fact that expectations of growth of the Indian economy are somewhat more muted compared to what they were a few years ago, there is no doubt about the fact that India will continue to be amongst the fastest-growing economies in the world, with average growth rates well above global averages.
Secondly, we believe that the infrastructure funding requirements of the country create opportunities for us. CRISIL has estimated that infrastructure fund requirements or investments in the next five years alone will be about $400 billion. Of this, about $100 billion will require to be funded by the debt capital markets. The bond markets themselves, I would say, are at a fairly nascent stage in India, and that again creates opportunities for us over the longer term. The total corporate bond market in India is barely $220 billion, or 14% of GDP, which offers opportunities for growth when you consider the fact that in recent times, regulatory changes have made issuance of bonds simpler. They have liberalized the investment norms for large investors like pension funds and insurance companies in the bond markets, and also greater foreign participation has been permitted in the bond markets.
All this, we believe, augurs well for future growth of the bond market. SME ratings is something we are very positive about. I talked about the fact that we've rated 50,000 companies. Consider the fact that there are 24 million such small and medium enterprises in India, and that gives you a sense of the untapped potential of this market. Finally, we believe the middle class will be an important driver of growth for us. That is because out of the 800 million working-age population, we are seeing an increasing mobility into the middle class with greater levels of affluence. That, we believe, will increase the demand for financial services, asset management services, and the like, which creates opportunities in turn for CRISIL to provide benchmarks, tools, and analysis. That is how we see the environment within India. What about our business outside India?
For our business outside India, we believe that the structural changes that we are seeing in global investment banking create tremendous opportunities for us. Investment banking revenues have actually declined from a level of about $350 billion in 2009 to $260 billion in 2013. Banks today are feeling greater pressure from regulation, which is both restricting their activities and also asking them to do a lot more analysis. Banks are also facing tremendous pressures on pricing as technology is reshaping their business. All this means that these banks are looking for greater levels of offshoring, and they are looking to ratchet up offshoring in traditional areas, be it research, be it COO functions or areas like collateral management. They're also looking at targeting a certain proportion of offshoring in newer areas like front office, sales and structuring, quant and risk, and the like.
This, again, creates opportunities for us. I've talked about the fact that we've created a great platform. We see several opportunities for growth. What is our growth strategy all about? CRISIL's growth strategy has two very simple themes. Within India, grow the market. Outside of India, expand the range of our services in response to emerging market needs. Within India, therefore, we are looking at enhancing our customer base in small and medium enterprise ratings with simple credit assessment and grading products and then migrate these customers up the value chain. As an SME grows, offer them bank loan ratings. As they grow even more and become even more sophisticated, offer them corporate bonds and commercial paper ratings. I talked about the fact that we work with all the top 14 global investment banks.
We are seeing an increasing demand for offshoring services in the research area, particularly from the next tier of banks, including regional banks in Europe and Australia. That forms an element of our growth strategy. The whole area of data analytics, we believe, provides tremendous opportunities for firms like CRISIL. We have created a separate vertical to tap into this opportunity. Finally, we have developed new offerings to meet banks' new needs arising from regulation, be it capital calculation, be it model documentation, model validation, and be it stress testing. As we pursue our growth strategy, we believe that three things will be important. Firstly, it'll be critical for us to continue to maintain our strong focus on excellence and execution as we scale up the business.
Secondly, it will be important for us to enhance the quality of our communications with all stakeholders, but particularly with customers, as we explain to them how in every business line, CRISIL is different from our competitors and what the value proposition of CRISIL's offerings is. We will, of course, maintain our focused thought leadership, which not only creates a differentiated position for us, but also forms the basis of our credibility, which is the bedrock on which the CRISIL brand has been built. Thank you very much. I would now like to invite Chip and Neeraj to take the Q&A.
Okay, raise your hand if you got a question. We'll get the microphones to you. Right over there. Bill.
Bill Bird from FBR. Neeraj, you touched on improving productivity at S&P. How do you think about your potential ability to narrow the margin gap to Moody's? Thank you.
I wish I could say I'm surprised by that question. I can't speak for my competitors, but what I can do is give you more color into what we do, how we do, and what our numbers look like. Firstly, if you look at the period between 2007 to 2013, about a third of our expense growth was due to risk, legal, compliance. That expense growth is slowing down. If you look at 2012 to 2013, that expense growth was only 2%. Secondly, during the same period, we virtually doubled our expense on CRISIL because of certain investments, and we were investing in the high-growth business.
Thirdly, there are certain differences in market shares in different aspects of asset classes where there are different margins, and we continue to choose how we play, where we play based on how we see is the quality of our work, and we don't often want to compromise that just to gain market share. Having said that, we also have a difference in the architecture. I talked about in my globality slide, the fact that we have analysts across the world. There's a trade-off between that model and a centralized model. We choose that model, and we choose that trade-off because I think we get better quality insight, we have more expertise, and more importantly, I think we have a platform to grow into that domestic market as and when the time permits and the opportunity comes up. That architecture, we are not going to change.
I don't fundamentally believe that we should look at expenses in isolation. If expenses create growth today or in the future, we'll fund those expenses. I definitely will focus on productivity to make sure we extract more dollars out of every expense we make. That's our approach, and that's the theory behind it.
Okay. Microphone ready anywhere? Yeah, in the back. Right corner.
Bank loans seem to have become an exploding category for ratings recently anyway. How do they rank in profitability compared to, say, the traditional bonds?
Your name and firm, please, Ed?
Ed Atorino. Thanks, Mark.
Thank you.
Yes. Bank loans did have an explosive growth. We continue to see the growth in this year, probably not as high as the 40% we saw. In terms of pricing, it depends, right? I would say it's about 50% of the pricing one would get from a traditional bond or note. One has to be careful whether one is comparing an investment grade versus a non-investment grade versus this asset class. There are price differences. I would say generally about 50%.
We've got a table full of folks here in the front who can, Neeraj, can phone a friend here since he's in the job two months. Feel free to phone a friend if you need to on anything. In the right corner there.
Our friends are not picking up the line.
Just points. You need them.
Doug Arthur from Evercore. Roopa, in terms of your international growth strategy, what competitively, what are you out there offering to the global market that your parent or others aren't? I mean, what is your competitive edge and how are you gaining share out there outside of India?
Okay. The first important thing to highlight in the work that we do outside India for global banks is that by and large, with the exception of Coalition, it is non-IP based. Which means that all the work we do is actually the intellectual property of our clients. In that manner, as differentiated, it is we are taking on work which otherwise the banks themselves would have to do. Five years ago, if you had asked our clients, what is the main reason that you work with CRISIL, they would have said cost arbitrage. Today, all our clients tell us that cost would not rank in the top three reasons why they work with us. The top three reasons they would work with us is time to market and ability to increase revenues and innovation. Those are the top three reasons that the banks today work with us.
I think over time, we have managed to move what was traditionally seen as an offshoring vendor kind of cost-cutting kind of relationship to a relationship which has transferred more to a relationship based on expertise and value add. That's the basis on which we compete with our competitors.
Okay, thank you. In the middle there.
Hi, Marla Sims from Brown Brothers Harriman. Just a continuation on the productivity question from before. Your revenue per employee has gone up significantly. If you think back over the last few years, one of the biggest sort of complaints about S&P was that your analysts were overworked, that they weren't spending enough time looking at each credit. As you grow, how do you manage the efficiency versus the need to make sure that your analysts are providing the proper attention to the work?
Great question. First to keep in mind is that we have the benefit of CRISIL. A lot of our work and analytical work can be done, actually same quality if not better quality, at a much cheaper price point because we have the benefit of CRISIL. We have a Global Analytical Centre there that does a lot of the work. The first thing to keep in mind is that our productivity gain is not coming because we are making our people work harder, which I wish they would do a little more, and I'll make sure they do a little more. The important point is it's not because we are making sure our people don't have quality time.
The second important aspect is what I referred to earlier in my presentation about workflow, about technology, data mining technology, workflow technology, how reports are published, how sensitivity analysis is done. We are leveraging a lot of those tools. Some of them, I think you saw Lou talk about in general on the Capital IQ presentation. Similar analogy on our side. It's a combination of technology and workflow and processes and combination of the benefits we have from CRISIL. Actually, Roopa can give you a little more color on the work she does for us and the group does for us and how we've gained from those workflow and that outsourcing.
Yeah, I think very briefly, we have 800 analysts which are based in Mumbai and Pune supporting S&P analysts around the world. I think three major benefits of the association. One, I think the association with GAC has helped S&P to meet the demands of increased analysis after the events of 2008. Secondly, I would highlight the importance of global consistency that having a centralized analytical center brings to global analysis. In several of the new analysis and new criteria that S&P has brought to market, a lot of the global consistency was ensured by having one group in one location working with units across the globe. The third, I think, is time to market. Whether it be with rating changes or whether it be with new types of analysis, I think the association with GAC has resulted in benefits on that front as well.
Thank you, Roopa. Let's see, who's got a microphone that's ready? On the back. Ready?
Craig Huber Research. Question for the U.S. ratings business, if I could. You charge roughly five and a half basis points for the run-of-the-mill investment grade rating up front. I'm curious, when you speak to treasurers out there or CFOs, how much do you think you save them in terms of annual interest rate savings on that bond if they get a rating from you versus if they don't get a rating at all from you and or Moody's? Thank you.
Yeah. Jay, have we done research on the subject that shows that or that we can share?
[Jay Drew ].
Yeah.
Phoning a friend.
Actually, that is something that we've been focusing on quite a bit about how much the ratings actually save. We have Bruce Schneier here also, who's our Chief Marketing Officer for the Americas. Anecdotally, we hear it ranges anywhere from 25 basis points-50 basis points, but it depends on what kind of market conditions we're seeing. In a borrower's market, it would be probably on the lower side. This is really anecdotal that we're hearing, but it's in the 25 basis points-50 basis points range.
Great. Thank you. In the middle there, Bill.
Bill Warmington, Wells Fargo. Two questions for you, one on the issuance side, one for CRISIL. On the issuance side, if you could give us some of your thoughts onto the U.S. and international issuance pipeline. Then for CRISIL, I wanted to ask if your 30% operating margin is now, what you thought the limit to that was likely to be and where you thought you could get to in the next three, four years.
On the issuance side, obviously, as everybody knows, we had a slow start to the year. If you look at issuance year to date, February, it was down about 16%. It varies depending on whether you're looking at the U.S., which was down 19%, Europe, which was slightly down. Within that, high yield was down much more than investment grade. I think 35% high yield, 9% investment grade. The first two weeks of March, we saw strong issuance. If we look at the underlying fundamentals of the economy, nothing seems to have changed drastically. The crisis we see on the horizon, the Ukraine, Crimea, the initial stock volatility to the emerging markets, all that sort of the markets have taken in their stride. The risk on trade still seems to be on.
We just now don't feel any need to change the original assumptions we had of growth this year, but obviously slower than last year because, as I talked about earlier, the refinancings that were brought in early into the second half of 2013. We were conservative about the structured finance market growth, which we still sort of hold on to that growth. The public finance market has been slow. I would say low to mid-single digit growth on the issuance varying across asset classes and geographies.
On the question regarding margins of CRISIL, I think a 30% margin, given the mix of our businesses and given the increasing proportion of bank loan ratings and SME ratings in our portfolio, is an excellent place to be. As far as the upside potential of this is concerned, I think the important thing to highlight here is that we've achieved these margins despite seeing no activity in the bond markets now for five, six, seven years in a row. When you do see that bond market activity, practically everything that goes into the top line has the potential to flow into the bottom line because we already have ratings on those 1,200 companies. It's tough to give a number because it would depend on the activity level in the bond market.
I would say that as the bond market matures and as we see greater amounts of issuance, it will provide an upside to this number.
Very good. Thanks, Roopa. Peter, in the front row.
It's Peter Appert, Piper Jaffray. Neeraj, one of the differences between Moody's and S&P is you guys are more relationship based in terms of pricing. They're more focused on transaction based pricing, which I think might be a fairly significant factor in terms of the differentials in profitability between the companies. I'm wondering if you would rethink that pricing model, number one. number two, as the new guy coming in, are there other structural things that you're looking at that you think might be opportunities for change?
Yeah, Peter, that's a great question, thanks for pointing it out. I should have mentioned it earlier, I think I did mention it on the volatility slide when you looked at the transaction and the non-transaction. Our relationship based pricing definitely does affect the margin, it depends on which way the economy is going. It gives low elasticity, it gives you low elasticity also on the downside. It does cut down on the volatility. I think it has played out well for us, especially if you think there is choppiness ahead. I'm not sure we necessarily need to rethink that. What we do need to do is can we leverage more of our research and more of the value we are creating, how do we sort of monetize that research and get more value out into the marketplace?
For instance, in Asia, we are very big in the cross-border market, if you look at the domestic issuance market, we are obviously good in India, there's a lot of the markets in Asia as well as Latin America, where we are not doing ratings in the domestic marketplace. How do we get into those marketplace at the right time? What's the right opportunity to get in there? How do we actually leverage some more of our research and thought leadership and monetize it? How do we work more closely with CapIQ and get more value, which may sort of, from an economic point, either lie on their side or our side, it'll be value to MHFI. The relationship pricing, I think, has held us in good stead, and we plan to stay with it.
Thanks, Neeraj. Last question for the final short Q&A round. In the back.
Hi, Tim McHugh, William Blair. I guess people have touched around this, but just on your comment earlier about driving productivity in the ratings business. Having come in with a fresh set of eyes, is there areas where you see that aren't as productive as you think, or is that a comment just about long-term driving more productivity through the business? I guess I just want to understand when you come in and you see that and you describe that opportunity, are you seeing overhead expense or lower productivity in areas? I guess what exactly would drove you to kind of have that strategy?
Yeah, I would think of it less as a problem. I would think of it more as an opportunity. That opportunity set lies, in my opinion, from what I've seen in we can leverage more technologies because over the last few years, a lot of our focus has gone on risk management and compliance and building that framework out. Now we can think of how do we leverage artificial intelligence, data mining, improve our workflow. We moved a lot of the work to India. Can we move more? It's attributes like that that definitely give us an opportunity for productivity gain. It's not a problem we are trying to solve. It's an opportunity we are trying to explore.
Great. Thank you both. Next up is a person behind the voice you've heard on several conference calls. He's a person that many of you have asked to meet over the years, and we refuse to allow you to meet him. Now, for the very first time, making his debut on Wall Street, Ken Vittor, our General Counsel.
Good afternoon. I will be providing you with a brief update today regarding the lawsuits that have been brought against S&P since 2007. We have been aggressively defending each and every one of these lawsuits, and we will continue to do so. I think as you will see through my presentation, we've made consistent, constant progress in dismissing many of these cases. I think we've demonstrated that these are legal risks that are manageable. It is our belief that they will continue to be manageable in the future. I think it's helpful for you to think about our lawsuits if we divide them into 5 categories. The first category is a category that I call the underwriter category.
Purchasers of securities claimed that when S&P issued its ratings opinions, they were acting not as a rating agency, but rather as an underwriter or as a seller of securities because of the importance that the rating agencies, and S&P in particular, play in the markets. Happily, courts have uniformly rejected these claims. There are no current underwriter or seller of securities claims currently pending against S&P. The courts have quite easily concluded that S&P has no financial interest in these transactions. They don't sell the securities. They are not underwriters under the federal securities laws. This is a significant legal victory for S&P because these are strict liability laws under the federal securities laws. That category of lawsuits has been entirely eliminated.
The second category are the stock drop lawsuits, the so-called stock drop lawsuits that relate to lawsuits by purchasers of McGraw Hill securities who claim that when McGraw Hill stock declined during the financial crisis, it declined not because of the financial crisis, not because of the global recession, but rather because McGraw Hill made statements about S&P's financial operations and S&P's independence and objectivity. Again, all of these stock drop lawsuits have been dismissed by the courts. In a leading case in this area, the Reese case, the courts have found that statements about independence and objectivity are simply too indefinite, too vague to be actionable as a matter of law. Now, let me make it clear. S&P was independent during this period of time. S&P was objective during this period of time.
The courts have said that statements about independence and objectivity are just simply too indefinite to form the basis of a lawsuit. This is a very helpful precedent for future cases. We have many cases that raise the question about S&P's statements regarding independence and objectivity. We will use these precedents in these pending and future cases. The third category of cases are cases involving state law claims. These are cases brought by purchasers of securities who claim that S&P either was negligent or fraudulent in assigning the ratings to the securities that these purchasers bought during the relevant period. There is a threshold issue in many of these cases in the negligence area, that goes to the duty of S&P towards these purchasers of securities.
Absent a contractual obligation or absent other special circumstances that are not present in any of our cases, it is our position, and courts have affirmed this position, that S&P does not owe a legal duty to purchasers of securities who happen to have read about a rating or happen to have seen it on our website. Unless we have a contractual obligation to a specific purchaser of the security, we do not owe a legal duty to those purchasers of securities. The next category are lawsuits that have been brought against S&P outside the United States. Many of these lawsuits have arisen out of the ratings by S&P of Lehman prior to the bankruptcy, and many of the claims in these lawsuits outside the United States are in effect that S&P should have predicted the bankruptcy.
Contrary to the fact that no one else predicted Lehman's bankruptcy, S&P should have predicted the bankruptcy. Therefore, we are being sued in many jurisdictions outside the United States. Here, we have a very powerful argument that has been very successful in a case in Italy that was decided at the end of 2013 in December. That argument goes to jurisdiction. The simple argument is Lehman ratings were issued by S&P, not in Europe, not in London, not in Italy, but in New York City. The courts in Italy have agreed with our argument that given the fact that the ratings were issued out of New York City, the Italian courts do not have jurisdiction over claims by purchasers of Lehman bonds in Italy.
We will be using this very favorable precedent not only in Italy, but across Europe to attack jurisdictional claims by purchasers of Lehman bonds. The final category are the lawsuits brought by the Department of Justice and the state attorneys general, and let me turn to discuss those for you briefly. As many of you know, in February of last year, the Department of Justice brought a civil action of fraud against S&P for ratings that were issued by S&P during the 2004-2007 period, and for statements made by S&P regarding its ratings process, particularly relating to its independence and objectivity. Our response at the time the lawsuit was brought and our response today is the same. The lawsuit has no factual or legal basis, and we will continue to aggressively defend against these baseless claims. Why do we say that?
First, all of the ratings that were issued that have been challenged in the DOJ case were issued in good faith by ratings committees, which believe that the ratings that were issued at the time they were issued were entirely appropriate. I should remind you that ratings are issued by S&P committees. They're not the product of individual analysts. These are committee conclusions, committee rating opinions. We do not believe that the DOJ will be able to establish that in over 150 CDOs that are at issue in the DOJ case, ratings committees across S&P uniformly engaged in fraudulent ratings and issued ratings that they did not believe were appropriate at the time they were issued. This is not a hindsight operation.
You do not look at the ratings today and look back and say, "Were they wrong or they were right?" These are opinions that you have to look at at the time they were issued, and the ratings were appropriate at the time they were issued. The second point that's a weakness of the DOJ case is that the ratings that S&P issued that are challenged in the DOJ case were virtually identical to every rating issued by the other major rating agencies. How will the DOJ be able to prove that S&P's ratings were fraudulent when the ratings of other major rating agencies were virtually identical? Similarly, the statements made by the other rating agencies about independence and objectivity were identical to the statements made by S&P during this period.
How will the DOJ prove that S&P's statements were fraudulent when they were identical to the other rating agencies? Now, the third weakness in the defense of the DOJ's case is that these opinions are forward-looking opinions about the economy. They were based in part about S&P's understanding of what the housing market was going to do going forward, what the economy, in general, was going to do going forward. These opinions were entirely consistent with the opinions issued at the same time and based on the same data by U.S. government officials and the Federal Reserve. A good illustration of this is if you look at the minutes that were just issued by the Federal Reserve going back to 2008, in particular, the minutes of the meetings that were held after the Lehman bankruptcy in September of 2008.
Here you have Federal Reserve officials looking at the economy, looking at the housing market, still not knowing what direction the housing market was going to go. Still not knowing the severity of the economic crisis that was about to happen to us. This was in September of 2008, more than a year after S&P downgraded many of the ratings that are challenged in the DOJ case, more than four years after the initial ratings from 2004 that are at issue in this case. How will the DOJ be able to say that it was fraudulent for S&P to fail to predict the severity of the housing market and the severity of the global recession when the same predictions were being made a year later in 2008 by the Federal Reserve? We don't believe they will be able to sustain that level of proof.
Finally, the alleged victims in this case are the very institutions that put together the securities that were rated by S&P. These are sophisticated financial institutions that knew exactly what was going into each one of these CDOs, which mortgages were in, which mortgages were not. How were these financial institutions victimized by S&P when S&P issued ratings? How is the DOJ going to prove that these victims lost anything as a result of these ratings when many of these CDOs were warehoused by these institutions, were never put into the market? S&P is not responsible for a decision by an institution to warehouse a CDO that it rated. Again, we do not believe the DOJ will be able to meet the stringent level of proof required in a fraud case against S&P. Now, what is the status of this case?
It is in pretrial discovery, the early stages of pretrial discovery. We will be taking depositions of government officials to establish what the economists in the government were saying to the people who were talking about the economy in the U.S. government. We will be asking what the government knew about financial institutions during this period and whether they made misrepresentations to S&P in connection with the ratings process. We will also be asking what did the government know about what other rating agencies were saying about independence and objectivity. 3 categories of documents which we've asked for from the government have not been produced by the government. We have been compelled to file a motion to compel the production of these 3 categories. They relate to financial institutions that the government has been investigating. They relate to rating agencies that the government has been investigating.
Finally, the one you've probably been reading about, it relates to one of our 19 affirmative defenses, the retaliation defense. What is the retaliation defense? It is unconstitutional as a matter of First Amendment law for the government to punish a speaker about government which it disagrees with, which was critical of the government. S&P, unlike any of the other rating agencies, was the only rating agency to downgrade the U.S. in 2011. It's our position in the DOJ case that the lawsuit brought only against S&P is in retaliation for that downgrade, in retaliation for that critical speech about the government. As I said before, the other rating agencies' ratings were virtually identical. The other rating agencies' statements about independence and objectivity were identical to S&P.
If you look back at the congressional investigations that predated the downgrade, you will find that the other rating agencies were under the same investigatory scrutiny as S&P. The other rating agencies have been sued by state attorney generals. The only reason we contend why S&P was picked and not the other rating agencies is because S&P downgraded the U.S. There was a hearing held last week on March 11th. A decision is pending by the judge in that case. We are hopeful we will get documents to support our defense. In federal courts, the plaintiff can support its claims by getting documents from the defendant. We've given over 30 million pages of documents to the DOJ. The defendant, similarly, can defend its defenses by getting documents from the government. We're hopeful that the judge will give us the documents that we requested.
Let me turn to the state attorneys general's lawsuits, many of which were brought simultaneously with the DOJ lawsuit last February. We have 19 states and the District of Columbia that have filed lawsuits against S&P. 17 of those cases have been consolidated in federal court here in New York City before Judge Furman. The state claims generally say that S&P engaged in misrepresentation, in violation of consumer protection laws, when it made statements about independence and objectivity. These cases are now subject to a remand motion before Judge Furman. The states would like to take the cases away from federal court here in New York City and send them back to their respective state courts. That motion has been fully briefed and argued as of October of last year. We are awaiting a decision. A decision is pending.
If S&P prevails and the state motion to remand is denied, all pretrial activities in the case will take place here in New York City before Judge Furman in federal court, and then we'll go back to the federal court in each state where the case is pending. If the remand motion is granted, all of the cases will go back to state court, and the case will be handled in state court. Regardless of what happens on the remand motion, we will immediately move to dismiss all of the state AG cases, and we have very strong arguments. The most powerful argument is the threshold argument, again, of jurisdiction. The Supreme Court of the United States, in decisions issued in January and February of this year, changed the game for jurisdiction.
What the cases in the Supreme Court said was that unless an out-of-state company like McGraw Hill, which is incorporated in New York and has its principal place of business in New York, unless that out-of-state corporation is at home in the state that's suing, and at home means place of incorporation, place of principal place of business, the courts of that state do not have jurisdiction. This is a matter of due process under the U.S. Constitution. It's deeply rooted in the Constitution. Because of the importance of this threshold issue, we have asked Judge Furman, and he has agreed, that if he keeps the case and does not remand the cases back to state court, he will take on an expedited basis, briefing on the sole question of jurisdiction.
Do the state courts, in light of these recent significant landmark decisions by the U.S. Supreme Court, have jurisdiction over McGraw Hill, which is a New York-based company, or S&P, which is a Delaware-incorporated company. Attorney generals outside of New York and Delaware, our position is, do not have jurisdiction over McGraw Hill or S&P, and we will move to dismiss on that basis as soon as we have the opportunity following Judge Furman's decision on the remand motion. Let me finally turn to our track record. We've had an excellent track record since 2007. As you'll see from the slide, we've had 36 cases dismissed in their entirety in response to motions to dismiss. Of those 36 cases, 13 were appealed to higher courts. All 13 were affirmed. All the dismissals were affirmed. Those 36 cases are no longer alive and well.
We've also had 11 cases voluntarily withdrawn, we think in large measure because of the success we've had in the dismissed cases. It's not only the numbers that are impressive or important, it's the precedents that came out of those decisions. We have received very important precedents from the courts dismissing the S&P cases, which we will use in the pending cases and in any future cases brought against us. For example, the courts are very clear. The plaintiffs have desperately tried to say that a rating is a fact, and we got the fact wrong and therefore we should be liable. The courts have consistently rejected that argument and said, "No, no. Ratings are forward-looking opinions about creditworthiness.
There is no such thing as a false opinion. The only way you can succeed in an action against S&P in challenging a rating is to prove that at the time the rating was issued, the rating committee, S&P, did not believe the rating was appropriate at that time. We do not believe that either in the pending cases or any future cases that will be brought, that they will be able to prove that the ratings committees of S&P knowingly issued inaccurate false ratings. There is simply no evidence that we have seen to demonstrate that ever happened during the relevant period. In closing, I should also point, on the left, you see the record of cases that were filed and cases that were dismissed. There has been a steady decline in the number of cases that have been filed, particularly since 2009.
The only slight uptick you'll see is in 2013. We think that is likely caused by the expiration of applicable statutes of limitations. That was a six-year moment in the cases. We think we will continue to see a steady decline, if not elimination, of cases being filed against S&P arising out of the financial crisis. In closing, let me reiterate, we will continue to aggressively defend these cases. We have made significant progress, and we continue to believe that these legal risks are clearly manageable. I will be happy to take questions at the end of the presentations during the final Q&A period, both on these cases and any of our other outstanding cases that I haven't touched upon. With that, let me turn the podium over to our last presenter, Jack Callahan, the Chief Financial Officer.
We certainly covered a great deal of material this afternoon. I hope that for all of you, that you found this deep dive into McGraw Hill Financial very helpful. I hope you better appreciate just what a great terrific group of leaders that we have across the company. What I want to do to close out all of our prepared remarks before moving to the final question and answer session, I want to recap some of the high points of creating growth and driving performance. First, I will discuss in some detail the financial growth goals that we have set out. I do want to discuss and outline our approach to the allocation of capital. I want to review with you the initiatives underway to deliver on the at least $100 million growth target that we have set out today.
I do want to take a minute up front just to give you an update on our current thinking with regards to McGraw Hill Construction. This was a difficult decision to consider strategic alternatives for construction. The business has a great position in the industry with leading brands like Dodge and Engineering News-Record, and a shifting business mix to data and analytics made possible by, frankly, just a great amount of tremendous work by our construction team over the last few years. Also with the construction industry beginning to pick up, this business is well-positioned to return to growth. There is, and we looked at it, there is clearly an opportunity for greater consolidation in this space across North America. We considered investing additional capital to participate in this consolidation opportunity. In the end, the management team and the board of directors chose another path.
Therefore, we are actively looking for strategic alternatives, such as partners or to exit the business completely. Work is already well underway, and we will update you on our progress as we go through the year. Let me turn to discuss our growth goals in some detail. Over the last three years, we have added over $900 million in revenue, growing 11% overall, 9% organically. Going forward, we believe we have the potential to continue growing on an organic basis in the mid to high single-digit growth range. Most of the specific businesses have grown at this range or better. I hope you feel more confident of our go-forward prospects now that you've had the opportunity to hear from each one of the business leaders.
Please note for 2014, we are guiding to a mid-single digit growth rate, in part due to selected divestitures such as Aviation Week last year and small product line shutdowns at S&P Capital IQ, which have impacted our year-on-year growth rate by about 1 point. At the same time, we are focused on continuing to expand overall margins. Consolidated operating margins improved 5 points over the last three years to 33% in 2013, and we are guiding to at least another one point improvement this year. Going forward, we have set as a goal to sustain margin expansion driven in part by continued top-line growth across the businesses and ongoing productivity initiatives. To aid overall margin improvement, we intend to continue the momentum in driving productivity.
After delivering $175 million in productivity across both McGraw Hill Financial and McGraw Hill Education as part of the Growth and Value Plan, we are targeting at least another $100 million cost out opportunity over the next three years. While our first priority is always going to be invest to drive top-line growth, we do have specific initiatives already in place to contribute on this productivity goal, as evidenced by the restructuring actions that we took in the fourth quarter to streamline our management operating structure and to reduce our real estate footprint, most notably in New York City, where we're moving from three locations to two. There are also initiatives underway in procurement, technology, data acquisitions, and shared costs to ensure we have enough ideas, initiatives in place to deliver on this $100 million cost out target.
To give you greater insight into just one example, one area that we're looking at very deeply, let me give you a little peek into one part of our cost structure that you frequently ask about: unallocated costs. In 2013, unallocated costs were just over $200 million. The primary driver of the increase over the last few years was the impact of stranded costs created by multiple divestitures, most notably McGraw Hill Education. To be clear, only about half of these unallocated costs are related to the corporate center. Over a third of the unallocated costs are shared costs that historically have not been allocated back to the individual business units, and these shared costs have gone up a bit due to the impact of the stranded costs through the divestitures. There is also excess real estate costs, essentially empty space not used across the business today.
Going forward, we are working to reduce the negative impact of these stranded costs, reduce our real estate footprint, streamline our corporate costs. Reducing these unallocated costs will contribute in some small part on this $100 million cost out target. Maybe not so small, but it will contribute. You bring that together, all in all, these productivity initiatives combined with continued top-line revenue growth should generate sustained margin expansion and growth in operating profits. Below operating profit, we are working on more effective tax planning, and we do anticipate continuing share repurchase activity. Taken together, we are setting double-digit growth in earnings per share as a goal, consistent with the current guidance that is in place for 2014. However, volatility in debt issuance or equity markets could impact performance in a given year. On a three-year view, we believe this goal is achievable.
Consistent with this promising outlook in earnings growth, we also anticipate strong cash flow. That the largely one-time costs of the growth and value plan are behind us, we are guiding to a step-up in free cash flow in the range of $1 billion for 2014, and we anticipate that free cash flow should exceed $1 billion for 2015 and beyond. Furthermore, given that our reinvestment requirements are limited, capital expenditures, for example, last year, were just $117 million, we have significant financial flexibility. That flexibility is clearly enhanced by the strength of the balance sheet. We have approximately $1.6 billion in cash, and our long-term debt is down by a third. We all agree with a point that many of you make to us, that the balance sheet currently is not optimized.
View where the balance sheet today is as a unique moment in time due to the proceeds from the sale of Education, combined with a prudent decision to maintain extra flexibility until the legal issues facing the company are resolved. In addition, we want to be sure that we have the dry powder to consider attractive acquisitions as they come up. In light of this balance sheet strength, I want to spend a few moments here just to outline how we think about how we want to allocate capital. The first priority will be to fund organic growth opportunities in the business. These are the best investments delivering the best return. I would point to our successful track record in building great businesses, Ratings, Index, Platts, in a largely organic manner. The second priority will be value-creating acquisitions.
Over the last three years, we have a good track record in adding tuck-in acquisitions to add breadth and capability to the portfolio. From time to time, we may take a look at larger acquisitions in a highly disciplined manner. We will only move forward if we have clear synergy and implementation plans in place to create shareholder value. The next priority is continuing to grow the dividend year-on-year. Look, this company has paid a dividend since 1937 and has increased it every year for the last 41 years. We are one of fewer than 25 companies in the S&P 500 today who can claim a similar track record. You can assume that we're going to maintain that record going forward. Let me back up one. Back up. There you go.
With regards to increased leverage, we are open to having additional debt if there is a financing requirement. Over the long term, we do believe it is important to remain investment-grade. As I just mentioned, we do believe it is important to have some flexibility over the medium term. Finally, we will continue to repurchase shares to both cover any dilution from equity-related compensation and to continue reducing overall share count as we have the last few years. Those are our principles and our hierarchy about how we think about allocation of capital. Now let's have a look how in practice we chose to allocate capital. Let's review acquisition activity. These are the 9 acquisitions and the 1 joint venture that we have completed over the last three years.
The most significant transaction was the formation of the exciting joint venture with CME to combine S&P Dow Jones Indices, where we now own 73%. In S&P Capital IQ, we added capabilities through acquisitions for R2 and portfolio analytics, CMA for pricing, QuantHouse for high-speed exchange-level information. For Platts, we added capability with Bentek and North American Natural Gas, Steel Business Briefing for iron ore and steel, and Kingsman as our initial foray into agriculture with a focus on sugar and ethanol. In ratings, we increased our ownership of CRISIL, and CRISIL directly acquired Coalition. In total, over the last three years, we have spent $650 million approximately in acquisitions. These were all great additions to our portfolio, and we look to leverage our current financial strength to add to our portfolio going forward.
During the same time period, we have returned significant cash to shareholders, both in terms of dividends and share repurchases, close to $4.4 billion over the last three years. Going forward, as I stated just a moment ago, we are committed to sustain year-on-year increases in the dividend, and our board of directors approved another 50 million share authorization just last December, which should sustain the program for the next few years, subject to market conditions. Let me sum up. You have now heard directly this afternoon from Doug, Ken, and all the business leaders. We are all focused on creating growth and driving performance. We believe McGraw Hill Financial is well-positioned to deliver on our longer-term financial goals of mid to high single-digit revenue growth, sustained margin expansion aided by productivity initiatives, mid-teens earnings per share growth, and $1 billion plus of free cash flow.
I hope that you agree that these goals for McGraw Hill Financial represent exceptional performance. Personally, I'd like to thank you all for coming today. This is an important day for all of us. Now that we are going to move to the final Q&A session, I would invite all of the presenters back to the podium.
Thank you for spending the afternoon with us. We hope that you were able to get a good broad view of our great senior management team, as well as understanding the types of businesses that we have. Many of you have been familiar in the past from the work that you did in the company of S&P Ratings, and you've also been familiar with Capital IQ, maybe because you know Lou, you know the business, or you actually are a client. Not many of you knew a lot before about J.D. Power or about Indices, about Platts, and especially CRISIL. It's great to have Roopa here with us today as well. As we talked through the day, there's many factors which are positioning our company and driving it for growth. We have a strong track record of delivery.
Our last growth and value plan delivered value and positioned us for growth. We are seeing trends in the markets, in the capital markets, the commodity markets, that are very favorable to us, and we watch those carefully to see where we're going to invest our considerable resources and our talent. We have a great stable of brands, which are brands that resonate with the markets, and they have high value. We have global growth. We have a globally well-positioned company that will grow. As you saw here today, and as you know, we have incredibly talented people. With that, let me open up for questions, our last session, before we head over to have demonstrations of some more talented people and some of our great products. Questions, please. Let's go right here. Yes.
Thank you. Again, Alex Kramm from UBS. I guess, just for Jack, I think you mentioned optimizing the balance sheet a couple of times, and I obviously hear you on the conservatism and the legal overhang. If we exit this in the next couple of years, what are the metrics you will be looking at in terms of leverage ratios, gross net bases, and obviously, with the business mix and also, obviously, if you could use that for share purchases actively?
Yeah. I think the only constraint we have on where we can go with the balance sheet is we do want to retain strong investment-grade quality in our rating. Even if, let's say, over a period of time, the legal overhang went away, even if that was our intent, we'd have to think about what's the right path to get a little bit more leverage over the P&L over a period of time. It's not something we could address, I don't think, overnight. Clearly, we have a fortress balance sheet right now. We think it's prudent to keep it for right now for both the legal issues and to let the businesses grow if there's an idea that comes along. I look forward to the day when we can use the balance sheet a little bit more proactively than we are today.
Let's go back there.
Hey. This is Andrew Rosenfeld from Meritage. I had a legal question for Ken. In the negligent misrepresentation cases, what are the legal merits, in your opinion, of the argument that S&P did have a duty of care if the group that could purchase the rated securities at issue was limited by something like a QIB rule?
We have taken the position in cases that have raised just that point that we do not have a legal duty, that that's too big a group. The whole point of the duty doctrine is to avoid unlimited liability. We say we don't give investment advice. That's clear on our website and all of our publications, so no one should be of the opinion that S&P is giving investment advice to anybody. Even in a group like that, the courts generally find that that's too large a group, that that's not a one, two, three, four, five, that's hundreds of people that could qualify for that kind of investment. Our position is we have no legal duty in that context.
Let's go back here to the center.
Sure. Hamzah Mazari, Credit Suisse. Jack, just for clarification, would you lever up for the right acquisition, even if their DOJ case has not started? That's just part one of the question.
It's a hypothetical question. It comes back to if we thought the transaction created shareholder value, I still think we have adequate flexibility to consider acquisitions of a certain size. I don't really want to comment on what size. I do think we have a fair amount of flexibility and still leave, I think, enough dry powder for other issues.
Fair enough. Just last question. On the productivity initiatives of $100 million, how much should we be reading into at least $100 million? A lot of it is coming from real estate. It seems that number is pretty conservative. What does the ramp look like? Is it front-end loaded, back-end loaded? Thanks.
I think some of the real estate benefits, as you noted, probably will be pretty significant. That may be a little back-end loaded. Across some of the others, I would say once we have hit sort of the middle part of this year, I would say it would be sort of even over the next two and a half years. It would be the way I think we could sort of think about it.
Let's go back to the middle over here.
Douglas Arthur, Evercore. Ken, I was under the impression that the March 11th hearing was going to provide, and maybe it will when there's a ruling, some clarity on the government's attempt to increase the scope of the number of CDOs at issue in the trial and the tranches that might be at issue. Your comeback, that discovery time, if the case was expanded, would be elongated. Where are we in that, or if we're anywhere, and is it still fair to think of time to trial as sometime mid 2015?
On the first part of your question, the government has identified more than 150 CDOs that they say they will be using at the trial, if there is a trial, to pursue their claim. We know what the universe is. It's approximately 150 or more CDOs. We have taken the position that in order to have a manageable trial in a manageable amount of time, and in order to have a manageable discovery period, we need to take a selective number of those 150-plus CDOs and use those for purposes of the trial as a first phase.
We've suggested to the judge, and we will be filing a motion to the effect that, "Judge, we ask you to make a subset of the 150 CDOs so that we don't have a six-plus month trial, and that we don't have years of discovery." Because each CDO requires knowing what that rating committee said and what the issuer said, the arranger, what mortgages went into each CDO. They're claiming that each CDO was a fraudulent rating. We're going to attack each one of them. We're going to go to the judge, and we're going to ask the judge, and we've already told the judge, that we would like to reduce the number of CDOs in the first trial.
In terms of the trial date, the judge has suggested, subject to what I just said, that he would like to schedule a trial sometime starting around September 2015. He's asked the parties to submit this week a proposed discovery schedule leading up to a trial in September 2015. We will do that subject to expressly reserving our right to ask him to reduce the number of CDOs so that we can have discovery in a time that would allow for a trial in 2015 in September. If we have 150-plus CDOs, we don't see how we can finish discovery in time for that trial date. There is no trial date yet, but the judge has signaled he would like to start September 2015.
Craig Huber of Huber Research. A question on share buybacks. How much is the DOJ case holding you back in terms of how much you're budgeting to buy back stock over the next couple of years? Also more near term for 2014, in your EPS guidance for the year, how much are you baking in there for share buyback in terms of number of shares, please? Thank you.
Well, Craig, to the first part of your question, I don't think it's held us back much at all because kind of given the aggregate amount of total capital we've turned to shareholders and a significant reduction that you've seen in our share count. I think if you look at the last three years, we've been fairly aggressive. We're a little reluctant to be overly specific as to what's exactly baked into our guidance, but our guidance does include continued share repurchase activity. We have repurchased shares in this quarter. We would continue to, depending on market conditions, continue to see that opportunity as we go through the year.
Right back there.
Thank you. Andre Benjamin from Goldman Sachs again. To come back to the cost savings point. Glad we touched on the timing, but we did stop a little bit short of the margin goal. I wanted to know if there was any margin goal attached to that cost savings and how we should think about potentially, even though it is cut on a headline basis, you may then take some of those savings and reinvest it in other parts of the business so it does not necessarily fall to the bottom line.
Andre. We are a little reluctant to be overly specific about a margin goal, an absolute number much beyond this year. As a reminder, we had said for 2014, we do believe that we will improve our margins by at least a point for this year. Moving beyond that, we do look to continue to sustain margin improvement in 2015 and 2016. I think it would be a little bit too early to be overly prescriptive. Obviously, there needs to be also, if we are doing a little better on revenue, there may be an opportunity to reinvest back in the business. We are focused on sustaining some level of margin expansion over the next few years.
Hi, Manav Patnaik with Barclays. I have two questions. One is for Platts and the other is on J.D. Power. On Platts, I understand sizing the market is tough. Just to get us a little more comfortable in terms of the double-digit long-term growth rates, how should we think about the mix between volume and pricing? Maybe if that is a better way to try and ask the question. Just on J.D. Power, in the context of active management and trying to lever every other sort of division you have in McGraw Hill, how much do you currently benefit from being part of McGraw Hill? How much can you do better? How much more can you use of them to benefit your business or even vice versa?
I will take the Platts one first. Unfortunately, it is a bit difficult to deconstruct that fully. What I can offer is that if you look at unit price increases for a given unit of product, those are relatively modest, in the low single digits, oftentimes around 2%-3%. It is the combination of aggregate usage and volume within existing customers. As I mentioned earlier, just expanded usage of our services, whether they be existing benchmarks or some of the new benchmarks. We have done, for example, a big move over the last two years toward an enterprise licensing structure where that affords clients much broader usage of the services within their enterprise. We are able to elevate license levels to reflect that. It makes it difficult to fully deconstruct, I think, the answer to your question. For us, it brings a lot of value to the customer.
It brings a lift in the business, we like those kind of strategies, customers like them as well.
With respect to the benefits of belonging to McGraw Hill Financial. First, there's obviously scaled support such as IT, that is important to us because we are moving in the market research world to a digitized world, they've been supportive in helping us make that transition. That's important. The second is the support for growth. We see considerable opportunity both in terms of product extension and potential moving into certain adjacencies. We think we're a much stronger company for that.
Let's go right up here.
It's Peter Appert at Piper Jaffray. Apologies to Chip starting out because I have a three-part question. Number one, Doug, I'm wondering, what are the financial metrics that you're most focused on in terms of evaluating the company's performance, what you think we should be looking at? Number two, maybe related to this, what drives the management compensation system? Thirdly, where, Doug, do you think the biggest opportunity is for margin improvement within this portfolio? Thanks.
Great. Our financial metrics are those which we presented to you today. We're looking at growing our top-line growth and having what's the mix of domestic versus international. We're looking at our margin expansion, which is another measure that we're looking at, and we're looking at EPS. A very simple measure that we're looking at today. Those are built into all of the compensation of everyone on this table, and everybody that's up here also has, with the exception of me and Jack and Ken, our performance goals are based off of total McGraw Hill Financial goals. Everybody else on this table has a combination of their business goals along with McGraw Hill Financial goals. By having combined goals, we have an alignment of our senior management team.
Across our senior management team, as you go deeper into the organization, it's more likely that your compensation goals are driven only by your business unit. At this most senior management level, all of us have a stake in the game for the returns of the entire group. Your third question, can you remind me?
Margin. Where do you see the most margin leverage?
There's a lot of margin leverage. There's margin leverage from the point of view of what we looked at at real estate. There's margin leverage from expanded costs, you call them stranded costs. There's margin leverage from doing things better. Generally speaking, we believe that just by being more actively managed company, which means that we're all going to be at 55 Water, most of us will be together in the same building. That will create a sense of team. It will create a lot more knowledge, day-to-day contact interaction amongst the management team. Through that, we can find other opportunities for margin expansion. What Jack outlined is really the first area that we're going to start attacking.
Can you call out one business segment where you see the biggest upside potential?
The question he asked was, are there any specific business segments where we would see other upside potential on our margins? No. Across the board, we're asking everybody to take a look at their margins. At the same time that we're asking the businesses to take a look, it's absolutely critical that the corporate center also take a look and a very hard, deep look at our expenses. Let's go. Jack, you want to add something?
I just want to remind everybody that margin expansion, we're going to work on cost very diligently. I think you heard that from me. You certainly heard that from Neeraj. It also has a lot to do with revenue growth and mix. Each one of these operators is very diligent about as they all are running businesses that have top-line growth potential, but they're very diligent about how they plan their expenses. There's operating leverage that they're looking to build into their P&Ls, we're looking to drive some of these cross-business initiatives to give us further oomph going forward.
Let's go back there.
Dan Duran, Frampton LP. This is a question for Mr. Vittor. His name escapes me right now, but your outside lead counsel has always really impressed me and given me a lot of comfort on the legal side. I think he's maybe 77 now. Do you have any idea if he plans to keep on representing McGraw Hill Financial? Thank you.
You're referring to Floyd Abrams, he has no plans of stopping. He will continue to represent us, we have excellent co-counsel on the DOJ case with Floyd, John Keker in California. Between the two, we're very well represented.
Zack Gober from Gates Capital. Jack, question on the guidance for revenue for the next three years. You've mentioned mid to high single digits. I was wondering what % of that you saw from organic versus acquisitions, and on organic, what % of that's coming from price?
In terms of mid high single digits, the view is be all organic. I think if we do acquisitions, that would come in on top of that. It just as look back on history, the last three years, we've grown 11% overall, 9% organically. The guidance is really more based on what we think we can do pretty much with the portfolio that we have now. The price realization varies. I think you heard that from Larry. We talk about pricing a lot in ratings. I really don't have a great company-wide number to share with you, quite honestly, because it varies. You look at our index business, there's not a lot of pricing leverage built into that. It's all based on growth in the marketplace. I'd be hesitant to speculate. I would guess it's probably in the 2%-3% range.
Let's go to the back.
Tim McHugh, William Blair. Just the commentary around McGraw Hill Construction, I think it was phrased as you've completed your review of businesses, I guess. Just to clarify, does that mean at this point we're not looking or you're most likely done divesting anything? Is there still the potential that you're reviewing things, either smaller businesses or bigger ones over the next year?
We want to grow. I think we have really solidified the portfolio. I hope as you heard today, we have an outstanding lineup of businesses, we want to really get our focus on building off this space.
Let me complement that by going back to where we started, that we've got this core group of businesses here that are deeply analytical, they're global, they have fantastic brands, all of them are worth investing in. You guys, it doesn't mean you can invest in everything you want. Jack has an excellent capital allocation model. We work together to ensure that we're watching very carefully what are the best opportunities, because even though we are very well capitalized and have a strong balance sheet, that doesn't mean that we treat capital as if it's free. We make sure that we are allocating it in a way that we're going to get excellent returns from it. We have time for one more question. Do we have any more questions?