Q3 2025 MSCI Inc Earnings Call

At this time all participants are in a listen only mode.

Later, we will conduct a question and answer session, where participants are requested to ask one question at a time, then and yourself back to the queue for any additional questions. We will have further instructions for you later on I would like now to turn the call over to Jeremy you Lin head of Investor Relations.

<unk> and Treasurer you may begin.

Thank you good day and welcome to the MSCI third quarter 2025 earnings Conference call earlier. This morning, we issued a press release announcing our results for the third quarter of 2025. This press release, along with an earnings presentation and brief quarterly update are available on our website.

Dot com under the Investor Relations Tab, let me remind you that this call contains forward looking statements, which are governed by the language on the second slide of today's presentation. You are cautioned not to place undue reliance on forward looking statements, which speak only as of the date on which they are made are based on current expectations and current.

Good day, ladies and gentlemen, and welcome to the msci. Third quarter 2025 earnings conference call. As a reminder, this call is being recorded at this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session where participants are requested to ask 1 question at a time. Then answer yourself back to the queue for any additional questions. We will have further instructions for you later on. I would like now to turn the call over to Jeremy Ulan head of investor relations and treasure. You may begin.

Conditions and are subject to risks and uncertainties that may cause actual results to differ materially from the results anticipated in these forward looking statements.

For a discussion of additional risks and uncertainties. Please see the risk factors and forward looking statements disclaimer in our most recent Form 10-K and in our other SEC filings. During today's call. In addition to results presented on the basis of U S. GAAP. We also refer to non-GAAP measures, you'll find a reconciliation of our non.

Thank you, good day and welcome to the msci. Third quarter 2025 earnings conference. Call earlier this morning, we issued a press release announcing our results. For the third quarter 2025, this press release along with an earnings presentation and brief. Quarterly update are available on our website, msci.com under the investor relations tab.

non-GAAP measures to the equivalent GAAP measures in the appendix of the earnings presentation.

So discuss operating metrics, such as run rate and retention rate.

For information regarding our use of operating metrics such as run rate and retention rate are available in the earnings presentation.

Let me remind you that this call contains 4 looking statements, which are governed by the language on the second slide of today's presentation. You are cautious, not to place undue Reliance on forward-looking statements, which speak only as of the date on, which they are made, are based on current expectations, and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from the results. Anticipated in these forward-looking statements,

On the call today are Henry Fernandez, our chairman and CEO Baer Pettit, our president and COO and Andy Wichmann, Our Chief Financial Officer Lastly, we wanted to remind our analysts to ask one question at a time during the Q&A portion of our call. We do encourage you to ask more questions by adding yourselves.

Back to the queue with that let me now turn the call over to Henry Fernandez Henry.

Thank you Jeremy.

Good day everyone.

And thank you all for joining us.

For a discussion of additional risks and uncertainties, please see the risk factors and forward-looking statements disclaimer in our most recent form 10K. And in our other SEC filings during today's call, in addition to results, presented on the basis of us gaap, we also refer to non-gaap measures. You'll find a Reconciliation of our non-gaap measures to the equivalent Gap. Measures in the appendix of the earnings presentation. We will discuss operating metrics such as run rate and retention rate. Important information regarding our use of operating metrics such as run rate and retention rate are available in the earnings presentation.

And then third quarter MSCI delivered strong financial and sales performance.

As highlighted many of our underlying competitive advantages.

We had organic revenue growth of 9%.

Adjusted EBITDA growth of 10%.

On an adjusted earnings per share growth of over 15%.

And coo, and Andy wishman, our Chief Financial Officer. Lastly, we wanted to remind our analysts to ask 1 question at a time during the Q&A portion of our call. We do encourage you to ask more questions by adding yourselves, back to the queue with that. Let me now turn the call over to Henry, Fernandez, Henry.

Thank you, Jeremy.

Since the beginning of the third quarter.

Good day, everyone.

And thank you all for joining us.

We repurchased one on a quarter billion dollars warrant.

<unk> shares.

This brings our year to date share repurchases to over one $5 billion, which demonstrates very strong conviction in Dubai view of our franchise.

In the third quarter, msci, delivered strong financial and sales performance.

That highlighted many of our underlying competitive advantages.

We are organic Revenue, growth of 9%.

Adjusted ebida growth of 10%.

Moreover, Msci's board of directors has authorized.

And adjusted earnings per share, growth of over 15%.

$3 billion warrants in additional share repurchases for the next few years.

Since the beginning of the third quarter.

Our third quarter operating metrics, including total run rate growth of over 10%.

We repurchased 1 and a quarter billion dollars worth of MSI shares.

Which includes asset based fee run rate growth of 17%.

Our asset based fee performance was driven by record AUM levels in both <unk>.

This brings our year-to-date share of purchases to over $1.5 billion, which demonstrates very strong conviction in the value of our franchise.

Yes.

Non ETF products linked to MSCI indices.

In my remarks today I will discuss a few of the biggest themes from our third quarter results.

Moreover msci's board of directors has authorized 3 billion dollars worth in additional share of purchases for the next few years.

Starting with our index franchise.

Our third quarter operating metrics included, total, run rate growth of over 10%.

Q3, underscore the depth and versatility of our index franchise.

Which includes asset based fees run rate growth of 17%.

MSCI achieve recurring net new subscription sales growth of 27% in the index.

Our asset-based fee performance was driven by record AUM levels in both.

ETF.

Including 43% growth in the Americas.

And non-etf products linked to msci, indices.

Total AUM in investment products linked to MSCI indexes reached six four trillion dollars globally.

In my remarks today, I will discuss a few of the biggest themes from our third quarter results.

Starting with our index franchise.

Including $2 million to $3 million in ETF products.

Q3 underscore The Depths and versatility of our index franchise.

And $4 two trillion dollars in non ETF products.

There are now four ETF products linked to MSCI indices that have more than $100 billion in.

Msci, achieve recurring. Net new subscription sales growth of 27% in index.

Including 43% growth in the Americas.

AUM.

This help our ABF run rate keep that new record high of nearly $800 million.

Total AUM in investment products linked to MSCI indexes reached $6.4 trillion globally.

The ongoing adoption of MSCI indices.

Showcases the investment community's confidence in using our industry as a foundational element of their portfolios.

Including 2.2 trillion dollars in ETF products.

And 4.2 trillion dollars in non-etf products.

And to help them attract capital.

And analytics MSCI deliver recurring net new sales growth of 16%.

There are now 4 ETF products linked to msci. Indices that have more than 100 billion dollars in AUM.

Driven by strong adoption of our risk tools and equity models by multi strategy hedge funds.

This helped our APF, run rate, hit a new record, high of nearly $800 million.

Our growth in analytics increasingly supports our growth in private assets and.

The ongoing adoption of MSCI indices.

And vice versa.

Last month for example, MSCI launched a private credit factor model.

Showcases the investment community's confidence in using our indices as a foundational element of their portfolios.

And to help them attract capital.

Powered by data from more than 1500 private credit funds in our proprietary database.

In analytics, MSI delivered recurring net new sales growth of 16%.

This factor model will provide investors with improved transparency and a consistent integrated view of market risk for our fast growing asset class.

Driven by a strong adoption of our risk tools and Equity models by multi-strategy hedge funds.

Our growth in analytics, increasingly supports our growth in private assets and vice versa.

Elsewhere in private assets, we recently launched a new global taxonomy.

Known as Mci box.

Last month, for example, MSCI launched a private credit factor model.

Private asset classification Spender. This proprietary asset classification framework aims to bring consistent comparable standards to private markets.

power, bi data from more than 1,500 private credit funds in our proprietary database,

Powered by artificial intelligence this new taxonomy goers, a wide range of private assets.

This Factor model will provide investors with improved transparency and a consistent integrated view of Market risk for a fast growing asset class.

<unk> private companies real estate and infrastructure.

Elsewhere in private assets. We recently launched a new Global taxonomy.

The new framework builds on <unk> long history as a stand our center in public equities.

And investors can use it to benchmark.

Analyze and communicate portfolios try to do some performance.

Comparable, standards to private markets.

And the last example illustrates msci's innovation themes are rapidly leveraging AI models, especially on our large proprietary databases.

Powered by artificial intelligence. This new taxonomy covers a wide range of private assets, including private companies, real estate, and infrastructure

To enhance existing products and develop new capabilities.

AI is allowing us to unlock significant value for clients.

The new framework Builds on msi's long history as a standard Setter in public equities.

Which will also lead to meaningful value creation for our shareholders.

And investors can use it to Benchmark analyze and communicate portfolio, strategies and performance.

In addition to rapid expansion and new products MSCI is significantly expanding our presence with newer client segments.

At the last example, illustrates msi's Innovation teams are rapidly leveraging AI models.

While deepening our penetration of more established segments, which bear will discuss.

Especially on our large, proprietary databases.

To enhance existing products, and develop new capabilities.

And with that let me turn things over to Barry.

Thank you Henry and greetings, everyone. As you are aware over the past year or so I have frame my remarks in these calls through the lens of Msci's main client segments and I will continue to do so as we grow our footprint with newer segments and deepen our penetration of existing ones.

AI is allowing us to unlock significant value for clients.

Which will also lead to meaningful value creation for our shareholders.

In addition, to Rapid expansion in new products.

Msci is significantly expanding our presence with newer client segments.

With that in mind as you saw in our earnings materials, MSCI recently enhanced our client segmentation strategy.

While deepening our penetration of more established segments.

Which bear will discuss.

Details in comparison points are available in our Q3 earnings presentation.

And with that, let me turn things over to bear.

Starting with hedge funds MSCI delivered 21% recurring net new subscription sales growth.

This was our highest Q3 ever for new recurring sales to hedge funds with notable strength in analytics.

Thank you, Henry, and greetings everyone. As you are aware, over the past year or so, I have framed my remarks on these calls through the lens of MSCI's main client segments.

And I will continue to do so. As we grow our footprint with Neuros segments and deepen our penetration of existing ones,

In particular, we see ongoing strong demand from our hedge funds for Msci's equity factor and enterprise risk and performance solutions, which have become deeply embedded in many clients investment workflows. For example, MSCI closed a seven figure renewal.

With that in mind, as you saw in our earnings materials, MSI recently enhanced our client segmentation strategy.

Details and comparison points are available in our Q3 earnings presentation.

Deal with one of the worlds largest hedge funds in which our contribution to their alpha generation and risk management is central.

Starting with hedge funds, MSI. Delivered, 21% recurring, net new subscription sales growth.

We also completed a global deal with a large U S based hedge fund that will expand its use of our enterprise risk and performance tools.

This was our highest Q3 ever for new recurring sales to hedge funds, with notable strengths in analytics.

Our analytics solutions are now fully integrated into every aspect of this client's risk management process, including its capital allocation framework for individuals portfolio management teams.

The common theme here is that amid elevated levels of market volatility and uncertainty hedge funds, one deeper faster insights into key sources of investment risk and return Msci's fortifying our position as a trusted partner.

in particular, we see ongoing strong demand from hedge funds for msi's Equity factor, and Enterprise risk and performance solutions which have become deeply embedded, in many clients investment workflows, for example, msei closed a 7 figure, renewal deal with 1 of the world's largest hedge funds in which our contribution to their Alpha generation and risk management is Central

We also completed a global deal with a large us-based hedge fund that will expand its use of our Enterprise risk and Performance Tools.

Turning to wealth managers, we achieved nearly 11% subscription run rate growth driven by a balanced mix of contributions from across our product lines.

Recently, a large independent wealth manager in the U S. Licensed our private capital fund transparency data to enhance client reporting on private funds.

Our analytic Solutions are now fully integrated into every aspect of this client's risk management process including its capital allocation framework for individual portfolio management teams.

This shows how MSCI is enabling both scaled data gathering and the standardization of private asset data to provide the enhanced portfolio insights clients needs.

The common theme Here is that amid elevated levels of Market, volatility and uncertainty hedge funds, want deeper faster, insights into key sources of investment risk and return msci is fortifying our position as a trusted partner.

Indeed wealth managers growing demand for tools and standards in private markets.

Creates a great opportunity for us.

Turning to wealth managers. We achieved nearly 11% subscription run rate, growth driven by a balanced mix of contributions from across product lines.

We also have a growing list of clients licensing MSCI wealth manager, which has allowed us to deliver unified solutions for the home office with advanced tools spanning personalized client portfolios and proposal generation along with regulatory workflows.

Recently, a large independent wealth manager in the U.S. licensed our Private Capital Fund transparency data to enhance client reporting on private funds.

Support.

This shows how msci is enabling both scale data gathering in the standardization of private asset data. To provide the enhanced portfolio, insights clients need

Shifting to asset owners, we posted 9% subscription run rate growth driven by analytics private capital solutions in the index.

Indeed, wealth managers growing demand for tools and standards in private markets.

Creates a great opportunity for us.

And one of our biggest deals in the quarter.

<unk> renewed our relationship with a major Canadian pension fund across our equity models and risk tools.

We also expanded our private capital solutions relationship with a U S based asset owner as we support this clients increasing demands for total portfolio of solutions and performance measurement and transparency as they grow their private markets allocations.

We also have a growing list of clients licensing, msei, wealth manager, which is allowed us to deliver unified solutions for the home office with Advanced tools spanning personalized, client portfolios and proposal generation along with regulatory workflow support.

And index.

In addition.

A rising number of Lps are using MSCI private capital indexes and our newly launched frozen indexes.

In 1 of our biggest deals in the quarter.

MSCI renewed our relationship with a major Canadian pension fund across our equity models and risk tools.

As their policy or performance benchmark, reflecting a shift away from public proxies and return targets and it increased alignment with MSCI standards.

We are therefore confident that our investments in private capital indexes will help create significant value both for clients and for MSCI.

We also expanded our private Capital Solutions relationship with the us-based asset owner. As we support this client's, increasing demands for total portfolio Solutions and performance measurement and transparency. As they grow, their private markets allocations

in addition.

Moving on to banks and broker dealers.

<unk> delivered 9% subscription run rate growth.

Including a record level of Q3 recurring sales.

A rising. Number of LPS are using msci. Private Capital indexes. And our newly launched Frozen indexes as their policy or performance benchmark.

This was driven primarily by index, which also posted its highest Q3 ever for new recurring sales.

Reflecting a shift away from public proxies and return targets, and it increased alignment with MSI standards.

Our most notable Q3 business win was a global index renewal deal with one of the largest banks in Europe that highlighted the mission critical role of MSCI index datasets in their trading index rebalancing research and product creation capabilities.

We are therefore confident that our investments in private capital indexes will help create significant value, both for clients and for MSI.

Moving on to banks and broker-dealers.

Msci delivered 9% subscription. Rung rate growth

Turning finally to asset managers, we achieved subscription run rate growth of just over 6%.

Including a record level of Q3 recurring sales.

MSCI is working intensely to increase our growth trajectory with this segment and our efforts had a meaningful impact in Q3.

This was driven primarily by index, which also posted its highest Q3 ever for new recurring sales.

In fact, we delivered our highest Q CRM record for new recurring sales to asset managers and index, which helped drive 11% overall, new recurring sales growth with asset managers across MSCI product line.

Our most notable Q3 business win was a global index renewal deal with 1 of the largest banks in Europe.

That highlighted the mission critical role of msci, index data sets in their trading index, rebalancing research and product creation capabilities.

For example, we landed a seven figure deal with one of the world's largest asset managers in support of their wealth management strategy.

Turning finally to asset managers, we achieved a subscription run rate growth of just over 6%.

MSCI is providing financial advisers with ever more sophisticated analytics tools, such as stress testing, which helps them grow their business and support their own clients.

MSCI is working intensely to increase our growth trajectory with this segment, and our efforts had a meaningful impact in Q3. In fact, we delivered our highest QCR on record for new recurring sales to asset managers and index.

We also completed a large deal with a top European asset manager to help them develop a centralized program for their risk performance factor and sustainability analytics across investment teams and different global locations.

Which helped Drive 11% overall new recurring sales growth with asset managers across MSI product lines.

This was another great example of our ability to expand and deepen existing client relationships using our one MSCI integrated solutions. Looking ahead, we are encouraged by Msci's long term opportunities and our ability to drive growth from recent areas of innovation and investments.

For example, we landed a $1 million deal with one of the world's largest asset managers in support of their wealth management strategy.

Msci is providing financial advisors with ever more sophisticated analytics, tools, such as stress testing, which helps them grow their business and support their own clients.

All of which should help us remain the mission critical provider of choice for clients across the capital markets and with that let me turn things over to Andy Hendi.

We also completed a large deal with the top European asset manager, to help them develop a centralized program for their risk for performance factor and sustainability analytics, across investment teams in different global locations.

Thanks Baer and.

Hi, everyone.

Our third quarter results highlight the momentum we are building across product lines, a dimension on which I will provide some additional color.

Within index were asset based fee run rate growth was 17%.

Etfs linked to our indexes captured $46 billion of inflows during the third quarter.

This was another great example of our ability to expand and deepen existing client relationships using our 1 MSI Integrated Solutions. Looking ahead, we are encouraged by MSCI's long-term opportunities and our ability to drive growth from recent areas of innovation and investment.

We continued to see strong demand for Etfs linked to MSCI developed markets ex U S indexes and MSCI emerging markets indexes.

In index subscription run rate growth was 9%, including nearly 8% growth with asset managers and area, where we saw some strength in the Americas.

All of which should help us remain the mission, critical provider of choice for clients across the capital markets. And with that, let me turn things over to Andy, Andy.

Thanks bear and hi everyone.

We recorded our best third quarter ever for index recurring net new subscription sales aided by our <unk> and <unk> modules and solid subscription run rate growth in the non market cap category.

Our third quarter results, highlight the momentum, we are building a cross product lines, a dimension on which I will provide some additional color.

Within index, where asset-based fee run rate growth was 17%.

We've been encouraged to see that new index products launched since the beginning of 2023 generated about $16 million of new recurring subscription sales over the last 12 months.

Equity ETFs linked to our indexes captured 46 billion dollars of inflows during the third quarter.

We continue to see strong demand for ETFs linked to msci. Developments xus, indexes and msci. Emerging Markets. Indexes

And the index retention rate remained durable at nearly 96%.

In analytics, we had subscription run rate growth of 7% driven by our highest Q3 ever for recurring net new sales.

And index subscription run rate growth was 9%, including nearly 8% growth with asset managers, an area where we saw some strength in the Americas.

Recurring sales in analytics benefited from 29% growth in equity solutions with strength among among hedge funds in the Americas and APAC.

We recorded our best third quarter ever for index recurring net, new subscription sales aided by our DM and EM modules and solid subscription, run rate growth in the non-market cap category.

Additionally, we saw strong sales of our multi asset class analytics, most notably with hedge funds as well.

We've been encouraged to see that new index products launched since the beginning of 2023 generated about 16 million dollars of new recurring, subscription sales over the last 12 months.

And sustainability and climate, we saw 8% subscription run rate growth for the reportable segment with.

And the index retention rate remained durable at nearly 96%.

With roughly 6% subscription run rate growth from sustainability solutions at 16% subscription run rate growth from climate solutions.

In analytics, we had subscription run rate growth of 7%, driven by our highest Q3 ever for recurring net new sales.

The sustainability and climate retention rate was almost 94% slightly higher than last year's level of 93% and reflecting the must have nature of our tools. Additionally.

with strength among among hedge funds in the Americas and APAC,

Additionally, we are seeing solid demand for new solutions, such as our geospatial offering which is seeing traction across client segments, including in particular with banks.

Additionally, we saw strong sales of our multi-asset class analytics, most notably with hedge funds as well.

Private capital solutions, we closed about $6 million of new recurring subscription sales in the quarter with success across client segments, including established segments, such as endowments and foundations as well as newer areas for us such as well and GPS.

In sustainability and climate. We saw 8% subscription, run rate growth for the reportable segments.

With roughly 6% subscription run rate growth from sustainability Solutions and 16% subscription run rate growth from climate Solutions.

The sustainability and climate retention rate was almost 94%.

Additionally, we continue to see strong momentum with our total plan offering.

Slightly higher than last year's level of 93% and reflecting the must-have nature of our tools.

Real assets recurring net new sales improved aided by stabilizing retention trends.

We're also driving sales from newly introduced product areas, including our data center offering which has gained traction with GP investors.

Additionally, we are seeing solid demand for new solutions such as our geospatial offering, which is seeing traction across client segments, including in particular with banks.

Across BCS in real assets, the retention rate improved slightly to 93, 3%.

Private Capital Solutions, we closed about 6 million, dollars of new recurring, subscription sales in the quarter.

Finally, turning to our full year guidance as we close out 2025 the.

The increase in the low end of our expense guidance range is consistent with our past comments and driven by the strong growth in AUM levels linked to our indexes.

With success across client segments, including established segments such as endowments and foundations, as well as newer areas for us, such as Wealth and GPS.

Additionally, we continue to see strong momentum with our total plan offering.

As a reminder, interest expense guidance reflects the previous notes issuance during the third quarter.

In real assets recurring net new sales improved aided by stabilizing retention trends.

And the increase in free cash flow guidance reflects business growth and the impact of tax benefits.

We're also driving sales from newly introduced product areas including our data center offering, which is gained traction with GP investors.

In summary, Msci's strong Q3 results are reflective of our mission critical durable solutions and are accelerating pace of innovation.

Across PCS and real assets. The retention rate, improves slightly to 93.3%

Solid momentum and delivering new products capabilities and enhanced go to market efforts and these are translating through to tangible results.

Finally, turning to our full-year guidance as we close out 2025.

We look forward to keeping you posted on our progress and with that operator. Please open the line for questions.

The increase in the low end of our expense guidance range is consistent with our past comments and driven by the strong growth in AUM levels, linked to our indexes.

Thank you as a reminder, task a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

As a reminder, interest expense guidance, reflects the previous notes issue during the third quarter.

And the increase of free cash flow guidance for Flex business growth and the impact of tax benefits.

And again participants are requested to ask one question at a time then the answer yourself back to the queue for any additional questions.

In summary mci's strong Q3 results, are reflective of our mission, critical durable Solutions and our accelerating pace of innovation.

And our first question will come from Manav Patnaik with Barclays. Your line is open.

We're seeing solid momentum in delivering new products, capabilities and enhanced go to markets and these are translating through to tangible results.

Thank you and good morning, everybody.

Henry I just wanted to ask kind of a bigger picture question on your strategy around private credit there's clearly.

We look forward to keeping you posted on our progress. With that, operator, please open the line for questions.

Scarcity of data assets out there, which is why some of the multiples. These assets are trading it seems to be very high but just curious from your perspective.

Do you feel like you have.

<unk>.

White spaces or would it be you feel like you need to fill in and how integral is the Moody's partnership to your strategy there.

Thank you. As a reminder, to ask a question, please press *1, then 1 again on your telephone and wait for your name to be announced to withdraw your question. Please press *1, then 1 again. Participants are requested to ask one question at a time, and then add yourself back to the queue for any additional questions.

And our first question will come from Manav Putnik with Barclays. Your line is open.

Thank you for that.

We are very bullish.

In our work in private credit.

If you step back a little bit.

The new banks in America, and parts of the world or the private credit funds.

The provision of private credit.

Is moving in addition to banks to private credit funds.

The second trend that may be.

Some ups and downs, but thats a secular trend is structural.

Thank you. Good morning, everybody. Um, Henry, I just wanted to ask a kind of bigger picture question on your strategy around private credit. There's clearly a scarcity of data assets out there, which is why some of the multiples these assets are trading at seem to be very high. But I'm just curious, from your perspective, where do you feel like you have, you know, the missing, uh, you know, white spaces or whatever you feel like you need to fill in? And how integral is the Moody's partnership to your strategy there?

And those banks that are in those private credit funds need to attract investors.

Thank you for that, man. I'm, uh, we are very bullish.

To fund the.

The provision of credit.

There is not enough institutional capital in the world.

In our work on private credit. Um, if you step back a little bit,

To fuel.

The funds that are needed the assets that are needed in this private credit funds. So they need to attract in addition to institutions.

You know, the new banks in America and parts of the world are part of the credit funds.

The provision of private credit.

Is moving in addition to Banks to private credit funds.

Large parts of the wealth management industry.

Industry, the retail industry and now the 401K industry in <unk>.

That is a secular Trend. You know, there may be some ups and downs but that's a secular Trend. It's a structural

Order for that to be viable and achievable in a sustainable and responsible way they need the tools.

And, uh, those banks—I mean, those private credit funds—need to attract investors.

For these funds to demonstrate what's inside the fund was declared awards and as all of it what's the market risk of it what is the valuation of them and so what are the terms and conditions on the underlying loans et cetera et cetera. So in the last nine months, we've been very feverishly innovating on this the first one was with <unk>.

Uh, to fund the uh, the provisional credit.

There's not enough institutional capital in the world.

To fuel.

The funds that are needed the the assets that are needed in this private credit fund. So they need to attract, uh, in addition to institutions,

Large parts of the world management.

Terms and conditions.

We looked at our database proprietary private credit database.

We found 2800 funds private credit funds that are not asset back.

Industry, the retail industry, and now the 401(k) industry, in order for that to be viable and achievable in a sustainable and responsible way, they need the tools.

And we develop terms and conditions on 80000 loans that are represented 14000 borrowers in this 2800 funds.

Then we moved on to create credit assessments of these funds with the Moody's.

We licensed the Moody's.

Credit risk models, we apply them to the MSCI database and we have <unk>.

The credit assessment of.

A lot of these funds, which are highly needed in this volatile environment and credit.

We've been listening to.

Database. We we found uh, 2800 funds, private credit funds that are not as set back.

In the media recently.

Then we created a taxonomy of private credit in order to develop market risk measurement. So there's private credit funds and we launched the private the factor risk models.

And we develop terms and conditions on 80,000 loans that are represent 14,000 borrowers in this 2800 funds.

<unk>.

So that's been another innovation and now we are looking into how we develop evaluated prices in private credit.

In order to provide.

Independent trusted source of valuation that can be basis on liquidity, so none of those things that yet.

Then we moved on to create credit assessments of these funds with the Moody's. We know we we license the moods credit risk models. We applied them to the msci database and we have uh, launched the credit assessments of of a lot of these funds which are highly needed in this uh, volatile environment in credit.

Translated.

<unk> fleet into high revenue high sales, but they will.

We are incredibly needed in this space as the trusted source of information about the benchmarks I forgot to mention that we launched.

Uh that we've been listening to, you know, in the in the media recently, then we created a a taxonomy of private Credit in order to develop Market risk measurements of this private credit funds and we launched the private, the factor, uh, risk models, you know on them.

60, 80 different private credit indices as well in the last few months.

Two.

<unk> make people understand the private credit fund relative to our market benchmark. So thats another innovation that with it. So we are very bullish in this space.

So that's been another uh Innovation. And now we're we're looking into how we develop evaluated prices and private Credit in order to provide, uh, an independent trusted source of valuation that can be basis of liquidity. So none of those things are yet.

We intend to be the leading provider of all this transparency tools.

Thank you and our next question will come from Alex Kramm with UBS. Your line is open.

Yes, Hey, good morning, everyone.

Last quarter, one of the messages was really that you're going to start leaning in more into these other new client segments outside of the traditional asset managers, obviously bill gave a lot of.

Color already in terms of.

The growth rates there, but can you just talk about in the last three months like what you've been doing in terms of new products, but also I think youre kind of doubling down on marketing and sales. So any any new any new things that we should be excited about in and win.

Translated uh meaningfully into high Revenue, uh, High sales, but they will. And we're, you know, we are incredibly needed in this space as The Trusted source of information about, uh, the benchmarks. I forgot to mention that we launched, uh, I don't know, 6080 different private credit indices as well, in the last few months. Uh, to to basically make, uh, people understand the private credit fund relative to a market Benchmark. So that's another Innovation that we did. So we are very bullish in this space. And we intend to be the leading provider of all this transparency tools.

Thank you. And our next question will come from Alex, Graham with UBS, your line is open.

Do you actually see this can make a material impact to you on our results. Thank you.

Thanks for that question Alex.

Strategy is really two pronged.

We believe strongly that the active asset management industry.

Needs us.

In this difficult time.

But he needs us not as a cost center to them and put more pressure on there.

On the financials they need owes us.

A company that can help them create new products.

We're very focused on creating that especially in the activate the space. So we can help clients do that you saw the recent launch with Goldman Sachs asset management of the private.

Yes. Hey, good morning everyone. So last quarter 1 of the messages was really that you're going to start leaning in more into these other new client segments outside of the traditional asset managers. Obviously bear gave a lot of color already in terms of the growth rate there. But, you know, can you just talk about in the last 3 months? Like what what you've been doing in terms of new products? But also I think you're you're kind of doubling down on marketing and sales. So any any, any new things that we should be excited about and and when uh, do you actually see this can make a material impact to you on on on results. Thank you.

Thanks for that question, Alex. The uh the strategy is really too too prone.

The private equity fund, which is a very innovative approach to look at it.

We believe strongly that the active Asset Management industry.

Needs us.

In this difficult time.

At our database of private equity understand the returns of the risk of all of that and then replicate that through public equities.

But it needs us not as a cost center to them and put more pressure on.

That provides liquidity. So that's an example of something that can generate revenues for the active asset management industry. So and we saw early signs of that recovery for us.

Their on their financials, they need us as.

A company that can help them create new products.

The industry continues to be challenged but if we can help them develop products and generate revenues, we're going to do very well with them. The second part Alex as you know is the expansion into other client segments and Thats. The reason, we presented in the slides and at the end.

The slides the two pages of the.

Of the redefinition of the Red the Venetian but the breakdown of the client segments that MSCI on the subscription part and you can see that we we can benefit significantly by helping the asset management industry, because we have 46% of our.

Subscription run rate on that and we can benefit if we make it grow.

Hedge funds are a very significant spot for us and other parts of what we call the fast money, which is market makers and broker dealers and all of that we don't very well there and one of the reason theres not only the risk tools that we sell but we have begun to realize its MSCI is a huge ecosystem.

So we're very focused on creating that especially in the activity, f space. So we can help, you know, clients do that. Uh you saw the recent launch with the Goldman Sachs as a management of the, uh, private uh, you know, the private Equity tracker fund, which is a very Innovative approach to look at, uh, at the uh, at our database of private Equity, understand the returns and the risk of all of that and then replicate that through public equities, in a way that provides liquidity. So that's an example of something that can generate revenues for the active as a management industry. So, and we saw early signs of that recovery for us. The industry continues to be challenged, but if we can help them, develop products and generate revenues, we're going to do very well with them. The second part Alex, as you know, is is the expansion into other, you know, client segments. And that's the reason we presented in these slides. And the at the end of the slides, the 2 pages of the

Trading around it in this instance, 18 trillion benchmark to MSCI of which $6 five 3 million or six four drilling is passive and that is a huge ecosystem. The nits and liquidity. So we're developing data sets and products for all of these market makers and broker dealers to help fuel that liquidity. So we believe that we have a lot of opportunities.

Would that would that segment more than we even estimated in the past. So that's an area that we're focused on obviously asset owners is it's always been our sweet spot in the index and in analytics and now very intensely in what we call <unk>.

<unk> solutions, because these are big investors in it.

But I would assets and they need more and more that transparency understanding of performance and risk and basing models on all of that so we're stepping up significantly our <unk> efforts.

We believe that we've seen some softening in Dcs, we are going to turn.

Turning the corner, particularly with institutional asset owners space and then there is wealth management the wealth management part as I said before needs us very significantly because a big part of the allegations that the wealth management is into private assets, particularly private credit, but they need to do it in a way that is responsible.

And compliant and they don't run afoul of selling products.

Individual investors don't understand so we are gearing up significantly for a major expansion in private assets and wealth management. In addition to helping them build portfolios through what we call MSCI wealth managers. So that's a little bit of a rundown of where we are and so we're very we're very optimistic that with the with the cigna.

And that has a huge ecosystem that needs liquidity. So we're developing data sets and products for all these market makers, and Market dealers to help fuel that liquidity. So we believe that we have a lot of opportunities with that. Uh, you know, with that segment, uh, more than we even estimated in the past. So that's an area that we're focused on, obviously, as a owners is, uh, it's always been our sweet spot in in index and an analytics and now, uh, very intensely in, uh, what we call PCS, but I try Client Solutions because these are Big investors in uh in private uh private assets. And they need more and more transparency understanding of performance and risk and basing models and all of that. So we're stepping up significantly our PCS efforts uh and we believe that, you know, we've seen some softening in PCS. We we are going to turn, you know, turn the corner, particularly with the institutional asset, owner space, and then there's wealth management, The Wealth Management.

<unk> ramping up and ramping up of the new probe machine at MSCI in the last nine months that that.

The softness that we highlighted in the prior quarter last quarter is beginning to dawn.

Not necessarily because the investment industry is extremely bullish if the markets are bullish, but but the budgets are may not be as bullish but it's because we can create a lot of new solutions that are going to help these people solve a lot of problems.

Part as I said before needs to very, you know, significantly because a big part of the allocation said to wealth management is to private assets, particularly private credit, but they need to do it in a way that that is responsible and uh, and compliant and they don't run a foul of, you know, selling products that this this this individual investors don't understand. So we are gearing up significantly for a major expansion in private assets and wealth management in addition to helping them build portfolios through what we

And that is the.

That's the strategy deepening on helping become a revenue center for the active asset management industry.

And obviously sell a lot of the things into the other client segments.

Thank you.

And the next question will come from Toni Kaplan with Morgan Stanley. Your line is open.

Thanks, so much Henry.

Henry you touched on in the prepared remarks that your teams are leveraging AI models AI to help develop new products and I was hoping you could give us an update on where you see the greatest opportunities.

To leverage AI, both on the revenue as well as on the cost side any quantification would be great. But also just what those products look like and what the cost savings opportunities are thanks.

Call MSI wealth manager. So as a little bit of a rundown of where we are, so we're very, we're very optimistic that with the, with the significant revving up and ramping up of the new product machine rmci in the last 9 months that uh, that you know, this the the the the softness that we highlighted in the prior quarter, you know, last quarter is beginning to turn H, not necessarily because the investment industry is extremely bullish. It, the markets are bullish, but it but the budgets, you know, are may not be as bullish, but it's because we can create a lot of new solutions that are going to help these people solve a lot of problems. And that is the, uh, you know, that's the strategy, deepening and helping become a, a revenue center for the active Asset Management industry and and obviously sell a lot of the things into the other client segments.

Thank you for that question, Tony and let me start by saying that.

Thank you. And the next question will come from Tony Kaplan with Morgan Stanley, your line is open

Thanks so much.

We in the past haven't really talked a lot about AI.

Because our style that MSCI is not to talk about intentions.

But to talk about actions.

And real tangible things so.

So that's one of the reasons you have inherited talk a lot about AI.

Got it.

GPT was launched three years ago, we've been feverishly looking into looking into on permeating every aspect of women's EI with AI.

Henry, you touched on in the prepared remarks, that your teams are leveraging, AI models, uh, AI to help develop new products. And I was hoping you could give us an update on where you see the greatest opportunities uh to leverage AI both on the revenue as well as on the cost side and any quantification be great but also just, you know what those products look.

Like and what the cost savings opportunities are. Thanks.

Thank you for that question, Tony. And let me start by saying that.

And the Punch line is AI is a godsend to us.

We in the past hadn't really talked a lot about AI.

Let me repeat that AI is a godsend to us because what MSCI is it is a company that collects large amounts of data proprietary unique data.

Um, because our style at MCI is not to talk about intentions.

but to talk about actions,

AI is going to help us scale up dramatically 1000 times more in the next five to seven years in data sets.

We then built in.

Bioterror and unique investment and risk models to apply to that proprietary data.

And real tangible things. So, uh, so that's, you know, 1 of the reasons, you haven't heard us, talk a lot about AI, but since you know, chat GPT was launched. 3 years ago, we've been feverishly looking into looking into and permeating every aspect of msci with AI.

And uh, and the the the punch line is AI is a godsend to us.

I can only you can only imagine how much AI is going to help us do that and then three we got to deliver all of that content to our clients in a way that they can consume in any way. They won so MSCI has never been a workflow software solution vendor a lot of our.

Let me repeat that. AI is a godsend to us because, what, what MSI, you know, is, is, is a company that collects large amounts of data proprietary unique data,

<unk> sort of it.

Workflow system like risk manager by one and all that they are there to sell the content that we got on it's almost like a necessary evil right. So if we get the world to create.

Every way every type of access into our content by themselves will have to spend any time on that or any money on that and thats going to propel us to much higher levels. So so we've been very busy in permitting every at every part of what we do so.

AI is going to help us. Scale up dramatically a thousand times more in the next, you know, 5 7 years in in data sets. Secondly, we then build in proprietary and unique investment and risk models to apply to that proprietary data. You you can I can only you can only imagine how much AI is going to help us, you know, do that. And then 3 we got to deliver all of that content to our clients in a way.

Start with the whole employee base six in a quarter.

Some people.

Almost 100% uses AI every single day, I actually made it a year ago a condition of employment.

Everyone needs to use AI tools every single day like using a phone losing more processing ore itself and things like that so we're very proud of that.

And then we have permitted AI into our all our all of our operations, especially data capture we have basically saved hundreds and hundreds of employees.

New hires of employees by using AI.

In private assets for example, in private capital solutions and sustainability and climate.

For example, this geospatial products that we have is all based on AI.

And we are so that has created incredible efficiency for us tens of millions of dollars that are not yet.

That are just the beginning of what we can do and then lastly, and most importantly is that we have used AI.

To build products. So a lot of our custom index factory is build by AI driven methodologies that is not a human in research with as an artisan trying to build up.

Into our content by themselves. We don't have to spend any time on that or any money on that, and that's going to propel us to much higher levels. So so we've been very busy and permeating every every part of what we do. So, you know, if you start with the whole employee base 6 and a quarter, you know thousand people, you know, almost 100% uses AI every single day, I actually made it a year ago, a condition of employment that's everyone needs to use AI tools every single day like using a phone losing word processing or in Excel and and things like that. So we're we're very proud of that. Then we have permeated ai into a all all of our operations especially data capture. We have basically saved hundreds and hundreds of employees and new hires of employees by using Ai and and private assets, for example, and private Capital Solutions and sustainability and climate, uh, for, you know, for example this

In index and it takes six months and all of that no. We want to do this instantaneously using AI. So a lot of what we're launching and custom indices is AI power as an example.

The geospatial data sets that were that are being popular now that were built that we're selling its own AI driven.

Geospatial products that we have are all based on AI. Uh, and the like we are so that has created incredible efficiency for us, tens of millions of dollars that are not yet, you know.

And of course, a lot of the data that comes out of private assets and sustainability as AI driven so so again, we haven't really talked a lot about this at all.

That that that that are just the beginning of what we can do. And then lastly and most importantly is that we have used AI.

Did we answer your questions, but since you asked.

And there is so much focus on this we might as well tell you exactly what we're doing and in terms of products. I think there is somewhere between $15 million to $20 million of products that are that were sold this year. This year out of 25, new products that are all AI power.

So that's that's the where we are so if anybody.

This is going to be a godsend to us now I cannot tell you.

So that's the biggest problem MSCI has just got we got so many opportunities and so little of investment money and we want to keep the profitability of the company the same.

So that's not an easy thing to square, but if we apply AI dramatically and we can lower our operating run the business expenses by 510, 15% all of that money can go into investing into the change in the business and that will create a incredible upsurge in April will develop.

To build products. So a lot of our custom index Factory is is built by AI driven methodologies. That is not a human in research with as an artisan trying to build a you know, an index and it takes 6 months and all of that. No we want to do this instantaneously using AI. So a lot of what we're launching in custom indices is AI power. As an example. I, you know, the geospatial data sets that were be that that are being popular. Now that were built that were selling. It's all AI driven you know. And and and of course you know a lot of the data that comes out of private assets and sustainability is AI driven. So uh so again you know, we haven't really talked a lot about this, you know. Uh, we did, we answer questions but since you asked and and there's so much focus on this, we might as well tell you exactly what we're doing. And in terms of products, I think there's somewhere between 15 to 20 million dollars of products that are that were sold this year. This year, out of 25, new products that are all AI power.

For us that's a goal that we have for 26.

Thank you.

And the next question is going to come from Ashish Suborn draw with RBC capital markets. Your line is open.

So that's you know, that's the way where we are. So if anybody you know, this is going to be a godsend to us. Now I cannot tell you enough that the biggest problem msci has is that we got so many opportunities and so little investment money, and we want to keep the profitability of the company, the same

Thanks for taking my question. So in the quarter, we saw really strong momentum in the index and analytics net new subscription fee that obviously you talked about some big deals that also.

The asset manager and when one of the largest banks in Euro. My question was much more focus on the pipeline as we get into the fourth quarter any comment on the pipeline as well as the sales cycle as you get into one of the highest seasonally highest bookings quarter.

So that's not an easy thing to square. But if we apply AI dramatically and we can lower our operating run-the-business expenses by 5%, 10%, or 15%, all of that money can go into investing in changing the business, and that will create an incredible impact on product development for us. That's a goal that we have for 2026.

Sure she should sandy so definitely as you alluded to encourage by the results in the third quarter.

Thank you. And the next question is going to come from a shish suborder with RBC Capital markets. Your line is open.

They have been fueled by the product innovation, the accelerating pace of product development that you've heard us talking about year end. So that's encouraging in terms of the overall environment and market backdrop, I would say its relatively stable we've seen fairly consistent dynamics to what we've seen in the past.

On the margin the sustained favorable market momentum is constructive.

But thanks for taking my question. So, uh, in the quarter we saw a really strong momentum in the index and analytics, net new subscription sales that obviously talked about some big deals there also with the asset manager. And when the 1 of the largest banks in Europe, my question was much more focused on the pipeline as we get into the fourth quarter. Any comment on the pipeline, as well as the sales cycle as we get into 1 of the highest seasonally. Highest uh, bookings quarter, thanks.

And we have seen pretty good results in the Americas, most notably in index and analytics as we talked about.

Sure. Hey hey, she should say Andy, um, so definitely as you alluded to encouraged by the results in in the third quarter.

And so we are generally encouraged by the healthy product pipeline and acceleration of product development that is supporting our strong client engagement as Henri alluded to both across asset managers.

As well as the broader range of client segments that we're targeting.

And so we are seeing a relatively stable dynamic across the business.

I would highlight that we do expect the dynamics, we've been seeing in sustainability.

Um, they've been fueled by the product Innovation, the accelerating pace of product development that you've heard us talking about here. Uh, and so that's encouraging in terms of the overall environment and, and Market backdrop, I would say it's relatively stable, we've seen fairly consistent Dynamics to, to what we see in the past. Um, on the margin, the sustained, uh, favorable Market momentum is is constructive.

Continue in the near term so similar to what we've talked about in the past.

And, uh, we have seen pretty good results in the Americas. Um, most notably in index analytics, as as we talked about

Those dynamics that we've been seeing there the pressures we've been seeing there how we expect to continue in the coming quarters.

But overall I would say dynamics across the business are fairly consistent and the performance is really being fueled by and driven by our product innovation.

And so, we are, um, generally encouraged by the healthy product pipeline and acceleration in product development that is supporting a strong climate engagement, as Henry alluded to, both across asset managers as well as the broader range of client segments that we're targeting.

Thank you.

Next question is going to come from Alexandra <unk> with Jpmorgan. Your line is open.

Yes, Hi, guys I hope, you're all well today just wanted to touch briefly on the non ETF in the fixed income businesses.

On the non ETF side.

Any rapid growth in ETF revenues, I think about 19% year to date and the non ETF tracking a good deal behind that.

Was there any prior year sort of.

Um, those dynamics that we've been seeing there, the pressures we've been seeing their, how we expect to continue in the, the coming quarters. Um, but overall, I'd say Dynamics across the business are fairly consistent, uh, and the performance is really being fueled by, and driven by our product innovation.

Call Center.

<unk> down the non ETF revenue growth and then on a fixed income can you remind us what the AUM.

Yes.

There is a <unk> and if there was any reason why if my math is right. There was a little bit of a quarterly dip in the run rate for that business.

Thank you. The next question is going to come from Alexander Hess with JP Morgan. Your line is open.

Just wanted to sort of unpack that a little bit.

You're out of order here, but hopefully we cannot yeah, hey, Alex it's <unk>.

Andy here so.

On.

The non ETF passive front.

We kept to your point, we can have impacts from true ups and true downs, which can skew the period to period comparability.

Yes. Hi guys. Uh I hope you're all well today. Um just want to touch briefly on the non-etf and the fixed income businesses. Uh on the non-etf side. You know there's there's been pretty rapid growth in the ETF revenues. I think about 19% year to date and the non-etf is tracking a a good deal behind that. It it is. Is there any prior year sort of

And so as you know there can be some lumpiness in any given period.

We can also at times see some.

You know, hurdles that are are pushing down that non-etf Revenue growth. And then, on a fixed income, can you remind us what the AUM is? Uh, there is a 3 q and, and if there was any

Modest fee adjustments.

Client funds and that can lead to some lumpiness in revenue and revenue recognition as well as run rate.

And so wouldn't read too much into lumpiness in the growth rate there on the revenue side.

This does continue to be a very important growth area for us.

We've seen some very nice new fund creation on the custom side. This is an area where a lot of the efforts that we've made on our custom index capabilities and the growing focus on customization and customize it outcomes manifests itself and we're in a unique position to help these organizations that are really anchored to our framework.

Reason why if, if my math is right, there was a little bit of a, a quarterly dip in the, The Run rate for that business, uh, just wanted to sort of unpack that a little bit. So I know I threw out a lot at you, but hopefully we can. Uh, yeah. Hey, hey Alex. It's, it's Andy here. So, um, on the, the, the non-etf passive, uh, front, um, we can't to your point. We can have impacts from true-ups and true Downs, which can skew the period to period comparability. Um, and so, as, you know, there can be some lumpiness in any given period. Um, we can also at times, see some, um, modest

And looking to achieve objectives around our frameworks.

And so what.

Didn't dig in too much to the revenue growth on that front.

On the fixed income side the.

AUM and Etfs linked to <unk>.

Fixed income indexes are fixed income indexes and partnership indexes is.

Around $90 billion.

And so it's been a.

Nice growth area for US that's continued to grow.

Similarly, I wouldn't.

Read too much into revenue growth in any one period on that category. We are heavily focused on continuing to drive adoption, new innovation, there and fueling the overall AUM growth across the.

Fee adjustments on on, uh, client funds and that can lead to some lumpiness in in revenue and revenue recognition, as well as run rate. Um, and so wouldn't read too much into, uh, lumpiness in the growth rate there on the the revenue side. Um, this does continue to be a very important growth area for us. Um, we've seen some very nice, new fun creation on the custom side. Um, this is an area where a lot of the efforts that we've made on on our custom index capabilities and the growing focus on customization, and customized outcomes manifests itself. And we're in a unique position to help these organizations that are really anchored to our our Frameworks and look into achieve objectives around our Frameworks.

Um, and so, um, wouldn't wouldn't dig in too much to the revenue growth, uh, on that front.

The fixed income category and continues to be an important area for us.

What I would add is that.

<unk>.

Obviously.

We see the challenges.

Sustainability and climate.

In this segment of sustainability and climate item NCI as Youll see.

But a meaningful part of the monetization of all of that is happening in equity and fixed income indices.

And.

It's in both but in fixed income indices.

On the fixed income side, the uh AUM and ETFs linked to. Um, fixed income indexes are are fixed income indexes and partnership indexes as around 90 billion dollars. Um, and so, it's been a, uh, a, a nice growth area for us, that's continued to grow. Um, you know, similarly, I wouldn't wouldn't, uh, read too much into Revenue growth and anyone period on that category. Um, we are heavily focused on continuing to drive adoption, new innovation there, and fueling the overall AUM growth across the, the fixed income category and continues to be an important area for us.

The percentages is even more as a total so so we've been very successful in.

What I would add is that, uh,

And especially in Europe, and having clients come to us on.

Obviously, you know, we see the, uh, the challenges uh, in sustainability and climate.

We've helped them design climate.

Lower climate risk fixed income indices that they can use as a portfolio either to give it to an institutional index manager or to turn into <unk>.

Uh, in the segment of sustainability and climate, you know, rmci as you see it. But a a meaningful part of the monetization of all of that is happening in equity and fixing. Commandes

And we see that continuing on a lot of our investment in climate is not only climate has its own in order to sell it directly physical risk transmission of energy.

Transition risk and all of that but it's because we believe there will be a large monetization over a lot of these climate I b and.

And uh uh it's in both, but in fixing command, this is, you know, the percentages is even more as a total. So so we've been very successful in uh, in in especially in Europe and having clients come to us and and uh We've helped them design climate.

In the form of <unk> and index investing so yes. When you look at the totality of sustainability on client and climate is a little challenged but you also have to look at the one MSCI.

Sustainability and climate franchise and see what they wanted deflation is happening.

Just to put a finer point on that I think Henry you hit a critical item here that $90 billion of fixed income Etfs AUM. The large majority of that is sustainability and climate related if you look at the equity Etfs linked to our sustainability and climate index is about 360.

Erh lower climate risk. Uh, fixing come indices that they can use as a portfolio either to, uh, to give it to an Institutional index, manager, or to turn it into a, into a into an ETF. And we see that continuing and, and a lot of our investment in climate is not only climate as in its own, in order to sell it, you know, directly uh, physical risk transition of energy and, you know, uh, you know, uh uh, transition risk and all of that. But it's because we believe there will be a large monetization of a lot of these climate IP uh in the form of uh of indices and index investing so uh yes you know.

$8 billion.

And within that about $135 billion or so is climate specific indexes and on the non ETF front.

Relating to your question, where we are seeing incredible focus by institutions and asset owners.

To develop specific climate outcomes the non ETF.

Climate AUM is about $316 billion. So these are our big becoming meaningful contributors in helping to fuel the growth of the business.

Thank you and the next question will come from Kelsey Xu with <unk>.

Economists your line is open.

Hi, Good morning, Thanks for taking my question on exit EPS could you just talk a little bit more about the economics of the products and services you provide in that area as far as your competitive advantages.

Also as the overall company is to shed from active mutual funds to accident Etfs is that a net positive or.

Ated, if you look at, uh, Equity ETFs linked to our sustainability and climate indexes, it's about 360 billion dollars. Um, and within that, uh, about 135 billion or so is climate specific, uh, indexes and on the non-etf front, um, relating to your question where we are, seeing incredible focus by institutions and asset owners, um, to develop, uh, specific climate outcomes. The non-etf, uh, climate AUM is about 316 billion dollars. So these are are big becoming meaningful contributors and helping to fuel the growth of the business.

Net negative for MSCI.

Thank you. And the next question will come from Kelsey zoo with

Sure. So so active Etfs are quite distributed category with things, which are really just quite literally putting in.

Autonomous, your line is open.

An ETF wrapper on a purely active fund troops are things, which are very rules based in which are much more like an index or which are indexed version of an active strategy. So the good news is that we are able to monetize across a lot of that spectrum not merely in the index business.

A fair amount of it also in analytics with portfolio construction et cetera.

Hi, good morning. Thanks for taking my question. I'll act with ETFs. Could you just talk a little bit more about, you know, the economics off the products and services you provide in that area as well as your competitive advantages. Um, also if the overall AUM continues to shift from active, mutual funds to active ETFs, is that and that positive or um any negative for msei.

So.

In terms of the more of the more specific the index linked component.

We're now up to almost $30 billion of assets in that category and the AUR was up 10% quarter on quarter not year on year quarter on quarter. So we think this is an extremely attractive category. We're very engaged in it I think it's difficult to say exactly how that will.

Play out over time in terms of the economics and the scale, but it's growing dramatically and it's certainly not cannibalizing at all anything we do today. It is literally new revenue new money new opportunity.

So I think we're very excited about it.

As I said from a selling of tools selling of data and information and also from an index construction and licensing point of view and we believe that we're going to see those numbers become more important in the future.

Sure. So so active ETFs are uh, quite distributed category with things which are really just quite literally, putting an, a an ETF wrapper on a purely, active fund, through to things, which are very rules-based and, and which are much more like an index or which are an indexed version of an active strategy. So the good news is that we are able to monetize across a lot of that Spectrum. Not merely in the index business, um but um, a fair amount of it also in analytics with portfolio construction, Etc. So, um, in in terms of the more um the more specifically index link component, um, we're now up to almost 30 billion of of assets in that category. And the AUM was up, 10% quarter on quarter, not year, on year quarter on quarter. So we think this is an extremely attractive category. We're very engaged in it.

Yes, as I said prior I just want to emphasize this point.

Which is.

Over the last.

Year or so.

Seriously analyzing.

The active asset management industry.

And.

And how do we.

How do we help the industry recover.

We held the industry build competitive advantage and adds value.

I think it's difficult to say exactly how that will play out over time in terms of the economics and the scale. But it's, it's growing dramatically and it's certainly not cannibalizing at all anything we do today. It is literally new Revenue, new money, New Opportunities, so. So I think, you know, we're very excited about it. Um, both as I said, from a, a selling of tools, a selling of um, data and information and also from an index Construction,

And how do we benefit from that in the increase in our growth.

And from a licensing point of view, we believe that we're going to see those numbers become more important in the future.

And therefore, one of the components now the only one but one important component of that is helping that industry go from mutual funds.

Yeah. And as I as I said prior, I just want to emphasize this point.

Which is.

Another forms of investment vehicles to activities.

Over the last, you know, year or so.

We've been seriously analyzing.

And we play a large role in their as Baer indicated. So this will be one of the things we'll talk some more about in the future, which is how do we gain significant growth.

The active as a management industry.

And, uh, and how do we?

Uh, how do we help the industry recover?

In <unk> in the active asset management industry. This is one of the component not the only one but one of the components.

Are we help the industry, build competitive advantage and add value. And uh and and how do we benefit from that in in increasing our growth?

Okay.

Thank you. The next question is going to come from Owen Lau with clear Street. Your line is open.

Uh and therefore 1 of the components, not the only 1 but 1 important component of that is helping that industry go from mutual funds.

Good morning, and thank you for taking my question I do have.

And other forms of investment vehicles to activity apps.

A question on AI and Henry I. Appreciate your response to the previous AI questions, but I do want to ask this question from a different angle because the absolute quantum auto constantly compensation about how AI has negatively impacted the whole sector, one concern needs AI investment could comprise margin.

And we play a large role in their as their indicated. So this will be 1 of the things. We'll talk some more about in the future which is how do we regain significant growth?

In buying MSI in the active, as a management industry. This is 1 of the components, not the only 1 but 1 of the components

If that means that someone couldn't bring in enough rather neal.

Do you get the confidence that you're involved in quite like 15 to 20 projects that can maintain or accelerate your revenue growth, but at the same time, you can see drive margin expansion.

Thank you. The next question is going to come from Owen law with clear Street. Your line is open.

The punch line.

Believe it or not.

Is that AI will dramatically increase our margins.

Really dramatically because we'll be able to create a lot of new products.

Scaled them faster to a lot of their various participants in the various client segments.

It will significantly reduce cost.

<unk>.

Good morning, and thank you for taking my question. Uh, I do have uh, another question on AI and Henry. I really appreciate your response, uh, to the previous AI questions. But I do want to ask this question from a different angle because there's been quite a lot of conversation about how AI has negatively impacted the whole sector 1 concern is AI investment. Could compress margin if that investment couldn't bring in enough Revenue. How do you get the confidence that invest in? Like, I think you quite like 15 to 20 AI projects. Uh, but that can maintain or accelerate your Revenue growth, but at the same time, you can still drive margin expansion. Thanks.

As we as we use AI agent rather than humans.

The punch line, believe it or not.

One a lot of what we do at MSCI.

Is this thematic.

Is that AI will dramatically increase our margins?

And therefore, you can sistema ties that within AI agent.

Um,

In terms of methodologies capture and data running performance and risk and our clients' portfolios.

really dramatically because we'll be able to create a lot new products.

Building models building software.

It's literally going to jump off a lot of our operating expenses.

Scale them faster to a lot of various, uh, participants in, you know, the various client segments and it will significantly reduce costs to us.

The question is how do we get there on the benefit that we have is that we don't need to build large language models, we need to buy them and train them.

uh,

As we as we use AI agents rather than humans.

To run a lot of what we do at MSCI.

Train them to apply to our data. So we don't have that cost secondly, we don't need massive data centers or any data centers.

Is systemic.

And therefore, you can systematize that with an AI agent.

We have our own.

Our clients are the ones that are running a lot of this so we don't have to invest in Egypt or in data centers or in electricity power and all of that so we.

you know, in terms of methodologies, capturing data, you know, running, you know, performance running risk, you know, in our class portfolios, you know, building models, building software

We are going to be a major beneficiary of what is called apply AI to an industry and our industry is made up of data.

So it's literally going to chop off a lot of our operating expenses.

Investment models and investment in our risk models and technology.

And therefore AI for US is we can build a lot more data we can build a lot more models and we can use a lot more technology on distributed so so that's very important and therefore the investments require for us to achieve that are not significant.

The question is, how do we get there? Uh, and the benefit that we have is that, you know, we don't need to build large language models, we need to buy them and train them.

Repeat that the investments for us to achieve that are not very significant it's a question of <unk>.

It's drained them to apply to our data so we don't have that cost. Secondly, we don't need massive data centers or any data centers. You know, we, we have our own. You know, these are our clients are the ones that are running a lot of this. So, so we don't have to invest in chips or in data centers, or in electricity, you know, power and all of that. So,

<unk>.

We are doing what you do is to be AI compliance. So that you can put a large language models on a on a data set that is already AI friendly so to speak we need to hire.

AI people experts that can help us with just hired two managing directors in our research operation that are AI experts in helping us build AI agenda, Argentic models investment risk and performance models and all of that so I do not see.

A reduction in margins.

we are going to be a major beneficiary of what is called apply AI to an industry. And our industry is made up of data, you know, investment models investment and risk models and technology and therefore AI you know for us is we can build a lot more data. We can build a lot more models and we can use a lot more technology and distributed. So so if that's very important and therefore the Investments require for us to achieve that are not significant. Let me repeat that the Investments for us to achieve that are not very significant. It's a question of

In order to accommodate the investment that we need to make in AI, and but having said that I don't I don't want you all to bank.

The increased margins that we're going to use that we're going to gather in AI, because we want to put them back into investments of the company to grow faster.

That's the punch line right.

Thank you.

And our next question will come from Scott.

So with Wolfe Research your line is now open.

Of uh, you know, retooling, what you do, you know, to be AI compliance so that you can put a large language models on a, on a data set that is already AI, you know, friendly. So to speak, you know, we need to hire, you know, ai, ai ai, people AI experts, that can help us. We just hire 2 managers and directors in, in our research operation that are AI experts in helping us build AI, agentic models, investment risk, and performance models, and all of that. So I do not see, you know, a reduction on margins.

Hey, good morning, guys and thank you for taking my question just wanted to go back to the asset manager and market and it sounded like it would be 11% sales growth sales growth youre seeing some momentum there, but just wondering if you could maybe characterize if this sales momentum is around kind of incremental demand from asset managers or maybe more of a kind of a release of <unk>.

In order to accommodate the investment that we need to make in Ai. And and but having said that, I I don't I don't want you all to bank The increased margins that we're going to use that. We're going to gather in AI because we want to put them back into Investments on the companies to grow faster.

So, that's the punch line, right? You know.

Up demand and are in the pipeline.

Thank you.

Yes, I would say going back to my comments earlier.

And our next question will come from Scott?

The environment has been relatively stable.

WZO with Wolfrey Search, your line is now open.

Consistent with what we've seen in past quarters, and so the strength that we saw in the quarter. As we mentioned was most notable in index.

We also had solid recurring net new within analytics.

This was particularly the case in the Americas.

And a lot of this has been fueled by selling more to our existing clients. So we've had success up selling additional content and services.

Hey, good morning guys and thank you for taking my question. Um, just wanted to go back to the uh the asset manager and market and sounded like with the 11% sales sales growth, you're seeing some momentum there. Uh, but just wondering if you can maybe characterize if this sales momentum is around, you know, kind of incremental demand from asset managers or maybe more of a kind of release of pent-up demand in uh in the pipeline. Thanks.

Particularly within index, which is which has definitely been encouraging for us to see in a lot of that's been enhanced by our product development pipeline.

Yeah, I would say, um, going back to my comments earlier.

I would say performance with asset managers can be a bit lumpy.

The environment's been relatively stable um consistent with what we've seen in past quarters and so the the strength that we saw in the quarter as we mentioned was most notable in index.

Yeah.

But generally overall we're seeing.

Quite stable results and we're also pretty encouraged by the solid retention rate with asset managers, which was about 97%.

Across the company in the third quarter.

And so I wouldn't call it a trend, but there are definitely encouraging results that we're seeing with asset managers and saw a solid quarter.

Thank you.

And the next question will come from Craig Huber with Huber Research. Your line is open.

Um, we also had solid recurring net new within analytics. Um, this was particularly the case in the Americas. Um, you know, and and a lot of this has been fueled by us, selling more to our existing clients. So we've had success upselling additional content and services, um, particularly within index. Um, which is, which is definitely been encouraging for us to see. And a lot of that's been enhanced by our product development pipeline. I would say, uh, performance with asset managers can be a bit Lumpy

Great. Thank you Henri your Berlin to ask you.

What school of thought out there with investors here the last year plus that.

That AI will be a net negative for your company and peers out there with the other information service companies in that it will allow new entrants to come into the marketplace. It takes significant share over time I hear what you're saying about what you guys can do with AI, but if you could just touch on more about.

Um, but generally overall, we're, we're seeing, um, quite stable results. And, and we were also, uh, pretty encouraged by the solid retention rate with asset managers which was about 97%, um, across the company and in the third quarter. Um, and so, I wouldn't wouldn't call it a trend, um, but there are definitely encouraging results that we're seeing with asset managers, um, and saw a solid quarter.

The competitive moat, you have about why others will not be able to come in here and take significant share across any of your major verticals business lines at MSCI. Thank you.

Cube, a researcher line is open.

No. Thank you for that great. Thank you.

Okay.

One way to look at it is to split it into the three kind of.

Processes right.

The first process is capturing data.

The second one is a blind investment and risk models on that data.

And the third processes distributing the content to clients.

Oh great, thank you. Um Henry or Baron ask you, um it's a lot School thought out there with investors here the last year plus that AI will be a net negative for your company and peers out there. Other information service companies in that it will allow new entrance to come into the marketplace and take significant share over time, I hear what you're saying about, what you guys can do with AI. But I'd like you, if you could just touch on more about

So let's start with the last one.

We are not.

A traditional sort of workflow software solution provider company.

The competitive mode you have about why others will not be able to come in here and take significant share across any of your major verticals, the business lines at MSCI. Thank you.

Hmm.

No, thank you for that. Uh, great. They I think look at the the

Than anything we've been criticized in our in the bonds that are workflow.

One way to look at it is to split it into the three, kind of.

The front end that we have is not as cutting age not as advanced in Barra, one and was monitor and ESG manager and all of that.

Processes, right? The first process is capturing data.

The second 1 is applying investment and risk models on that data.

We've been hesitant to put a lot of money into that because we see that the industry is creating different ways of accessing the data like data breaks in a snowflake and people like that so it was a let them let them invest the money in that and then we provide the content to them and then the content or led the client.

And the third process is distributing the content to clients.

Uh, so let's start with the last one. Uh, we are not.

A traditional sort of workflow software solution provider company.

um,

if anything we've been criticizing our in the past, that our workflow,

Develop their own workflow internally, which a lot of wealth management do and we'd sell we sell them the content.

So that's that part so we're not going to be disrupted there because we're not that's not where we were on the contrary to the extent that there are more ways that AI can help somebody access content.

We are going to be there right. So that's that part.

At the other end of the spectrum is the capturing of the data.

A lot of the data we capture is proprietary.

And it has to be accurate and it has to be a trusted and it has to be branded.

What the the the front end that we have is not as, you know, Cutting Edge, not as advanced, you know, in bar 1 and risk manager, and ESG manager, and all of that. And and we've been hesitant to put a lot of money into that because we see that the industry is creating different ways of accessing the data like data breaks and you know Snowflake and and people like that. So we said let them let them invest the money in that and then we provide the content to them and the and then the content or let the client develop their own workflow internally, which a lot of wealth management do and we sell, we sell them the content.

And alike. So it starts with client data.

So today just to give you two examples today kley.

Clients with over 50 trillion dollars of assets.

So that's the part. We're not going to be disrupted there because we're not, you know, that's not where we are. On the contrary, to the extent that there are more ways that AI can help somebody access content.

We are going to be there, right? So that's that part.

Use our MSCI analytics platform.

At the other end of the spectrum, is the capturing of the data.

To run the risk and performance.

So.

That is data that is sitting in our servers. That's data that we can access they're not going to be too. Many firms that are going to be able to do that.

Do have that.

These people are not going to put their portfolios everywhere.

remember a lot of the data we capture is proprietary, it's uh and it has to be accurate and it has to be trusted and it has to be branded a, a a, and the like, so it starts with client data,

They have to put them in a trusted place.

You know, so today just to give you 2 examples today.

They are they believe is secure that they can do their computations safely and all of that.

Clients with over $50 trillion of assets.

That's one example, another example is our clients have given those 15 trillion dollars.

Use our MSI analytics platform.

Their portfolio their portfolio in private assets.

To run the risk and performance, right? So,

That's sitting in our servers, we have access to that the book models on top of that now we cannot disclose client a has the following portfolio, but we can use to create products and we can use it to anonymised it and all of that just like we can use the other one the other day all of it.

About 53 million assets.

So that is proprietary data.

That is data that is sitting in our servers, that's data that we can access. They're not going to be too many firms that are going to be able to do that to have that, you know, because these people are not going to put their portfolios everywhere, you know, in in they have to put in a trusted place that, uh, they believe they believe is secure that they can do their computations, you know, safely and all of that.

Now that's in the Bakken and the in the Middle is the investment in risk models that we need that we need to put on top of that data and then deliver that content.

That's 1 example. Another example is our clients have given us 15 trillion dollars of their portfolio, their portfolios in private assets,

Yes, you can use <unk> to go look at something.

And maybe the answer is right maybe the answer is not as right at the end of the day, we're not in the gathering information in order to have a political opinions for example.

We are our clients are in the business of getting accurate data accurate models accurate performance and all of that there are no simply going out draws to anybody they are not simply going again.

A large language models sitting on the side and go do that they need a thorough process reliable branded product that puts his name and reputation behind it that will be huge barriers to entry to a lot of people. So those are examples that I will give you a run.

That's sitting in our servers. We have access to that to put models on top of that. Now we cannot disclose client a has the following portfolio, but we can use it to create products and we can use it, you know, to anonymize it. And all of that, just like we can use the other 1, the other, the other, you know, the the the clients at 50 trillion in assets. So that is proprietary data. Now, that's in the in the back end in the in the middle is the the investment and risk models that we need that we need to put on top of that data and then deliver that content.

Thank you.

And the next question will come from Faiza <unk> with Deutsche Bank. Your line is open.

Yes, great. Thank you just wanted to go back to the performance of net new sales in the quarter I know, obviously, there can be a lot of lumpiness and you highlighted strength in Americas and index.

That's what you're seeing in India in particular.

It sounded like net new sales declines, but just curious if there if maybe some of the new product innovation that you highlighted as mark cater to America or if there's something specific maybe it's ESG related so just some additional color there would be helpful.

Yes, you could use chat GPD to go, look at something, you know, and maybe the answer is, right. Maybe the answer is not as right at the end of the day, we're not in the gathering information in order to have a political opinion. For example, you know, we are, you know, our clients are in the business of getting accurate data, accurate models, accurate performance, and all of that, they're not simply going to trust anybody. They're not simply going to get, you know a you know, a large language model, sitting on the side and go do that. They need a thorough process, reliable branded product that puts his name and reputation behind it. That would be big, huge barriers to entry to a lot of people. So those are examples that that I will give you right.

Thank you.

Bank, your line is open.

Sure Yeah, So I would say similar to the comments I gave overall, we see relatively consistent dynamics.

I've mentioned in the past that we've seen a bit of sluggishness with asset managers in EMEA.

We continue to see a bit of that I think they've been a little bit slower moving on the rebound of the markets here.

And so our results have been a little bit softer in the EMEA region.

Our product development efforts are global in nature, and so a lot of the enhancements that we're making for not only asset managers.

Yes. Hi. Thank you. Just wanted to go back to the performance of, you know, net new sales in the quarter. I know obviously there can be a lot of lumpiness and you highlighted strength in America's and index just curious what you're seeing in emia in particular because it sounded like net new sales declined. So I was just curious if there's if maybe some of the new product Innovation that you highlighted is more catered to America or if there's something specific maybe it's ESG related. So just some additional color that would be helpful.

All client segments are targeting.

Tremendous opportunities within the European region.

Sure. Yeah, so I would say, um, similar to the comments I gave overall we see relatively consistent Dynamics,

We actually on the index side see a growing ecosystem around our our index is within the ETF community and so we've seen tremendous growth in assets under management in Etfs.

Linked to our indexes in Europe, particularly around the World a world Index.

I've mentioned in the past that we've seen a bit of sluggishness with asset managers in Amia. Um we continue to see a bit of that I think they they've been a little bit slower moving on on the rebound of of the markets here. Um and so our results have been a little bit softer in the Amia region.

Where we are becoming a standout in terms of largest etfs and thats perpetuating through to a whole host of additional opportunities and so yes, we see some sluggishness from clients.

Our product development efforts are Global in nature and and so a lot of the enhancements that we're making for not only asset managers. Um but all client segments are targeting. Um

Some some pressure outsized pressure relative to the Americas, but our position there is very strong and a lot of the innovations that we have across product lines are positioning us to continue to drive growth.

Tremendous opportunities within the European region.

And then as I alluded to that's not only on the index side, but in areas like.

PCF many of the innovations you heard hen.

Henry you talk about and better to talk about it in the prepared remarks or position us well to.

Unlock big pools of capital focused on the private asset market in Europe.

And we continue to enhance our go to market effort across many of these additional client segments in Europe. So continue to believe it's an attractive opportunity, but we are seeing in the near term the continuation of <unk>.

Some of the sluggishness that I've mentioned in the past.

Thank you.

And our next question will come from Patrick O'shaughnessy with Raymond James Your line is open.

Hey, good morning, how are you thinking about the expected timeline to utilize the $3 billion repurchase authorization and to what extent would you plan to fund that with free cash flow versus incremental debt.

Um, we actually on the index side, see a growing ecosystem, around our, our indexes within uh the ETF community. And so we've seen tremendous growth in assets under management and ETFs linked to our indexes in Europe, particularly around the world uh World index. Um, where we are becoming a standout in terms of larger ETFs and that's perpetuating through to a whole host of additional opportunities. And so, yeah, we see some sluggishness, um, from clients. Um, you know, some some pressure, uh, outside pressure relative to the Americas. But our position there is very strong and a lot of the in Innovations, uh, that we have across product lines or position us to uh, continue to drive growth. Um, and and as I alluded to, that's not only on the index side. Um, but in areas like um, PCS, many of the Innovations, you heard um, Henry talked about and bear, talk about in, in the prepared, remarks or position us well to um, unlock big pools of capital, um, focused on

Uh huh.

Thanks Bye break.

First of all we love MSCI.

The private asset Market in in Europe, um, and we continue to enhance our our go-to market for across many of these additional client segments in Europe. So continue to believe it's an attractive opportunity, but we are seeing in the near term, the continuation of of um some of the, the sluggishness that I I've mentioned in the past.

And we love it even more when there's undervalue franchise.

Clearly we hit some soft spots in the last couple of years.

Thank you. And our next question will come from Patrick Auchan Nessie with Raymond James. Your line is open.

On the.

The undervaluation of the company has increased.

And therefore.

We've been.

Hey, good morning. How are you thinking about the expected timeline to utilize the 3 billion dollar repurchase authorization and to what extent would you plan to fund that with free cash flow versus incremental debt?

Pretty active in buying the stock.

$1 $5 billion year to date.

And we.

Uh, thanks fabric. Uh,

The board obviously to.

Authorized another $3 billion to do that.

First of all, we love MSI.

And we love it even more when it's an undervalued franchise.

We.

We would like to be as aggressive as we can if the company continues to have a.

Uh, nearly we hit some soft spots the last couple years.

Under evaluation in the franchise.

and the, um,

And take advantage of that.

the undervaluation of the company has, um, increased

And we are a strong believer in.

and therefore, um,

In the medium and the sharp, but more importantly median.

We've been, uh, you know, pretty active in buying this stock, you know, $1.5 billion a year to date.

Term prospects of the company.

I for one.

We have done the same not just with the assets of the company, but personally in the last 18 months, but.

And uh we uh, got the board obviously to um, authorize another 3 billion, uh, to do that.

um,

$20 million over the MSCI Ishares for me and my family.

We, uh, you know, we would like to be as aggressive as we can. If the company continues to have...

Under valuation in the franchise.

It's not because of a pride of authorship.

There is a rationale decisions that.

That given our opportunities.

And take advantage of that. Um, and we are you know, strong believer.

Given the.

The new product development machine this company can create.

In in the, in the uh, medium in the short, you know, but more importantly, medium to long long-term prospects of the company.

We will remember this period is a period of <unk>.

um,

I for 1.

The evaluation that.

That is a good opportunity to load up.

So we're going to do the same with the assets of the company.

have done the same, not just, you know, with the assets of the company, but uh, personally in the last 18 months I've I've bought uh,

Now I think that in terms of the split.

$20 million over the MSI shares for me and my family.

Yes in order to do it 3 billion over some reasonable period, we will have to do both free cash flows.

And it's not because of pride of authorship.

This is a rational decisions that, uh,

And continue to.

that given our opportunities.

To lever up to three and a half.

Times of growth to three five times.

given the, uh, the new product development machine, this company can uh, can create

That will provide us hopefully over $1 billion, a year or something like that and then we'll be opportunistic like we have always been.

um, you know, we will remember this period as a period of

undervaluation that, uh,

If the stock runs up way too much we'll send it out now because we don't believe is attractive, but it's because tactically we can buy it cheaper. So that's that's our plan.

And just to be clear no change to our approach to capital allocation no change to our leverage targets Henry described as more of the approach.

The company, you know? Uh, now, uh, I think that in terms of the split, uh, yes, in order to do the $3 billion over some reasonable period, we'll have to do both uh free cash flows.

We've consistently taken.

And so it's a continuation of what we've been doing.

Thank you.

And the next question will come from George Tong with Goldman Sachs. Your line is open.

Hi, Thanks, good morning.

Can you talk about how much pricing contributed to net new bookings growth this quarter and what your strategy overall is around pricing.

Yes, so I would say.

Ross the company the contribution of price increases to new recurring sales is roughly in line with what we've seen in recent quarters. So no no major shift in the approach it does vary a bit.

Most product lines and client segments.

In terms of that approach that we've taken we're generally trying to align price increases with the value that we're delivering so.

Many of the enhancements.

And improvements that we make and innovations that we've talked about here, we will be monetizing through price increase and so that's a key component to enable us to continue to drive price increase.

But we also factor in the overall pricing environment and we do look at client health.

Our approach can vary product.

Product segment, the product segment, even client a client segment the client segment.

But importantly, we are really focused on being a strong long term partner to our clients.

And we're focused on building that relationship and so we want to be constructive around price increases and very mindful that we need to continue to deliver value to.

Be able to support price increases over time, but but across the organization no major change on the contribution.

Thank you and the next question.

Comes from Jason Haas with Wells Fargo. Your line is open.

Hey, good morning, or good afternoon, and thanks for taking my question.

You've talked a.

A bunch of them in the call about some of the improvements that you've been making to your offering and I'm curious if you could talk about just the timeline for when we should see that show up I know it took time to revenue, but maybe in terms of the net new sales to what extent have you been benefiting from those introductions and it sounds like there's more coming through so over over what timeframe even high level should we think about those improved.

<unk> coming through and I could slip in a second one just on the AI benefits that you talked about and the efficiencies that you can gain I'm also trying to thing about the timeline there in terms of when we might see that start to show up.

Improved margins from here. So can you talk about the timing there that'd be that'd be very helpful. Thank you Yeah, I would say overall as you know our financial model moves very smoothly.

<unk>.

We.

Touched a little bit on this in my prepared remarks, but there is strong momentum and releasing new products and that is starting to impact sales, we've seen roughly $25 million of sales year to date from recently released new products.

I mentioned, the $16 million on the index side and my my prepared remarks and so.

We are starting to see these benefits in that pace of acceleration.

In product development is definitely additive in something that helps us across many many parts of the company here.

And allows us to.

Continue to drive.

Growth across not only the asset manager client segment, but all of our client segments and so it's one that we we do believe.

Is it going to be an important driver of growth moving forward here.

That you started to see but hopefully continues to be a big contributor to our success.

Future.

Just on the impact on the financial model of AI.

Henry touched on this.

But I would say overall AI is.

Enhancing to our financial profile.

As you know our business sales tremendous operating leverage with high incremental margins.

We are selling the IP based solutions that we produce once and sell to many users for many use cases.

That enables us to both invest in growth and drive attractive profitability grow with on an ongoing basis.

So as Henry alluded to AI enhances both of those dynamics, even more so we're creating even more scale enhanced productivity, enabling us to invest even more in the business.

Hence our solutions and drive attractive top line growth as well as profitability growth.

As Henry alluded to we're not going to take the margin down with some massive elevated AI spend.

But it's something that will be a key ingredient to continuing to fuel that dual mandate that we have with our shareholders, which is continue to invest in the business to drive.

Long term growth and continue to drive attractive period to period profitability and free cash flow growth and so it is something that will be.

Smooth the impact on the overall financial financial model here.

And let me just add that the <unk>.

Virtuous circle.

We will that we're trying to achieve over time.

Is one in wage.

We.

Bush higher and higher the operating leverage of the company.

To free up resources.

If it goes higher and higher the operating leverage of the company maintain the profit margins.

And therefore free up significant resources.

To invest.

Back into the business.

We have enormous opportunities in private assets and index investing and.

And physical risk and climate than they are in wealth management in GBS in AR and the faster money segment, you know hedge funds broker dealers datasets investing and creating new datasets and all of that we do not want to make those investments by taking the profit margins down.

But we need investment dollars and the bigger the investment dollars. The more we can achieve higher growth in the company.

So that's going to come from AI.

That's what we're looking for.

Thank you.

And the next question will come from Russell Quelch with Rothschild and company. Your line is open.

Yes, Hello gents. Thanks for squeezing me in just wanted to circle back to the discussion on active Etfs I think that you said you'd seen an impressive 10% quarter on quarter growth.

I think it would be helpful to unpack. Your response to <unk> question, maybe give a bit more detail on exactly why growth in active Etfs does not cannibalize your revenue growth with diverse it manages.

And also I Wonder if you could send the other part of the question, which was the difference in the economics between the absence of asset management benchmarks in the active ETF benchmark that'd be helpful. Thank you.

That is in private Assets in index investing, and, uh, in physical risk and climate in the, uh, in Wealth Management in GPS, in uh, in in in the faster money segment, you know, hedge funds, broke a dealers, you know, data sets investing and, uh, creating new data sets. And all of that, we do not want to make those Investments by taking the profit margins down.

but we need investment dollars and the bigger, the investment dollars, the more we can achieve higher growth in the company,

Sure.

I'm not being cute, but it's genuinely and intuitive to me why it would cannibalize. It right. So you think there is a there is an active fund.

So that's going to come from AI.

That's what we're looking for.

Thank you.

Its benchmarks.

And its previously likely wrapped in a mutual fund or perhaps some other type of in some other way.

And the next question will come from Russell quelch with Ralph Chowan company. Your line is open.

So then that same active funds.

Let's say holding everything else constant it doesn't change its investment strategy is safe to say.

Same goes into an ETF wrapper, it's fundamentally pretty much neutral for us right, but in fact generally what occurs.

Yeah. Hi James. Thanks for squeezing me in. Um, just wanted to Circle back to the discussion on active ETFs. I think there, you said, you've seen an impressive 10%, quote, unquote to growth there. Um, I think it would be helpful to unpack your response to Kelsey's question. And maybe give a bit more details on exactly why growth in active ETFs does not cannibalize your Revenue growth with active asset managers.

Is it the following things one in transferring into an ETF wrapper. It typically has a more rules based approach wants to be more transparent. It doesn't just wants to move the fund into it there are many cases I'm not saying it doesn't happen. There are a lot of funds that go straight to the ETF wrapper, but in many instances.

I know. So I wonder if you could send the other part of the question, which was the difference between the economics between the active Asset Management benchmarks and the active ETF benchmarks? That would be helpful. Thank you.

The investment strategy is somewhat adjusted or you could say quantified quantification of the strategy and we have a role to play there with our tools.

Sure. Um, so so I'm not I'm not being queued but it's, it's genuinely unintuitive to me why it would cannibalize it, right? So you think there's a, so there's an active fund.

Their models et cetera, then in turn it May go further staff and it may be turned into an index.

Um, it's benchmarked and it's previously likely wrapped in a mutual fund or, you know, perhaps some other type in some other way.

So then that same act of funds.

But those will become more.

More.

Strict and hence the strategy becomes an index.

And in turn many such strategies are being built from scratch today.

And so we played a part in it so.

I would say that and in turn.

The people who are doing this are generally or.

Not in the.

The index towards passive as people say, we don't like the term that much but.

You know, let's say holding everything else constant, it doesn't change its investment strategy; it stays the same. It goes into an ETF wrapper. Fundamentally, it's pretty much neutral for us, right? But in fact, generally, ours is the following things: 1. In transferring into an ETF wrapper, it typically has a more rules-based approach and wants to be more transparent. It doesn't just want to move the fund into it. So there are many cases... so I'm not saying it doesn't happen. There are a lot of funds that go straight into an ETF wrapper.

The index business, they're not the traditionally.

There are some major index players doing in the active space, but many of these are purely traditional active managers, putting an ETF wrapper on our funds.

So honestly, it's just not a it's not a threat to the existing business and there's a lot of upside for us in the future.

Yes and to add to the financial model is in addition to the subscription fees.

When that.

But I'll get Sistema ties, we charged assets under management fees on top of the beta phase.

So that's where the incremental revenue comes in.

Thank you.

And our last question will come from Gregory Simpson with BNP. Your line is open.

Hi.

But in many instances, the investment strategy is somewhat adjusted. Or you could say Quantified quantification of the strategy and we have a role to play there with our tools, um, Factor models, Etc. Then in turn, it may go further steps and it may be, you know, turned into an index. Maybe that, that that those rules become more, um, more um, uh, you know, strict and hence the the the the strategy becomes an index. And and, and in turn, many such strategies are being built from scratch today. Um, and, and so, we play the part in it. So, so, so I would say that and, and, and in turn, uh, you know, the the people who are doing this are generally or, you know, not in the in, in in the index or the, you know, the path service people say, we don't like the term that much but the, you know, the index business they're not the the traditionally, you know, there are

If you could share more on the MSCI is product offering revenue entrust you with the GP client base, given Olson now make up over half the revenue pool with asset management.

Wanted to ask this in the context of the.

Five 5% run rate growth in the private asset segment, and the opportunity and timeline to get this growth rate up. Thank you.

Some major, you know, index players doing in the active space, but many of these are purely traditional active managers putting an ETF wrapper on a fund. So, so, so honestly, it's, it's just not a, you know, it's not a threat to the existing business and there's a lot of upside for us in the future.

So saw private assets as you know we haven't classified at MSCI between real assets real estate and infrastructure on what we call.

Yeah, and to add to that, the financial model is in addition to the subscription fees.

When that?

Private capital solutions, which has some real estate component on it.

That product is systematized. We charge assets under management, fees on top of the data fees.

It is.

There's a lot of it is private equity and private debt.

So that's where the incremental revenue comes in.

So within private.

Thank you.

Private capital solutions, which is the former Burgess.

Company that we acquired three years ago.

And our last question will come from Gregory Simpson with BNP. Your line is open.

Yeah.

A lot of the business there has been built in creating.

Tools and transparency for the institutional LP market.

So the model is that an institutional LP gets presented with a proposal by our GP to invest they invest and they invest in hundreds of these things and then they turn to US and say can you help me.

Hi there. Um, I wondered if you could share more, uh, on mci's product offering revenue and strategy with the GP client base, given alternative now, make up over half of the revenue forward Asset Management. Uh, I also wanted to ask this in the context of the uh 5 and a half percent, run rate growth in the private asset segment and the you know opportunity in Timeline to get this growth rate up. Thank you.

Understand all of this so we go to the GB and tell them that we're representing the LP. The GP. It gives us all their data every single data then they give the LP and therefore, we aggregate that data and then we look at the funds with Dell the institutional investor.

So so uh private assets as you know, we have it classified uh items CI between real assets, real estate and infrastructure and what we call, um, you know, private Capital Solutions which has some real estate component on it uh in it. But it is uh it is is a lot of it is private equity and and private debt.

What's in the fund what is the benchmark how are they doing relative to the benchmark how was the performance how is the risk when will the capital B coal when will the capital B return and all of that.

Private Capital Solutions, which is the former Burgess UH company that we acquired 3 years ago.

So in that model, we get paid by the LP and that's largely the business model today.

A lot of the business there has been built in creating uh, tools and transparency for the institutional LP Market.

So what we're doing is two things.

As we are.

We're creating the product line that is similar to the institutional LP. So it can be used by the wealth L. P.

So the model is that an institutional LP gets presented with a proposal by a GP to invest. They invest and they invest in hundreds of these things, and they turn to us and say, "Can you help me?"

Which is not a big transformation is just re programming the tools.

That of transparency of understanding the benchmark the performance the risk and all of that in the portfolio. The Grant Award then as the market risk and all of that that I talked about in like in private credit and then serve it up.

Do the wealth management organization. So they have the same level of transparency and understanding what would they invested in us as a still limited partners because they are instead of being an institutional limited partner is not one individual limited partner or a pool of limited partners.

Understand all of this. So we we go to the GP and tell them that we're representing the lp, the GP gives us older data, every single data that they give the lp and and therefore, we aggregate that data. And then we we look at the funds. We tell the uh, the Institutional Investor. What, what's in the fund? What is the Benchmark? How are they doing? Relative to The Benchmark? What how is the performance? How is the risk, when will the capital be called? When will the capital be returned and, and all of that?

So in that model, we get paid by the lp and that's largely the business model today.

So that's one part of the the growth the second part of the growth is to then.

So, what we're doing is two things.

Is we are?

Which we're doing right now is to create products for the GPS because we are in the ecosystem, we're talking to GPS.

You know, we're creating the product line that is similar to the institutional LP, so it can be used by the wealth LP.

Every day because of the role that we play for their invest with their investors. So we go into the GPS and will launch.

Which is not a big transformation; it's just reprogramming the tools.

A few products recently, we launched one is called asset and deal.

Information in private equities.

As to.

Looking at every deal and every asset based on our database and provide that as a reference for the GPS to see who is doing what around the industry. So right now our revenues coming from GPS directly on private assets and private capital solution is minimum.

That of transparency of understanding, you know, the Benchmark, the performance, the risk and all of that in the portfolio, the credit wordiness the market risk and all of that that I talked about in, like, in private credit and then serve it up.

To the wealth management organization. So they have the same level of transparency and understanding what would they invested in. As as as still limited partners because they are instead of being an Institutional limited partner is, now an individual limited partner over a pool of limited partners.

A lot of the revenues that are coming from the GPS right now are in analytics, we help them risk manage their assets, we help them with certain within this is in certain parts of the business, we help them with sustainability and climate, but our revenue is coming from PC from from private assets.

So that's one part of the growth. The second part of the growth is to then...

These GPS is minimal.

I don't know if I had $10 million some number like that that is a massive opportunity for us.

So those are the three the three strategies or deepen our penetration on the institutional L. B.

<unk> to the <unk>.

To the wealth or individual Lps through the wealth management sector and build products for the GP in which we have all the all the underlying information on the data and everything is just a question of building products.

Which we're doing right now is to create, you know, products for the GPS because we are in the ecosystem. We're talking to GPS, you know, every day, because of the, the the role that we play for their invest, with their investors. So we're going to the GPS and we launched a few, a few uh, a few uh, products. Recently, we launched 1 is called asset and deal uh information in private equities. As to uh you know, looking at every deal at every asset and based on our database and provide that as a reference for

This does conclude today's question and answer session I would now like to turn the call back over to Henry for closing remark.

The GPS to see who is doing what, you know, around the industry. So right now, our revenues coming from GPS, directly on private assets, in private capital solutions is minimal.

So thank you very much for attending.

Obviously, a different tone from last quarter.

I normally say to people is darkest before dawn.

And we feel that the dawn has arrived and we are turning the corner here, it's not going to be a straight line is going to be lumpy.

We're not in the kind of business that you know.

The layers outbound players down it's a consistent buildup.

And it could be a little lumpy, but we're very optimistic about about our prospects now.

So thank you everyone for joining us.

You can see we have an all weather franchise delivering.

Significant performance and attractive margins, we're a mission critical tool.

A lot of the revenues that are coming from the GPS right now are in analytics, we help them, you know, risk manage their assets. We help them with certain within the systems in certain parts of the, of the business, we help them with sustainability and climate but our revenue is coming from PC, from from private assets of these GPS is minimal at, you know, I don't know, 510 million dollars some number like that, that is a massive opportunity for us. So those are the 3, you know, the 3 strategies are deep in our penetrations on the institutional LP expand to the uh to the uh wealth or you know, individual LPS through the wealth management sector and build products for the GP in which we have all the all the underlying information and the data and everything. It's just a question of Building Products, right?

Our footprint.

Has largely been driven and now we are expanding.

This does conclude today's question and answer session, I would now like to turn the call back over to Henry for closing remarks.

Expanding more strategically in a little different client segments two to link the ecosystem.

In the us and benefit from that so and that will that will.

Will bear value creation over time, we're long term compounded we're not a flare up flare down company. So our goal is to continue to build it or.

Higher growth higher profitability on a on a year in year out basis year on euro basis to be.

To be a long term compound there of EPS and growth. Thank you very much everyone.

This concludes today's conference call. Thank you for participating you may now disconnect.

The ecosystem and the and and benefit from that. So um and that will both that will bear value creation. You know, over time we're a long-term compounder we're not a flare, a flare down company. So our our our goal is to continue to build, you know, higher growth higher profitability, you know on a on a year end year out basis year in year out basis to be a uh, to be a long-term compounder of eps and growth. Thank you very much everyone.

This concludes today.

Conference call.