Good day, ladies and gentlemen, and welcome to the MSCI First Quarter 2026 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 one question at a time, then add themselves back to the queue for any additional questions. We will have further instructions for you later on. I would like to now turn the call over to Jeremy Euland, Head of Investor Relations and Treasurer. You may begin, sir.

Thank you, Operator. Good day and welcome to the MSCI First Quarter 2026 Earnings Conference Call. Earlier this morning, we issued a press release announcing our results for the first quarter 2026. This press release, along with an earnings presentation, are available on our website, MSCI.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 the 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 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. For discussion of additional risks and uncertainties, please see the risk factors and forward-looking statements disclaimer in our most recent form, 10K, 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-GAAP measures to the equivalent GAAP measures in the appendix of the earnings presentation. We will also 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. On the call today are Henry Fernandez, our Chairman and CEO, and Andy Wishman, our Chief Financial Officer. With that, let me now turn the call over to Henry Fernandez.

Henry. Thank you, Jeremy. Good day, everyone, and thank you for joining us. MSCI's first quarter results affirm our foundational, mission-critical role in global investing, while also showcasing the highly diversified nature of our business. Our key financial metrics included organic revenue growth of over 13 percent, adjusted EPS growth of nearly 14 percent, adjusted EBITDA growth of almost 19 percent. We remain long-term believers in the MSCI franchise, and we are committed to maximizing value creation through the disciplined deployment of our excess capital. Between January 1st and yesterday, we repurchased more than $464 million of MSCI shares at an average price of about $556 per share. In addition, we recently completed three very exciting and highly strategic small bolt-on acquisitions in key growth areas. Our Q1 operating metrics included total run rate growth of nearly 13%, fueled by a record asset-based fee run rate, of $872 million, growing 25%. And recurring subscription run rate growth of 9%, fueled by net new recurring subscription sales of $39.6 million, growing 52%. It was our best first quarter for net new recurring subscription sales since 2022. The retention rate across all MSCI product lines was 95.4%. Our increased business momentum is starting to reflect the relentless adoption of agentic AI in everything we do, ranging from how we capture data and build models and platforms to how we launch and market our products to how our people work every day. This momentum cuts across geographic regions, product lines, client segments, and asset classes. We did well in all regions in Q1 with Asia Pacific, a particular standout. In fact, we posted our strongest ever Q1 on record for recurring sales in APAC at $15 million, up 46% from a year earlier. Across product lines, MSCI has built our momentum through sales of both newer and more traditional solutions. In index, for example, subscription run rate growth returned to double digits in Q1. at 10.7%, and we achieve a record level of Q1 recurring sales at nearly $33 million. These results were driven mainly by our market cap indices, but we also deliver impressive growth in custom indices. With more than $21 trillion in AUM benchmark to MSCI indices, the ecosystem around our products is scaling to new heights. This includes $7.4 trillion of indexed equity AUM benchmark to MSCI indices, comprised of $2.4 trillion in ETF products and $4.9 trillion in non-ETF products. Q1 was our best quarter since 2023 for traded volumes and run rate from listed futures and options contracts linked to MSCI indices. This further reinforces the power of our ecosystem and our shared success with MSCI exchange partners, including our new licensing agreement for options on MSCI indices listed on the New York Stock Exchange. AI is helping us capitalize on these trends by offering more flexibility, faster customization, and greater interoperability. For example, our new Index AI Insights Connector makes it easier for clients to answer questions about our index data and methodologies using their preferred AI large language models, such as CLOL and chat GPT, or on MSCI One. Hundreds of clients have used Index AI Insights since our launch in late February. MSCI's recent acquisition of Compass Financial Technologies, a Swiss-based provider of index calculation services, extends our customization capabilities into additional asset classes, such as commodities, digital assets, and equity derivatives. Meanwhile, in private capital solutions, we deliver recurrent net new sales growth of nearly 44% in Q1, while driving adoption of both newer and established solutions. Some of our reimagined and innovative new tools include daily private valuation indices and benchmarks for private equity and private credit. MSCI's AI capabilities in private assets have increased dramatically over the past year, including a new connector on cloud linked to our private capital intel fund benchmarking. We're helping allocators streamline the due diligence and evaluation of private fund managers at scale with our private asset due diligence platform. Our recent acquisition of Vantager, a platform built entirely on AI, accelerates our ability to help clients perform better due diligence when investing in private markets. Likewise, our acquisition of PM Insights earlier this month will help us deliver secondary market pricing, liquidity, and reference data, which will support more robust portfolio construction and the development of indices and analytics solutions. Turning back to MSCI's Q1 performance, in analytics, we drove recurrent net new subscription sales of $8.2 million at nearly 55%, reflecting large wins and renewals of our equity offerings and enterprise risk tools. These wins underscore the continued innovation of our factor capabilities, such as our next-gen models and the release of basket-building solutions for the market-making and trading community. They also demonstrate our advancements across total portfolio solutions, including our own parallel private asset coverage, as seen in our new private credit risk models. Among client segments, MSCI has an especially strong quarter with hedge funds and traders. Among hedge funds specifically, we posted subscription run rate growth of 17%, along with our highest ever level of Q1 recurring net new subscription sales at roughly $12 million. These results were driven mainly by index and analytics. This wins included a seven-figure index rebalancing deal with a top global hedge fund. In analytics, hedge funds are also licensing our crowded trades datasets to support their alpha generation. Among banks and broker dealers, we deliver subscription run rate growth of almost 11%, along with our best-ever Q1 for recurrent net new sales at nearly $11 million. Shifting to asset owners, MSCI achieved subscription run rate growth of nearly 10%, driven by private capital solutions and analytics. As more pension funds diversified into private markets, we see growing demand for our total portfolio solutions and private asset tools, including our tools for benchmarking and for transparency. Moving on to asset managers, we posted subscription run rate growth of over 6%, along with nearly 11% recurrent net new sales growth, including notably a strong growth in analytics and a retention rate of close to 96 percent. MSCI is executing on key growth opportunities for the asset management segment, including advanced data sets, private assets, total portfolio solutions, and active ETFs. Looking at our Q1 performance as a whole, we once again demonstrated the benefits of our all-weather franchise, our client segment and product diversification, recurring revenue financial model, and the growing liquidity and scale of the investment ecosystem linked to our indices and our IP. Our ongoing technology and AI-driven transformation will strengthen these advantages. To help us lead that transformation, Dinesh Gupta joined MSCI last month as our new Chief Data Officer and Global Head of Operations. Dinesh came to us from Goldman Sachs, where he spent nearly three decades and held leadership roles spanning multiple business lines including asset and wealth management. Dinesh served as Global Head of Data Engineering at Goldman, and he also led the organization responsible for building agentic AI platforms and machine learning capabilities across the whole firm. He is ideally suited to help MSCI strength in our comprehensive data strategy, reinforce our technology and AI-first mindset, and accelerate our transformation. And with that, let me turn the call over to Andy. Andy.

Thanks, Henry. As you indicated, it's a very exciting time to be at MSCI. We closed one of the strongest first quarters in our history, reaffirming our traction across key initiatives, and we are growing our market share and expanding our influence in the increasingly AI-centric investment industry. Indexed organic subscription run rate growth re-accelerated to low double-digit levels at over 10 percent, with record Q1 recurring net new sales of $25 million, up 75 percent year-over-year. We benefited from a few large deals with trader and hedge fund clients, where these opportunities included new custom index content, such as our non-ETF custom index and constituent data sets, which span rebalancing and history use cases. Additionally, we had another quarter of strong traction with our market cap modules, where we saw success across asset managers, hedge funds, and broker-dealers. Index retention was nearly 97% for the quarter, further improving from last year's levels. Asset-based fee run rate growth was 25%, fueled by the incredible flows to products linked to MSCI indexes. Equity ETFs linked to our indexes captured a record $103 billion of inflows during the quarter, representing roughly 35% of all flows into equity index-linked ETFs. To put that in context, the prior record for quarterly inflows was $67 billion, which occurred in the fourth quarter of last year. Global investors continued to deploy significant capital into ETFs and non-ETF products linked to MSCI Developed Markets ex-US indexes and MSCI Emerging Markets indexes. Additionally, our clients are seeing very strong performance in European-listed ETFs linked to our indexes. In general, we see attractive white space opportunities in the European market. Nearly $1.1 trillion of the $2.4 trillion of AUM in equity ETFs linked to our indexes comes from European-listed products. And during the first quarter, we saw European-listed ETFs capture $46 billion of inflows, which was nearly 50% of all flows in the region. In analytics, we had subscription run rate growth of nearly 8%, driven by new recurring sales of $17 million, which grew 30% from a year ago. We saw continued strength in equity analytics, and we had some large enterprise risk and performance wins. The analytics Q1 revenue growth was over 10%, although this reflected a higher volume of implementations recognized in non-recurring revenues. For Q2 2026, we currently expect analytics year-over-year revenue growth to be roughly 5% for the quarter. In private capital solutions, subscription run rate growth accelerated to nearly 16%. We've seen strong momentum with our transparency data, private capital intel, and total plan offerings, all of which have benefited from numerous enhancements and new capabilities. In real assets, we still face some headwinds with our property transaction solutions, although we had another quarter of improving cancels and solid sales of our index intel offering for property benchmarking use cases. In sustainability and climate, while new recurring sales grew modestly, they were offset by higher cancels. We are seeing clients focus spend on their most critical sustainability priorities, which leads to some down sales, although it has also led to competitive wins for us. We expect these pressures and the muted growth in sustainability and climate to continue in the near term. Our capital position remains strong, with close to $400 million of cash on our balance sheet at the end of March. As Henry noted, we completed the acquisitions of Vantager, Encompass during the first quarter, and PM Insights earlier this month. These three acquisitions add a relatively modest contribution to run rate and ongoing expenses. On guidance, we updated our full-year outlook on DNA by $5 million to incorporate the impact of intangibles related to the acquisitions. Given the strong ABF performance and the assumption of very gradual market appreciation in the back half of the year, we are trending to be in the top half of our expense guidance range. The Q1 effective tax rate reflected lower tax windfall benefits from the vesting of stock-based compensation compared to recent years. I would highlight our effective tax rate outlook for 2026 is unchanged, and for Q2, we expect to have an effective tax rate between 18 and 20%. The free cash flow outlook for the full year is unchanged, although Q2 is seasonally the highest quarter for cash tax payments for us. Looking ahead, we have an attractive pipeline of opportunities as we drive adoption of our new and existing solutions across the investment landscape. Our strong start to 2026 reaffirms the mission-critical nature of our solutions in today's AI-first economy. We are seeing solid momentum in delivering new products and capabilities, supported by enhanced go-to-market efforts, which are translating through to tangible results. We are focused on meeting client needs and enhancing value across client segments. We look forward to keeping you posted on our progress, and with that, operator, please open the line for questions.

Certainly. And as a reminder, ladies and gentlemen, if you have a question, please press star one one on your telephone. We ask that you please limit yourself to one question each. You may get back in the queue as time allows. Our first question comes from the line of Alex Graham from UBS. Your question, please.

Yeah. Hey, good morning, everyone. Just want to talk about the, I guess, sales momentum a little bit here. I mean, I guess the first quarter had a choppy ending with all the volatility in the markets in March. So good to see still good momentum there.

So just wondering, did anything slip given the environment, but more importantly, given that the second quarter is generally a more important sales quarter for you? Any kind of insight of what you're seeing so far, in particular, in index analytics? Hi, Alexa. Thanks for the question. Except for a slowdown in dialogue and presentations and, obviously, demos in the Gulf region, the countries in the Gulf, the Arabian Gulf region, we have not seen any effect of the Iran war anywhere else in the world. it has obviously been a bit surprising to us but we have not seen clients pull back we have not seen clients delay decisions they've been operating on a business as usual and that has also that was at the end of March and also in the first three weeks of April

thank you one moment for our next question and our next question comes from the line of Manav Patnick from Barclays. Your question, please.

Thank you. Good morning. I guess, Henry, I just wanted a little bit more color. I mean, these are obviously some impressive net new sales numbers out there, especially in this environment where we all perceive, you know, your main customers to be budget challenged. Are you taking share? Are you just taking more of the wallet? Can you talk a little bit about some of the product areas, innovation, and where this growth is coming from?

Yeah, so Manav, the, you know, So in our own internal discussions and analysis, we have not seen, let me back, the operating environment and the end markets that we're serving have not changed for the last few quarters, have not changed almost at all. A few things a little better, a few things a little worse, but they have not changed. What has changed in terms of this performance of Q1 and also the past performance of Q4 of last year is a stronger execution across MSCI in three big categories. The first category is selling what we currently have, the products that we currently have more aggressively, more creatively, more energetically across all client segments and all regions of the world. Number two is a significant acceleration of the launch of new products, or I should say the start of an acceleration in the launch of new products. We launched an equal number of products in Q1 as we did in the full year of 2025. And number three, a significant acceleration in adoption of AI tools in everything we do, along the lines of what I said in my prepared remarks. So those three areas have helped us increase our recurrent and new, have bigger penetration, take market share away from competitors, especially in the sustainability and climate area, and grow faster. And we believe that, as we have said before, that Q3 was a little bit of the bottom, Q4 was better, Q1 is better relative to, obviously, expectations, and we think we're on a growth path here.

Thank you. And our next question comes from the line of Tony Kaplan from Morgan Stanley. Your question, please.

Thanks so much. I was hoping if you could talk about whether you've seen sort of any uptick to revenue specifically related to AI. I know you talked about sort of the products built on AI and any quantification around expense savings with regard to AI.

Yeah, Tony, basically every new product we're launching has an AI component to it. Some of them are, a few of them are AI native. Some of them are AI powered. And some of them have some AI enablement. So depending on the product and the area, the importance of AI is very big in the AI native ones or just the ingredients that go into the launch of the product. So that's pretty much across the board in any new product. So therefore, we have been tracking last year on the revenues associated with quote-unquote AI products. And we keep doing that, but it is almost irrelevant right now, because everything that we're launching has an AI component to it. It's just a matter of degrees. The second part of your question is efficiencies. We are seeing significant early efficiencies in the use of AI across the whole board. It started in earnest in AI data, and I'm sorry, applying AI to the data capture and the data development in private assets and in sustainability and climate. That has accelerated significantly to the point that it allows us to dramatically increase the amount of data gathering and data development with the same level of health camp that we have rather than adding, you know, health count. We're beginning to see significant productivity as well in software development, new software development, new software applications. And we haven't yet started rewriting the current software that we have in terms of either production or applications with AI, but that will be a big project that we want to get into in the near future. And then thirdly, and also very importantly, we began to use AI across the board in the development of models, models and methodologies. So, for example, in custom indices that we're ramping up, as you know, the development of the custom index capabilities, we're now using AI, obviously managed and monitored by our humans in our research department in the creation of custom indices at a much faster speed than we've ever done before. We always use AI for analytics submodels as well, and we just revamped the entire sustainability rating system, ESG rating systems, using AI, and that's going to be in the process of being relaunched, and that's going to give us enormous productivity and scalability. And by the way, I would just add that from a year ago to now, the use of AI across over 6,000 professionals in the company has increased dramatically. About a year and a half ago, we made AI a condition of employment at MSCI. We started giving tools and training and demos and created champions and all of that across the whole company. We now have the vast majority of MSCI employees using AI models every single day that they're working. Andy?

Yep, Tony. This is Andy. One other point to highlight, which adds to the benefits side of the ledger from AI, is we are starting to see clients that are interested in licensing more content, getting access to more content for AI-driven use cases. We think that's early days, And that's potentially a huge opportunity for us and something we get very excited about, given the unique content that we have. So that added to all the points that Henry highlighted reaffirms that AI is definitely a boon for us.

Thank you. And our next question comes from the line of Owen Lau from Clear Street. Your question, please.

Hi, good morning. Thank you for taking my questions. So analytics revenue was up over 10 percent year over year. And Andy, you also mentioned that you had some pretty strong non-recurring revenue related to implementation. Could you please talk about the outlook there in specific for implementation and then how high is the correlation between the strength of the index business and the strength in analytics in the first quarter?

Sure, sure. So, a few points there. Maybe let me talk first about the momentum we're seeing in analytics, which definitely has been encouraging. We continue to have strong success with our equity analytics, and we had some big wins in the quarter, and we also had some nice wins on the multi-asset class side. so that the success that we saw in analytics in the quarter was across multiple fronts. We're seeing strength across client segments. We continue to see very strong growth with hedge funds. We actually had 14% growth in analytics with hedge funds. We're also seeing strong momentum with banks, where we had 10% growth. And asset owners also are a big win area for us, which Henry highlighted earlier. A lot of that is enabled by our total portfolio capabilities, which really lean on our differentiated private asset content. And so we saw 9% growth with asset owners. And so good momentum across client segments. Our factor franchise continues to get a strong boost within that hedge fund community. But excitingly, we are seeing traction outside of hedge funds. And so it had some wins with traditional asset managers as well. And so we're encouraged by the momentum across analytics. And you see that in the run rate where we've been kind of steady in the high single digit type area. Your comment about analytics revenue growth was that there are some unique factors at play in the quarter. So it would highlight that we did have a large implementation that was completed during the quarter. and hence you saw some meaningful non-recurring revenues within analytics, which drove the overall revenue growth to be slightly above 10% within the segment. As you've seen in the past, there can be some lumpiness with regards to when those implementations are completed and the comparisons to the prior year period or the comparable period. And so in Q2, we do expect the revenue growth to be more mid-single digits, so closer to 5% within analytics. Beyond Q2, we do expect the revenue growth to track much more closely to run rate growth. So looking forward longer term, we think run rate growth is a good indicator of the revenue growth. And as I alluded to, that's an area where we see good momentum and strong traction. Your question about correlation with index, Listen, there are dynamics that are overlapping. So within the trading and hedge fund community, our content sets are very complementary there. We've seen strong traction both in analytics and in index within that client segment. You know, we do see also general environmental factors at play that drive both. But then, as you can tell by the results, we had a good quarter in index and a good quarter in analytics. So there is some correlation there. But there are also differing dynamics across different parts of the business. So I'd say it really depends.

Thank you. And our next question comes from the line of Aziz Sabhadra from RBC Capital Markets. Your question, please.

Thanks for taking my question. So really strong subscription run rate growth in hedge funds, asset owners, and broker dealers. But I wanted to focus on the asset manager, where it moderated a bit from 7%, I believe, last quarter to 6%. Can you just talk about the puts and takes there? How should we think about that momentum in asset managers going forward?

Yeah, sure. And listen, there are some FX factors at play with the growth rates in any given sector. we actually have seen good momentum and we've seen pickup with asset managers in spots. As Henry alluded to earlier, we are benefiting from the innovations that we've made. So the new product development, as well as just more generally enhanced execution. And that includes how we cover our asset manager clients. You know, the success was multifaceted. So we did have success in licensing, more content and broader usage of our tools across asset managers. For many of the, particularly the larger clients, we've taken more of an enterprise type approach to how we work with them. And that leads to some very attractive additional licensing opportunities. And it also leads to more stability in the segment and with the retention rate, as we alluded to, saw a very strong retention with asset managers in the quarter. We from a geographic standpoint, we saw good momentum in the Americas and good momentum in APAC. And as I alluded to, we've seen it both in analytics and index. And so maybe just to double click on each of those quickly. On the index side, we have delivered more solutions beyond the broader licensing that I referenced earlier. We've released content sets that are helping these clients in the portfolio construction process, but also in the sales enablement process, meaning how they communicate to their clients and how they think about launching new products. We also have solution sets that are getting traction for active ETS. and then more generally supporting indexed investing in many forms and fashions. And so we're seeing a number of areas of growth across index for asset managers. And then, as I alluded to in the last question on the analytics side, listen, we've had some big multi-asset class wins, and we've also seen some traction with our factor franchise. And so it's overall encouraging. I think a lot of it, as Henry alluded to, is really driven by our efforts and our execution on that front. And we continue to view asset managers as the key and core client segment for us.

Thank you. And our next question comes from the line of Craig Kuber from Huber Research Partners. Your question, please.

Thank you. Maybe just talk a little bit further about a little bit better numbers in sustainability and climate there. It's obviously nowhere back to where it was before. It seems like the environment for that hasn't dramatically changed here in recent quarters. But just talk about what's a little bit better momentum there, if you would, please.

So, Craig, the way we look at it, it's important to start by differentiating sustainability or former ESG, right, sustainability from climate. They have been a little bit linked in the past, not because they have similar dynamics or supply and demand or competitive landscapes, but at least because sometimes the sales that we did were sales that were in one package. We were linking them into one package, which we are increasingly separating between the too, because we believe that sustainability, we will continue to sell and sell well, but there is a lot of rationalization of cost. And there is a significant market share that we are taking away from competitors on sustainability. On climate, we're pretty hopeful. We're cautiously optimistic that at some point it will re-accelerate, especially in physical risk. So this past quarter, we had an important win, which was Deutsche Bank, the Central Bank of Germany, was not Deutsche Bank, but the Central Bank of Germany, was subscribed to a series of climate risk tools from our side on behalf of the European Central Bank system, which incorporates all the national central banks. So we're very encouraged by that because it was a competitive win. We were selected as the best provider. And now obviously we got the work of penetrating each one of the national central banks. So that tells you how important they view climate risk and how important they view the MSCI offering. So we're very focused on, we continue to focus on the transition elements of climate change, But very importantly, we're now more and more focused on the physical risk part. And we see increasing demand there. We believe that the Iran war and the energy shock that has come out of that is going to underscore significantly the energy transition that a lot of countries need to make to ensure less dependence on oil and gas coming from the Gulf. And that's going to bode well for a lot of our tools.

Thank you. And our next question comes from the line of Alexander Hess from J.P. Morgan. Your question, please.

Hi, guys. I want to jump into the active ETF business. It seems like from our data there was some pickup in active ETFs more broadly that these seem to be doing pretty well as sort of a category. Maybe you could highlight what that business looks like, how that may have helped your fund flows in 1Q or not, and then anything we should understand about how you guys participate in that business and how that flows through your numbers. Thank you so much.

So, we're very excited about that part of our business. Very excited. And there are a number of reasons why that's the case. The first one is we believe that this is an area of significant expansion by the active asset management industry, right? That a lot of what they're getting hit in outflows, in mutual funds, and other forms of active management, they can latch on to active ETFs and revive growth. And this is a client base that we know exceedingly well. They recognize our data sets and our indices extremely well, and therefore we can be very helpful to them. Number two is it's important to also recognize that something like 70, 80% of the active ETFs that are being launched have some elements of systematic investing or index investing in them. And they're not pure play, stop picking ETFs like some of the mutual funds could be. So that is fertile territory for MSCI to be of significant help. in terms of the underlying database and the organization of the database to the indices that are built on the database, and then to the quantitative tools that can be applied on top of the indices to do overlays that are actively managed on that. So we're very, very bullish about that and then uh and then thirdly uh of course that uh that you know our role in in this industry on the passive side is significant as you know and that that is uh you know and a lot of our clients are coming to us to help them on the activity f because of our brand uh and the trust on our on our on our database and our you know indices and our methodologies in order to build this active ETF business. So we're very, very, you know, hopeful that that will be a growth area for us on the more challenging part of the active managers around the world.

Alex, just to answer the part about where it shows up in our financials. Firstly, I would say we are very actively used as a benchmark on active ETFs. That is something that oftentimes, times, as you know, is not a new sale for us. So if the client is licensed already for the module when they use this as a benchmark on the active ETF, that's not going to be a new sale for us. But to the extent it is something that's, as Henry said, helping with the help of the asset manager, helping them grow, that can lead to additional sales for us. As Henry alluded to, we do also license additional content sets. So we have some specific content sets like our index universe data, but also broader content sets that can be used as part of the portfolio construction process, be used for overlays, risk management, as part of our client's active ETF management. That's an additional module license for us. So that's on the subscription side. And then we have launched our active financial product license. And this is where you've heard us talk about in the past, we can do more for the client and be an integral part of the overall portfolio management, if you will, which is the index and calculating the index on an ongoing basis. And that can translate through to ABF revenue. And so we can benefit both on the subscription side and the ABF side. It's very early days, so it's small for us. As I said, we are getting good traction as a benchmark. We've had quite a bit of success early days and licensing additional content sets. But we think the opportunity is much bigger going forward, as Henry alluded to, to help on both the EBF side and the subscription side.

Thank you. And our next question comes from the line of Fraiza Alley from Deutsche Bank. Your question, please.

Yes, Sai, thank you so much. I wanted to ask about the strong growth that you saw in custom indexes. And I'm curious if it's driven by just your ability to process you know things faster or is it more a function of kind of end market demand just trying to understand you know the sustainability of the you know just a higher growth that you saw this quarter so basically let's start with

the the end market demand in systematic investing and a big part of that is index investing, we have the vast majority of the historical work that we have done has been on market cap exposures. And that is, you know, give me the market cap of your emerging markets, give me the market cap of Japan or Europe or one way or another. What is now happening is that the door is now wide open to do systematic investing and rules-based investing and index investing in what we call non-market cap, which is give me a portfolio or an index of all the securities, equity securities in the world that have low volatility, high quality, high ESG ratings, low climate risk, or whatever. You can see the flavor. So there is an investment thesis behind that, not just a market exposure. And therefore, there is incredible growth in that inequities. We're now seeing fixed income. We're even getting requests about that in private assets, like private credit or private equity. So therefore, we're uniquely positioned to benefit from that, because not only do we have the index universe, the index methodologies, and a great index brand, but we have all the other ingredients to provide that. We have the factor models to create factor, you know, the compositions. We have the ESG ratings, we have the climate exposures, we have the thematic scores with all that in which we can put everything together in building people an index. So some of that gets translated into a standard index that we create or off-the-shelf index that we create, but the vast majority of that is coming into a form of custom index for either active management, for active ETFs, for passive management, in ETF for institutional, for structural products, for an over-the-counter swap, an over-the-counter option in a structural product or a swap. So the demand is very significant and therefore we've been, as you have heard those say in the last few years, we've been ramping up the ability for us to meet that demand And that comes in two, three components. The first component, which is the workflow application to help people and help us design these indices. And that's the acquisition of Foxberry. The second part is once you have that workflow application and you design what you're looking for, how do you link that to an industrial scale production environment in which you have tens of thousands of custom indices being produced safely and with high quality? and we've done all that work already. And then the third component is, okay, how do we accelerate the process of creating the methodology, the index algorithm? And we obviously were doing that with humans in our research department and we're now doing that with AI to help accelerate that. So the demand is there, we're meeting most of the demand but we're leaving some money on the table and with all this improvement in these three areas We're now well positioned to capture the vast majority of this demand in the world, and we're very uniquely positioned to achieve that.

Thank you. And our next question comes from the line of George Tong from Goldman Sachs. Your question, please.

Hi, this is Anna. I'm for George. George, we saw very strong AUM growth of ETFs linked to MSCI indices this quarter, especially in developed market ex-US and emerging markets over the period of time. And can you provide more color around the momentum behind the international inflows outside of the US? How do you see the trends going forward? And additionally, do you expect the trends to drive broader subscription growth opportunities for you going forward, given MSCI's unique exposure to international markets?

Sure, sure. Yeah, so as you alluded to, we have a unique and differentiated franchise in ex-U.S. markets. And if you look over the last 10 years, we've captured about a 35% share of ex-US equity ETF AUM. And that sustained leadership is really supported by consistent inflows, strength of our comprehensive offering, our strong position with the asset owners of the world, and the fact that we really have fit-for-purpose indexes tailored to whatever need our clients need. And so we feel very strong about the power of that franchise. You have seen, if you look over that 10-year period, you've seen meaningful, for most of that period, meaningfully outsized flows and outperformance of the U.S. market. And, you know, we did okay. We did fine during that period. but what you've seen over the last 18 months, so really the last year and a half, is you have seen a rotation take place and start to take place into international equities, so non-U.S. equity exposure. And clearly that has been a big benefit for us. We saw tremendous inflows throughout last year. We saw record inflows into ETFs linked to our indexes in the first quarter here, so north of $100 billion. And importantly, we are capturing a significant percentage of the market share of those flows, which I think speaks to the strength of the franchise. The other stat, which I would highlight, and I mentioned it earlier, is within the European listed ETF market. So these are ETFs that are listed in the European market. We have a very strong position. So we captured 40% of flows into European listed funds within the first quarter here. We also, by the way, had very strong flow capture in the U.S. for international exposure products. But Europe has been a continued area of outsized strength for us. And that is something that is helping to fuel the broader ecosystem of products for us. So the growth in AUM in European listed ETFs, but also ETFs more generally is part of what helps fuel the opportunity with the trading and hedge fund ecosystem. It's something that drives more demand for clients to create new ETFs based on our indexes and obviously helps in the derivatives, both over-the-counter and listed markets. And so it's an important point of strength for us. I don't want to speculate as to what happens going forward here, But given many of the fiscal and geopolitical dynamics at play, we have seen the sustained momentum of outsized growth into international exposure areas. And that's a huge opportunity for us. We've got an all-weather franchise that can benefit in all environments. But this environment is one that creates numerous opportunities across different product areas, different client segments, and different geographies for us.

I normally say that we're only getting in the indexed investing world and in this case, the ETF world, because the only thing that has been largely capture and conquer is market cap exposures. And so when you think about the norm market cap investment thesis, which is the vast majority of the investment process worldwide, is being systematized, is being turned into rules based, just like this active ETF that I was mentioning. And there is now a revolution going on in fixed income as well, and in commodities, and in equity derivatives, and this acquisition of Compass Financial that we made is going to help us dramatically penetrate these other asset classes like commodities, creating indices and systematized structures for commodities, for cryptocurrencies, for other digital assets, and for equity derivatives and the like. So, you know, I want to make sure you pay attention to that acquisition because it's going to to open up a lot of new doors for us. And by and large, we are by far and above the provider of choice of this, you know, this custom indices across the board. And that's been the strength of our fixed income, the fixed income ETF franchise, you know, linked to MSCI indices is being, you know, not the market cap, you know, fixed income indices, but the non-market cap, which is, you know, There is an ESG overlay, there is a climate overlay, there is a factor overlay, and you're seeing that growth. And lastly, I want to reinforce what Andy was saying, which is that the two big ETF markets in the world are the US and Europe. And our presence in Europe is one trillion, one plus trillion out of the two four-point trillions. So we're extremely well positioned, capturing a significant amount of the flows there in addition to the strength that we have in the U.S.

Thank you. And our next question comes from the line of Scott Wurtzel from Wolf Research. Your question, please.

Thanks for taking my question. Just wanted to ask on the growth that you're seeing with hedge funds. You know, it's been pretty impressive, I think, you know, in this quarter and I think in the past couple of quarters as well. And just wondering if you can maybe contextualize like what, you know, inning we're in in this opportunity to sell into the hedge fund channel, just given the growth that you've seen in recent quarters.

Sure. And maybe I can broaden it to traders, broker dealers, hedge funds, you know, what we've referred to as the trading ecosystem in the past. This is an area, as you alluded to, it's been a strong growth area for us. It's been our highest growth area for the last couple of years, but it's also very strategic for us. And so we've seen growth in both index, where we actually had 27% subscription run rate growth within index with hedge funds. On analytics, we saw 14% subscription run rate growth with hedge funds. We've similarly had very strong traction with trading firms and with broker dealers. And a lot of this is fueled by our actions. We have benefited probably by the health and asset growth that you've seen within multi-strat hedge funds and the growth of certain strategies. But importantly, we have been actively innovating, enhancing the services that we deliver to these organizations. And we have been becoming much more of a enterprise-wide partner to many of these organizations. And so we are offering things like custom indexes used for structured products, over-the-counter derivatives, custom bespoke strategies. We have custom index sets, content sets that are used for systematic and index rebalancing strategies related to that index methodology data sets. We continue to enhance our risk models and broader systematic solutions, which create additional upsell opportunities. And so we believe this is a big market where we will be a critical partner to these organizations. And it's a sustainable area where we have a long way to go in terms of doing more for them at an enterprise level, being a strategic partner for them. And as I alluded to earlier, this is very strategic for us as a firm because it helps fuel opportunities in the ETF market, the non-ETF passive market, the over-the-counter market as well. And this is something that provides more liquidity and more opportunity for asset owners that are looking to implement index strategies, even opportunities within the wealth segment. And so this has been a nice growth engine for us in the short term here within those three specific client segments. But more generally, this is something that's helping to fuel the power of the overall franchise for us. And so we do believe it's attractive and sustainable, and we continue to innovate and enhance our service there.

Thank you. And our next question comes from the line of Kurt Nagel from Bank of America. Your question, please.

Great. Thanks very much. Just kind of going back to the net new, very obviously notable in 1Q, great results. I guess, would you be able to, Andy, I guess, disaggregate how much of that was due to some larger concentrated deals? uh, which, you know, eludes to the prepared remarks versus, you know, again, the substantial increase in product velocity and execution. Um, yeah, just any, any comments on that would be,

uh, helpful. That's, uh, that's my question. Sure. Yeah, we, we, um, you know, we alluded to this earlier, but we, we did see, as Henry mentioned, uh, we saw a notable pickup in number of new products launched in the first quarter, but we also saw a notable increase in sales from new products compared to the first quarter of last year. And so our actions are definitely playing a role in the impact we've seen, the acceleration and growth we've seen. If you look at where some of that momentum is, we've seen strong momentum in areas like index, where we're accelerated back to double digit growth there. We've seen an acceleration in PCS On both fronts, we have been very active in pace of new product development, as well as enhancing our go-to-market efforts. And so things like new index content sets that we've been delivering, things like within PCS, a whole host of new capabilities, like our document management and source view offerings, like our asset and deal level metrics that you've seen, a number of content sets that are helping drive growth across basically all of our PCS offerings are all things that have been released in recent periods here. And then obviously on the custom index side, as Henry alluded to, that scenario where we've been heavily investing broadening our capabilities and become a partner of choice. And so, you know, there's probably some environmental aspects at play. The sustained market momentum is constructive for us. But a lot of the momentum that we've seen has been driven by the efforts and actions that we've been taking.

Thank you. And our next question comes from the line of David Mookmeaton from Evercore ISI. Your question, please.

Hey, thanks for squeezing me in. And so I wanted to just talk a little bit about some of the momentum since the February rollout of the index AI insights. Sounds like that's driving increased monetization or, you know, at least a little bit of a pickup in licensing data. And I guess I'm wondering just how the economics on that might differ, whether it's going through msc1 or um third-party apps like claude or chat gpt thank you yeah sure so consistent with our

past approach we want to make our content is easily accessible and available however clients want to get access to it so as we alluded to um you can get access to it through the claude mcp through MSCI One. We even have certain content sets available through Copilot. The economics are generally consistent regardless of how clients access it. There are some, depending on how and where they're using it, there can be upcharges and upsells for us. But our goal is to make it easier for clients to access the content and use it in a multitude of use cases. This is something that is one of those areas where we are increasing value to clients. So as we alluded to, we've seen a notable pickup or notable traction, given that we just released it in February, but notable traction in clients who are accessing the index AI insights. We see clients who are getting more value out of the content sets they have, so they can query, interrogate what's going on in the index, what drives the methodology, what are the constituents. It's also a natural, natural upsell driver for them to ask for additional content sets to want to get insight to our risk models across the firm. And so we think this is a key enabler. It does help support price increases on the margin. It's something, you know, that can lead to upcharges around, as I said, usage. But this is step one for us. And over time, we think clients are going to want to use more of our content within their AI-driven processes. And so as they start to want to use that content to train models, use it as part of their AI investment processes, those are areas where there are meaningful up-sale opportunities for us. And we are spending a lot of time thinking about the right licensing models there, how we can capitalize, because we know directly from our clients that they want to use our content heavily. And these initial ways that clients can access the content via the AI channels are the first step. But we continue to believe there's a long journey of additional things that we can do and opportunities to monetize the content we have. Thank you. And our next question

comes from the line of Jason Haas from Wells Fargo. Your question, please. Hey, good afternoon.

and thanks for taking my question. There's been a lot of fear in the private credit markets recently around, I guess, credit risk. So curious if you could talk about how that's impacting your PCS business. Is it a headwind? Is it a tailwind? How is it impacting you?

It's definitely a tailwind for us. So think about it similarly to our analytics offering, you know, equity factor analytics and multi-asset class analytics, the period of highest interest and highest demand is when there's a lot of volatility in the marketplace. So then what we're seeing right now in private credit is because of the lack of transparency on the funds, people don't understand what the sort of sector exposure of various credits are, what the valuations are, and what the liquidity is and all of that so there is increasing interest in a lot of the tools that we provide the transparency tool understanding you know what is it that is in the fund what are the what are the terms and conditions of the loans and the fund what are the credit assessments you know in this partnership we have with moody's on those funds what is the market risk of those funds based on factors and and the like so i think that uh you know we're increasingly focused on creating valuations, you know, private credit. So I think this is a major tailwind for us. There will be more and more people wanting to look at that in order to understand what they bought and, you know, whether they should keep it or sell it or add to it.

Thank you. And our next question comes from the line of Kelsey Zill from Autonomous. Your question,

please. Good morning. Thanks for taking my question. How does AI change the competitive dynamics for you, particularly for the analytics business? Are you seeing any intensified competition there? And if so, is it coming from other startups or large customers who may try to build some of

these products themselves? Thanks a lot. It's a very good question. So far, we haven't seen in any kind of, you know, competition or intense competition from either the traditional competitors of MSCI or the, you know, the upstarts, the startups. We're not relaxed. We're monitoring and focused on that intensely just to make sure that we continue to have a very deep and wide competitive moat. What we have seen is a significant acceleration from MSCI in terms of product creation, starting with gathering more data to accelerating the pace of model creation and methodologies and index to do all of that. And obviously, the efficiencies that we can create are things that can help us save health count and help us save expenses that we can then reinvest into even more product creation and more distribution. So that's all in progress. I believe personally that the ultimate big sort of opportunity for us is not only in the data and the models and the enhancement of the software capabilities that we have, but it is in changing the business model of how our clients consume our content. As you know, a lot of our content is consumed either by our own applications, by our One, Risk Manager, Private Eye, et cetera, or the clients have their own software applications, or by third-party applications that aggregate our content with others. through what we're doing, which is a significant increase in the creation of agents that our clients can use to consume our content. We can change that. We can get clients to consume a lot more of our content with a lot more people in many different locations. And that's what we're aiming for in the medium to longer term. And that will redefine dramatically how clients consume our content, and it will give us a lot more control and give us a lot more ability to expand. Thank you. This does conclude the question

and answer session of today's program. I'd like to hand the program back to Henry Fernandez for

any further remarks. Well, thank you all for joining us today. I would like to emphasize that our strategy here last year and going forward is a strategy of significantly increase the pace of growth of our existing product segments, like index analytics, with our traditional client segments of asset owners, asset managers, hedge funds, broker dealers, et cetera. And simultaneously, step up significantly the pace of development and growth of newer product lines, such as Climate and PCS, and sold to the traditional client base and newer client bases, like GPs and banks as principals and insurance companies and other parts, market makers, and other parts of that trading ecosystem. So, so that ultimately we become an even bigger long-term compounder of growth, which has always been our goal. So we're on the way on that strategy. You know, the benefit of what you see and what we're doing right now is that this is not like, you know, growth in the periphery. This is growth in the existing, you know, big part of the product line with the existing clients and, and the like, and then it's going to be highly supplemented by, up by the newer product lines and the newer client segments, you know, to add to that growth. So we're very optimistic about that. And it's an all-weather franchise. We're diversified in many aspects of what we do across products, across client segments, across asset classes, et cetera. So it's a great franchise. And the question is, you know, how far can we and how aggressively we can optimize it and monetize it to develop compound growth over the years and significant value creation for all of our shareholders, including our shareholders in the management

team. Thank you very much. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.