Bernstein Institutional Services LLC Annual Strategic Decisions Conference

Good afternoon, everyone. Thank you so much for joining us today. My name is Kelsey Zhu. I'm the Information Services Analyst at Autonomous. With me on stage today, I'm very pleased to welcome Andy Wishman, CFO of MSCI. Thank you so much for joining us today, Andy. Really appreciate this.

Very happy to be here. Very happy to be here. Great event. So thank you for having us.

I guess there's a lot to chat about, but maybe a good place to start is really, I think we've seen a pretty noticeable reacceleration of growth since Q3 2025, give or take. So the new information data we track has definitely picked up globally and in Europe as well. And MSCS net new sales have been beating street expectations for the last two quarters. So I was wondering if you can talk through some of the key changes you're seeing in the broad selling environment, the sales cycles that you're seeing, as well as any additional insight on what's driving the strength and performance for MSCI.

Yeah, so the dynamics are exciting, as you alluded to. We have some very good momentum across the business. And if you look at where that momentum is coming from, it's driven heavily by the actions that we've been taking. on the new product development side but also it's being driven by these big secular changes and transformations that are happening in the industry around systematic investing indexation custom indexing private asset investing multi-asset class investing those are the components that are fueling fueling the growth so we continue to be very excited about industry trends but also the actions and innovations that we're delivering to capitalize on that so maybe if i can drill in across a couple dimensions here if you look at what's where we've seen the acceleration and growth it's been in areas like index so index subscription run rate growth has gone back above 10 percent so organically 10.4 organic subscription run rate growth and index if you look at where that growth is coming from it's around custom indexes and so custom indexes are a reflection of this growing trend of systematic investing indexation personalization at scale and we are uniquely suited to to fill that that demand the other area where we've seen some acceleration is in private assets and pcs particularly so we've seen pcs it's early days and it's small but we've We've seen an acceleration there, and so not only have we seen this evolution of investing into private assets, but we've seen the evolution of people starting to become more thoughtful about how they measure the risk and performance of their private asset portfolios, how they understand the value that they're getting for the fees they pay, and we are now at a stage where we have the tools that can help them on that journey and so that's a very exciting frontier for us and then if you look across client segment dimensions you've seen us have tremendous growth in an acceleration in areas like hedge funds trading firms broker-dealers these are all areas where a lot of that innovation that I talked about earlier or we're developing tools that are nicely suited for those client segments use cases and we can monetize them quickly, but also these are tools that will help fuel other parts of the investment industry. And so we've had good momentum on a number of fronts and definitely excited about

the outlook here. Got it. How do you think about the future pipelines and the sustainability of

this strong growth at MSCI? Yeah, so I think we have alluded to in recent quarters that we've seen a notable pickup in new product development. So we are not only increasing the throughput of new products that we are developing, but we're also capturing more sales from new products. So new products are contributing a higher percentage of our overall sales as an organization. We do believe that that is a key driver of continued growth for us. And so there's a deliberate focused from the top down, from Henry, from Alvisay, and continuing to fuel that new product machine for us. And AI is an exceptional accelerant. And so AI has dramatically enhanced our ability and reduced the cost of producing new solutions for us. And so we're just getting started on that journey. The new capabilities that we've been coming out with and are on the cusp of coming out with here are things that can be really transformative for the industry and are things that we historically would not have been able to do without AI. So we're really encouraged and confident about the new product generation machine we've created and the opportunity that will ensue from it. The other thing that I would highlight is we are also increasing our focus across client segment dimensions. And I've talked about this in the past where we've put a more deliberate effort around our go-to-market within client segments where we've historically been smaller, like wealth management, as I alluded to, within the trading community and broker-dealers, insurance companies. And so we've tried to enhance our go-to-market, but we are also now organizing much of that product development, to your question, along client segment needs and client segment demands more formally. And that is putting us in a position where with AI, we can create these solutions that are geared towards specific use cases. So in addition to just selling products and content that we've historically developed to these new client segments, we're now developing tailor-made type solutions for those opportunity sets. And that can be really, really impactful and transformational for us. So definitely excited about the pace of product innovation, but also the impact we can have

on the end client got it and speaking of ai henry certainly calls this as a godsend to msci and we heard that ai is a condition of employment at msci as well maybe talk us through some of the key initiatives related to ai implementation at msci that you're most excited about and i know you alluded to like new product introductions but is this also opening up new client segments for you and how do you think about how that translates to stronger pricing power maybe yeah um but yeah

help us think through yeah so it permeates every part of of msci it's your point uh henry has made it a condition of employment so every employee gets access to a wide range of ai tools um and we you know provide the training and the mandate that they need to be active users of these tools and need to be reinventing their day-to-day workflows and their day-to-day jobs on a more coordinated basis obviously it's transforming production processes for us if you think about what msci does we take in large amounts of unstructured data client data market data fundamental data we standardize we clean that information we run it through analytics models to develop derive content like indexes, like risk models, like broader sustainability insights and climate insights across asset classes, and then we deliver it to clients. And so at every stage of that value chain, AI is accelerating our pace to develop these tools, deliver them, making our processes he's more efficient. And so that also creates this virtuous circle of additional investment funding. And so part of the reason Henry says it's a godsend here is it is making us more efficient in what we do already. So our run the business costs, if you will, are lower, which allows us to invest more. So the portion of our expenditure is going to change the business or higher for us. and so that relates to your prior question about product pace of product innovation expansion into new markets uh and so ai we've definitely seen ai as a boon on on that front but then if you look at at a value delivered to clients standpoint there are several layers to what ai is enabling us to do and so at a fundamental kind of baseline level it is allowing us to allow clients to get more value out of the tools that they're already using for us from us so think of our index ai insights offering which if you're an index client you get access to ai insights today you can access our indexes via an mcp but you also have a natural language interface now where you can interrogate what happened within a specific market, what happened, what drove the performance of an index, what's going on with certain sector dynamics. There's this rich content that our clients get as an index client that most of them don't fully appreciate or use. And so AI is just, it's a very efficient mechanism now for us to bring more value to our clients in what they are doing today. Make it also easier for them to integrate into their processes workflows and to the extent they are moving more into a agentic gentified workflow you know we're making it easier for them and more efficient for them to operate and so that's that's at a baseline we are also coming out with new products that we otherwise could not come out with so AI is allowing us to get deeper very rapidly deeper insights into the rich amounts of private credit information that we have that we sit on we have a long history of documents from private credit managers and AI has allowed us to very quickly extract standardize and and provide insights into private credit portfolio performance foreign clients helping to do advanced analytics into some of the insights we get from client position data around crowd trade crowding and And then more generally, allow us to rapidly build out data sets using massive amounts of both proprietary but also external data to give insights into what we call asset location geospatial data set that allows you to understand the full physical footprint of a security or an asset globally, which is a key input into assessing physical risk. it can also be very helpful into understanding supply chains and this is all stuff that that ai is enabling us to do and then the last layer getting at your question it can transform how the investment process works and so we are rapidly rolling out the first generation of tools that are you know really ai native if you will that are allowing clients to build baskets on the fly her basket builder our tool we call signal library which allows a investor to develop a custom factor if you will or a custom signal around our standard factor models we're with a very robust governed infrastructure around the factor content and in fact factor frameworks ultimately it's things that we are using to connect market participants so uh you know connecting the rich information we have about client portfolios what their strategy objectives are with those providers that want to launch a over-the-counter instrument or a tradable product that can fill that need and so ai is is a godsend across many layers for us we can't move fast enough but it's super exciting in terms of the layers of opportunity that it creates for us. Andy, I think you touched

on a number of revenue opportunities enabled by AI. How should we think about the medium-term margin upside or the cost-saving opportunities? And I think a lot of companies have talked about productivity uplift for their developers, so maybe it's a question of labor cost reduction, maybe it's a question of reducing data ingestion costs, and so on and so forth. So just help us

think through the upside on margin yeah so it is as i alluded to it has absolutely been a productivity enhancer for us at almost every layer of our value chain and production process our goal though is not to pass those efficiencies through to the bottom line our goal is not to cause the margin to expand faster than it otherwise would but it's to reinvest back in these tremendous opportunities that I was alluding to. So what we've said is there's no change to our financial model or financial algorithm overall, but it should reinforce that virtuous circle flywheel of investment, innovation, fueling additional sales, which fuels more investment capacity and more sales in the future. And so we view it as a accelerant and driving that financial model faster and having a bigger impact over time but the goal is not to pass through efficiencies in

the short term got it and in relation to this conversation about ai investments i brought up the capital allocation question early um maybe help us think about you know in this cycle in particular how are you prioritizing the different avenues of capital allocation is this the environment where you want to double down on organic or maybe inorganic investments and then then there's all of these buyback opportunities and dividends and that prepayment so just help us think through some of those areas yeah yeah so firstly

no change to our approach to capital allocation but to your question being smart about capital allocation is a huge value generator over over the long term here so it is an area we spend a tremendous amount of time the the biggest opportunities and core opportunities we see at MSCI are organic for us. We're in the advantageous position that, as I alluded to earlier, we have secular trends that are fueling the demand for tools that we generate. We have secular trends that are helping with our pace of innovation and product development. So first thing, the highest returning use of our capital is fueling that growth. And so that doesn't change. We do view both share repurchases and targeted bolt-on acquisitions as accelerants to unlocking those opportunities. And so we will continue to be opportunistic on both fronts. As we always have, we will do share repurchases when we have more excess liquidity, when we see more volatility in the market in our share price, and when we see a higher degree of conviction around value we believe the stock is a very attractive long-term opportunity but in the short term we can kind of calibrate the pace of spend and get a better return and so we will calibrate that based on the stock price at any any point in time and so we'll continue to be opportunistic there and that'll be a key driver of long-term growth and it's been tremendously successful for us over time. And then acquisitions by their nature are opportunistic. As I alluded to, we're not looking to diversify the business. If anything, we want to reinforce the existing franchise. And so acquisitions are accelerants to the organic strategy for us. So if you look at the acquisitions that we've been doing over the last couple years, they've been in those key growth areas where it matters having differentiated data, speed to market with certain technological capabilities, access to certain client channels can be dramatic accelerants and enhancements to that organic roadmap that we have. And so we've done acquisitions around things like custom index. Now with the Compass acquisition, We've brought in the ability to calculate digital asset commodity derivative indexes together with fixed income and equity capabilities, so the ability to do multi-asset class indexes. With PM Insights, we now have one of, if not the best source for private market stock pricing or share price information, which is truly proprietary and unique. And as you'd imagine, as a key input into understanding the exposure and the value of your private portfolio, but also starting to introduce things like liquid indexes and other tools to hedge or gain exposure to the private markets. And then Vantager is an AI-native tool that allows our clients to really do pre-investment analysis. So at the due diligence phase of a private asset investment, we can very easily allow them to extract all the relevant information from the fund documents and help them compare that to their existing portfolio, to the index universe or the broader private market universe and make a more informed decision about whether they want to invest in a fund or not. And so that's a natural extension of what we've been doing today. They're all very small kind of targeted capabilities, but in MSCI's hands, they're incredibly valuable and we can unlock significant value. And so we'll continue to look for those types of opportunities. and we'll continue to be very, very financially disciplined. So it's gotta be one that we're confident generates an attractive return. And we're always comparing that against buying our stock, which we believe is a very attractive long-term return. And it's gotta be something that does not distract us. And as I alluded to earlier, really reinforces our competitive moat and our competitive advantage with the investment decision makers within the investment process. And so oftentimes that will lead us to decide to partner with an organization as opposed to acquiring. But we want to be very measured and disciplined, and we're confident that taking that very disciplined approach to capital allocation will generate attractive value over time.

That's very helpful. Thank you. So let's dive into each segment of MSCI. For the index segment, in my view, two of the biggest secular growth drivers are really custom index, as you mentioned, and active ETFs. So if we start from active ETFs, I guess one thing that's worth clarifying a little bit more is just the products and services you're able to offer to active ETF providers. And at the same time, I guess if I look at the majority of the active ETFs that were launched over the last two years, they were mostly in the U.S. markets. So how do you think about your competitive advantage over some of the U.S.-based players like S&P and NASDAQ?

Yeah, it's an exciting opportunity for us. So maybe just to level set on where the active ETF opportunity is for us. if a manager launches a new active etf that doesn't necessarily translate through to typically it will not translate through to a new sale for us they already have a license to use our index as a benchmark they're likely licensing em core and dm core already from us and so they have the right to actually to use our benchmark on that active etf already and so it's kind of net neutral to us to the extent it helps them raise assets and as a result they expand as an organization that's on the margin helpful to us but just the move from a mutual fund to an etf or even if they launch a new active etf is not going to generate a new sale for us it's helpful to us we want active managers to be healthy and raise raise capital so it's good from that perspective the opportunity for us comes when the managers are launching more systematic type strategies And you do see many of these active ETFs that are taking a more systematic type approach to portfolio construction, not a stock picking type approach. But it's, I'm going to get exposure to this region, these sectors, these factors, these sizes, these styles. And that's where our content sets, our index frameworks can be differentiating for them. That is what our index content was designed for, is to do an asset allocation across all those dimensions, but then construct a portfolio systematically to achieve calculated exposures to countries, to sectors, to sizes, to styles, to factors, to climate considerations. And so we are in a unique position to, if you will, deliver this toolkit to an active ETF provider that is doing a more systematic strategy. and that can be an additional subscription license so it can be a license where it will give you the content you need to do that systematic calculation of the portfolio management of the portfolio over time that's on top of just the benchmarking license and that can be meaningful if they want to get access to all those different dimensions that I talked about but then we also are in a position to actually play a more ingrained role in that kind calculation of that portfolio an index at its core is a portfolio um and so we can actually you know they need to give us the weights and tell us how they want to calculate it but we can be almost the underlying portfolio in which case there are opportunities to charge asset-based fees on that active etf it's early days but we are engaging with a lot of clients and we've had some wins where we are doing more than just being the benchmark for an active etf and in these systematic strategies. And the value to the end client is not just that we can provide those systematic inputs and insights into those different dimensions, but it's that we also help them gain credibility. And from a marketing standpoint, typically you want to be very targeted in how they market a product to their end clients. And so their end clients are thinking in terms of these same risk dimensions, industry exposures, objectives that they have, and so being able to market, here's my strategy relative to MSCI frameworks is deeply valuable to them. And so, yeah, we think active ETFs on a net basis are an opportunity for us over time, and we're actively rolling out solutions and capabilities to do more on that front.

And your competitive advantages over S&P and NASDAQ and other peers?

Yeah, so a couple. We view our, we have always viewed our indexes as a tool. It's an investment tool. Most of the index providers out there view an index as a market barometer. So I will give you the barometer that tells you how the largest stocks on this exchange moved on any given day or time period. I'll give you the barometer for how the largest stocks in this country moved on any day or time period. You can use our indexes for that, How did the emerging markets perform? But at their core, it's a data set, a content set that is designed for that systematic asset allocation. Here's how I wanna allocate between developed markets versus emerging markets. Here's how I wanna allocate large cap versus mid cap. Here's how I wanna allocate across sectors. And then the portfolio construction process around it, ultimately used as a performance benchmark. And so the fact that we are licensing these content sets that are designed for that systematic portfolio construction is differentiated, and we do it globally. We start with the global opportunity set. We're not starting with, here's the largest stocks in this country. We're starting with, here is the total universe of investable equity securities, and here's all the ways you can segment it. That's very unique for MSCI, so that's a big advantage for us. Then there's a lot of content capability service that goes around that. That's why we have the largest subscription base any index provider but then it's also as I alluded to we are a common language that is used by the end clients whether that's a pension fund a wealth driven process where they're building model portfolios they're doing an asset allocation it's not just that they are thinking about their policy benchmark as MSCI Acqui Acqui XUS maybe it's that they're also thinking about the climate objective they have, a risk tolerance that they might feel comfortable with, a planning objective that they have in MSCI terms, and no other index provider has that suite in those common languages of interoperable frameworks, and so that really lends itself to be truly differentiated within that systematic portfolio construction process, which you see underlying many active ETFs. Got it.

That's very helpful. So I had a question in my list around the net revenue impact for the same AUMs to shift from active mutual funds to active ETFs, but now I'm starting to think that maybe isn't the right question because I think, Andy, in your view, active ETFs are an avenue for expansion of the investment universe and investment industry, so that sounds like incremental revenue opportunity instead of replacing some of that. Correct, yes. All else

SQL, it's neutral, as I said before, but just the wrapper, the approach that many of these active ETFs are taking and the potential end users and use cases create additional opportunity sets for us to license more to a dollar managed in an active ETF versus a mutual fund. Got it. I guess

switching gears to custom index, it has been the fastest growing subsegment within MSCI for a while now in the last quarter we saw 24 subscription run rate growth which is very impressive um could you maybe talk us through what's driving the strength we've seen in custom index over the last few years and what type of medium term growth algorithm should we expect for um custom index

products yeah link links back to something i said at the beginning which is one of the largest trends and i was just talking a lot about it on the active etf question but one of the largest trends you're seeing across the investment industry is this move towards systematic investing and that manifests itself in many different forms and fashions you know you see it in direct indexing you see it in even managed account investing you see it in we call non-etf passive or institutional passive or an institution once to systematically achieve some investment objective more generally in terms of how an asset owner manages their total portfolio, a move from strategic asset allocation to a total portfolio approach to how they manage their assets, which is by its nature kind of a systematic type approach that's multi-asset class or asset class agnostic. Generally, you see it manifest itself in the use of structured products, over-the-counter derivatives and explosion of baskets which I know everyone's familiar with up there and so these systematic portfolios and investment tools that allow for customization at scale and allow for a specific objective very easily lend themselves to an index wrapper and as I said earlier an index really is a portfolio it's a systematic portfolio it's a basket of securities with specific weights and rules for how those weights will change over time and so for the reasons i highlighted in your active etf question we're in a unique position to help on that custom index journey and so we actually see it benefiting we're seeing growth across many different dimensions we see it obviously on the asset-based fee side so we've seen tremendous growth and outsized growth in assets in ETFs and non-ETF passive products linked to our custom indexes. We are seeing it within active managers that are launching some sort of more systematic or quantitative or solution-oriented strategy that want an active benchmark. But the area where we've seen probably the biggest growth and the biggest impact on the subscription side has been around the hedge fund and trading ecosystem recently and so related to the growth in assets in etfs linked to our custom indexes that is creating opportunities for market makers for index rebalance funds for quantitative investors to arbitrage make markets in this broad diverse universe of tradable securities and so we are creating data modules that allow them to get get deeper insights into the constituents of these custom indexes, give them deeper insights into the methodologies we've used to weight the constituents. Those all become important inputs into their investment processes or their investment strategies. But then also, areas like broker-dealers are creating things like total return swaps, index total return swaps, or a, as I said before, a basket or a index-linked note to ultimately help that pension fund or maybe an asset manager hedge a risk, put an overlay, help transition their portfolio. And because they are again thinking in MSCI terms, because we have this interoperable global framework, multi-asset class capabilities, we are a natural partner to help on that custom indexing journey. And so we think it's just getting started. It can be massive. And it's one that is, of our largest investment areas and it's something that touches so many parts of the MSCI franchise and the standards and common languages that we have across the organization. We're super excited about the outlook and the opportunity around custom indexes. How does AI change the competitive

landscape in custom index? Does it make it easier for smaller index providers to gain inroads into to this market, or how are you thinking about the competitive dynamics here?

Yeah, so there have been low-cost, white-label, custom index platforms out there for quite some time. Many of the big index providers do offer the kind of custom index white-label service. You know, you've seen some niche players that are willing to do it at a very low fee. And so AI, yeah, does it make it easier? Probably, does it make it faster? Does it make it cheaper? Yeah, although I wouldn't say there's a lot of economics already in doing that low cost white label custom indexing because there are so many competitors there. And so AI doesn't really change that dynamic. The reason why people turn to MSCI is because we are ultimately a revenue generator for them. Yes, we are the most trusted brand. We pride ourselves on the quality. We have the ability to do these interoperable frameworks together into a unified index better than anybody else. Those all matter, and for sure, command a premium. But ultimately, clients work with us because we are gonna help them attract assets, and we are gonna help them attract assets that are willing to pay them a higher fee. And so AI for us is an opportunity to do that more in spades and make it easier for them. And so it's not something that decreases our competitive advantage on that front. It's not something that increases the abilities of other providers to do that. The reason why clients want to use us for custom indexes is it's something that can't be replicated by AI. It's those industry standards, it's proprietary data. It is the fact that we are ingrained in the investment process of the world's biggest asset owners, increasingly the wealth management organizations there and the objectives they're trying to achieve are around our custom frameworks and so we view AI as an enabler to allow us to do more faster better for our clients on the custom indexing front and so I alluded to things like the basket builder which we're coming out with very soon you know we have clients trialing it right now which gives a natural language interface for a client to very easily build a basket of securities you know crudely and index we do differentiate between them and and that's something that we could not do with AI allowing it us to do it across more dimensions in a very robust fashion and so we think it's for us an accelerant more than anything and we don't worry that it's something that's gonna bring down any of our competitive advantages or or enhance the positioning of these low-cost providers

out there got it that's super helpful I guess last year at our SDC we talked about the profitability difference between custom index products and traditional market cap weighted index products this year with now you know you've spent so much time talking about ai ai implementation and how that helps custom index products does that change the way you think about the profitability comparison between custom index and traditional market cap weighted products so i i would say

this I think I mentioned this last year all else equal a custom index generally is a lower lower margin for lower incremental margin it involves sometimes more research input and more involved selling process upfront having said that but it's still a very high-margin product for us. And it's one where you set it. And from that point forward, so there's the initial setup costs, but going forward, it's very high margin. It's also one that once you've created that IP, you can monetize it in many different fashions, as I was alluding to earlier. And so it creates a very compelling positive operating leverage for us to sell more custom indexes yeah it's a little bit lower than if somebody just says I want to license your EM core module which is just off the shelf and we can we can license it to them but it's one that we believe is very strategic for us very high margin and one that also reinforces the broader standards that we have across the organization so it's not something that that we think changes the overall algorithm of the company it's something that if anything kind of fuels more firm wide opportunities for us across all those dimensions that I alluded to.

Got it. I guess switching gears to analytics, analytics has had another really strong year last year. So maybe talk us through what's driving the strength there and with our conversation about AI, does that change the competitive landscape for analytics or are larger customers building in-house solutions to try to compete with MSCI solutions or what are you seeing in terms of competitive dynamics?

Yeah, we're not seeing AI as a pressure. Similar to other areas, we view it very much as an opportunity. Just your first point about what's driving the growth of analytics. We've seen tremendous success with our, we call it, if you look at our investor presentation equity analytics, underline that as our risk models, our factor models. So our factor models, we've been getting tremendous success with. Again, it relates to this move towards systematic investing. Yes, we've benefited from the growth in multi-strat hedge funds. They are some of the biggest consumers of our equity analytics and our risk models. But we've also had traction across broader parts of the investment industry, whether that's broker-dealers as well as traditional asset managers who are starting to think more about bringing risk into the front office we've always been in the middle office kind of a risk function but these organizations are starting to think about incorporating factor analytics and risk insights into the portfolio management process that that creates opportunity for us and so very encouraged about the momentum on the equity analytics side and a lot of innovation on that front to continue to fuel that on the enterprise risk and performance, or what we call multi-asset class analytics. We have been having success across a number of dimensions. One that I would call out that is very differentiated for us and relates to the AI question is, and I alluded to this earlier, our ability to analyze the private asset allocations of our clients. So if you are a big investor that has investments across many different asset classes, we have by far the best risk models, analytics, insights, and capabilities around the private asset parts of your portfolio, which are the toughest to model and toughest to analyze parts of the portfolio. That's something nobody else can do, and AI cannot enable that because it's built on the very proprietary data that we have across our private asset franchise. More generally to your question about AI, and it's similar to what I said on the custom index question uh will ai enable clients to do analytics more efficiently um cheaper yes can they do you know some of the basic analytics support risk analytics and performance analytics with ai probably um there have been players out there for a long time that can do it cheaper than us. We don't play as well in the smaller organizations. If you are equities or equities and equity derivatives, we're probably not the right provider to you. You can go to a Bloomberg, to a FactSet, to an Axioma and get lower cost analytics. Our bread and butter is those clients that have many different asset classes, many different securities across many different geographies where it is very hard to model and so we have a very unique service on that front because we were able to source positions across every position that they sit on including the privates so we've got the the connections into the fund admins into the custodians into the broker-dealers you know into oftentimes their order management and accounting systems to be able to source every position that they sit on for each position every every security or every instrument that they have and this cuts across not just securities it's commodities it could be natural resources you know exotic derivatives we have a pricing mechanism again for equities equity derivatives even more liquid fixed income very easy to come up with a price for those for everything else it is a very proprietary unique approach we take to pricing those instruments and then having the curves that allow us to do the risk analytics so being able to understand covariance matrices factor exposures being able to do a scenario analysis sensitivities if I put my entire organization through the financial crisis you know that is a very mature transparent well governed process that we use to do those calculations for clients uh and so it's very difficult to see ai being able to do that firstly because it doesn't have all the ingredients and pieces around it even if it could it's not going to be economic for a client to do that on on their own and so we are viewing it ai much more as an enabler for us to do more service for them so allow them to do it more efficiently as i was saying before move more towards the front office as they move into those more systematic investment processes and then it's important to underscore that many of our frameworks are industry standard as well and so things like our factor models you have to pay attention to them because those are the factors that move markets and so yeah could you for sure you could go in the next two hours develop your own you know factor insights on claude around your portfolio but it's not going to give you the unique msi factors that actually you need to pay attention to, even though you might disagree with what's important to focus on, you need to pay attention to them. So those standards really do matter. And the most sophisticated investors are our biggest clients. Clients that have been using AI for a long time are very advanced in developing their own AI-driven risk and factor models are our biggest clients because we bring all those unique elements at scale to them and unique insights. So we're excited about what AI can do. If you think about the needs in that future agentic-driven investment process, it is the need for trusted, well-governed, transparent ways to do these analytic calculations. These are fiduciaries that we are selling to. if they're going to have an agent making a portfolio decision or giving an insight that is used to make a portfolio decision they better be able to stand up and for a regulator before a litigator and being able to say I had a well-governed process to understand what the machine was doing and that's where we can come in and provide more services and a trusted agentic layer to that systematic process in the future so long-winded answer but we get super excited about the prospects on the analytics side.

Got it. That's very helpful. I guess before we dive into private asset, I do want to ask one quick ESG question. A year ago when we sat here at our SDC, we talked about one of the major, or one of the headwinds to sustainability and climate portfolio at MSCI is really this regulatory markiness that wasn't resolved a year ago. So maybe just tell us more about where we are or what are you seeing in that regulatory landscape today?

Sure. Yes, there has been some fluidity. There continues to be some degree of uncertainty. There have been some clarifications around various regulations in Europe, but there are active discussions taking place around others. It continues to be an area of complexity. Some of the ones that have been clarified do create opportunities for us, and we've, I think Henry mentioned on the earnings call, you know, we've won some big mandates to support large government organizations, institutions, regulatory-driven mandates in Europe, and so it continues to be an opportunity, but it is also an area that is evolving, and so there are differing, continue to be differing views on how to think about materiality how to think about impact or double materiality investing what what what's important from a climate perspective all those things are creating opportunities for us to sell more to our clients and so we are continuing to upsell you know you see outsized growth with us on the climate side climate continues to be a big focal point I think the big advantage that MSCI has had is we've always been focused on that materiality points of what matters from a financial risk standpoint. And we are doubling down on that and providing deeper insights into physical risk, transition risk, some of those areas that clients are worried about their supply chain exposures. I alluded to earlier some of the geospatial asset location content sets that we've come out with. And so we are evolving. There's gonna be these shifting dynamics as I've alluded to in the past. We think the dynamics that we've seen in recent quarters will continue in the near term. There are areas of caution, hesitancy around parts of sustainable investing, but there are definitely opportunities and long-term opportunities that we're very excited about and have conviction that we're uniquely positioned to capitalize on. One regulation that is going into effect very soon in the second half of this year ESMA's regulation of ESG ratings providers and so ESMA is formally going to regulate ESG ratings and more generally ESG analytic or data providers and that is something that is helpful to us it makes it tougher for many of the broad ESG data providers to compete that that is a standard that will require governance, strong governance, transparency, you know, strong risk management practices, ensuring being free from conflicts. These are all things, and consistency around pricing, these are all things that MSCI does well, naturally, and we are well positioned to thrive in that regulatory environment. And so that should help us continue to solidify our position as a standard, which you are starting to see where clients are consolidating providers and we tend to be the provider of choice and I think that regulation is something that should

solidify our position even more okay switching gears to private assets the Burgess acquisition is almost three years ago now I guess where are we in the process of accelerating Burgess growth to 20% type top-line growth and Are there any cost synergies that you wanna highlight?

Yeah, so as you alluded to, and I said this when we announced the acquisition of Burgess, we believe this Burgess can be a 20% plus grower. It has not been there, so it's not performed to the level that we've been looking for. I think there have been a few factors at play. One is our pace of product innovation has probably taken longer related to that, you know, getting the right management team integrated within MSCI in the right fashion has probably taken longer. And then just the adoption of the industry of many of these new standards is just something that naturally takes longer. We are very encouraged, as I alluded to earlier, you've seen an acceleration now for the last couple quarters in the PCS, which is mostly the Burgess franchise subscription run rate growth and we're seeing good momentum across those dimensions of getting traction internationally which is a under penetrated market for burges but also a less evolved private asset market so we're seeing very strong growth outside the US that we're confident we're hoping to drive we're seeing strong traction behind many of the new solutions and capabilities that we've been developing and those are actually enabling us to do more for existing clients as well but then last and importantly we're at this period where we are starting to see that adoption take place the investment industry moves very slowly we like to say overnight change takes ten years in the investment industry because people have policies risk practices strong governance their fiduciaries regulations it's not easy for them to change the way they invest overnight but we are seeing strong engagement, and that is accelerating from things like concerns around private credit exposure and private credit portfolios, things around concerns within growth equity portfolios to SaaS companies and how they're being marked, deeper insights into market liquidity and distribution curves. These are all things that many market participants are paying attention to, and we are truly differentiated in our ability to help on that journey. So we think we've got the pieces to start to really evangelize the industry. We're super excited. And as I said, we've got some good momentum that we're confident will continue across private assets.

I guess we're running out of time. Maybe just one last question from me today. What's your next key focus area in private asset? Help us think through that product roadmap for the next five to ten years.

Yeah, so we have, it's probably our most fertile area of innovation right now. and so it's tough to say it is one thing because it cuts across many dimensions of content areas but also services that we are delivering and so maybe I can highlight a few quickly here. I alluded to private credit. We've historically been much more prevalent including the legacy franchises of Burgess and RCA around private equity and private real estate. We have built out infrastructure insights and infrastructure risk model, but we have very rapidly, as I alluded to earlier with AI, built out a private credit capability that allows us to do transparency into private credit portfolios. We have a partnership with Moody's that allows us to do private credit risk scoring for clients. And so there is tremendous growth for us to expand our service across asset classes with clients. And that's not just private credit. That's a big area for us. But it's also, as I said, natural resources, infrastructure. It's also moving from closed-end fund vehicles, which is our bread and butter, into many of these continuation funds and more open-ended vehicle structures. And so just the expanding the breadth of fund types, fund structures, assets that we cover is a tremendous growth opportunity for us. I alluded to this earlier in analytics, but it's the case in private assets. with many of the capabilities that we've brought to bear together with the MSCI franchise. We're having tremendous success on the total portfolio side. And so many of these big private asset investors, like an endowment, a foundation, a family office, huge portions of their portfolio are into private assets. And they historically have not been as robust in thinking about factor risk, market sensitivities, tracking errors. and they are starting to awaken to those things and we have the ability to do that for them across their total portfolio really anchored to the private asset exposure that they have which is the bulk of the fees that they're paying in many instances the bulk of their assets and so we have an offering we call total plan manager tpm which is getting tremendous traction and it's one that we think has a long way to go and penetrating a long long tail of asset owners also from a client segment dimension standpoint we've been very big with the LPs those asset owners but we are starting to get traction with wealth organizations who are saying I need to do a better job qualifying my end client but also this fund so as part of their due diligence process helping them understand the risk that's associated with a specific asset class how that that is interoperable or how that risk relates to the risk in the broader or a portfolio that they have. Help them understand the value that they are getting for the fees that their clients are paying to these private asset managers, which can be very sizable. As taking a fiduciary standard, you better make sure you understand the value your clients are getting for the fees that they're paying and the risk that they are taking. Those are things that we can help them with. And then even the managers themselves, alternative managers, the GPs are recognizing that their clients care about these things more and more. Clients are hesitating to put more money into a private credit fund. They're hesitating to put more money into a growth equity fund that's exposed to software companies unless they can get a better feel for why is this an uncorrelated risk? What is the value that you're bringing? Is it really just leverage and industry exposure? And so we can actually help them tell their story to the LPs. And so tremendous opportunities for us to grow across additional client segments. I had mentioned earlier the geographic opportunities for us outside the US. And then there's a whole host of innovations coming down the pike from now casting evaluated pricing, liquid benchmarks, you know, a whole host of risk insights and analytics that are super exciting. So long-winded answer to we are super excited about the opportunity across private assets going forward here.

Very exciting. Thank you so much for sharing with us today. Thanks everyone for joining us.

Thank you. Appreciate it.