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My latest @SeekingAlpha article on $MSCI:
-Quick rundown of the business model
-A deep dive into MSCI's relationship with & reliance on $BLK
-How passive investing and the ETF bonanza benefits MSCI & the "big three" asset managers long termhttps://seekingalpha.com/article/4348904-msci-pricey-high-powered-sports-car-of-index-providers …
As of the end of 2019, $MSCI calculated more than 226,000 daily indices and more than 12,000 real-time indices for different markets and industries, with over $900 billion in equity AUM tracking against them:pic.twitter.com/tmAXDyIBkQ
BlackRock $BLK in particular stands out as $MSCI’s largest customer, with this one asset manager alone accounting for ~10% of MSCI’s total revenue since 2009:pic.twitter.com/yOSsm22vAN
BlackRock’s iShares ETF business has experienced strong growth in AUM amid client demand for passive index funds and lower management fees. As more AUM flows into iShares ETFs that rely on $MSCI's indices, $BLK's license fees paid to MSCI grow in tandem:pic.twitter.com/TaMO1GHdgR
A notable outlier from $MSCI's customer base is Vanguard, the 2nd largest asset manager globally. In 2012, Vanguard announced it was cutting MSCI as a provider and moved its funds to FTSE, an LSE-owned competitor with lower fees. MSCI stock dropped 20% on the news:pic.twitter.com/I85DBhVvjC
Passive index funds have become so popular due to two primary factors: low expenses and superior returns to actively managed funds.
What’s bullish for $MSCI long term is that these factors don’t seem to be changing anytime soon.
The powerful secular trends at play are partially why MSCI has issued such aggressive long-term targets:pic.twitter.com/8bgqxdWtie
Revenue growth in the low double digits and EBITDA growth in the mid-teens? Long term? No wonder the stock trades at such a high multiple:pic.twitter.com/MWZMokXmvX
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