MSCI Inc. (MSCI)

This was the perfect quarter for MSCI as the investment thesis is starting to play out nicely.

First, we saw the investment thesis on new initiatives like custom indices, private markets and newer client segments like hedge funds and wealth drive acceleration for MSCI this quarter.

The investment thesis on accelerating international flows also seem to be starting to play out this quarter.

Strong acceleration due to Index segment

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We saw total subscription run rate growth accelerate from 7% growth last quarter to 8% in the 4Q25.

The main reason for this acceleration was due to continued improvement in the Index segment and partially due to gains in the Private Assets segment.

Index segment subscription run rate growth accelerated further to 9.4% in 4Q25.

The key contributors for the Index segment acceleration is due to the 16% growth in custom indexes with large wins with banks and hedge funds, while index recurring subscription sales growth was 10% for the asset manager client segment.

In my view, this is highly encouraging for MSCI given how important and large the Index segment is for the company.

The Index segment makes up about 60% of the total revenue mix for MSCI.

Retention for the Index remained strong at 96% for the full year and 95% for the quarter.

This continues to be at a very healthy level and given the talks about AI disruption, the fact that we see retention being this high suggests the impact to MSCI’s Index business is limited.

This acceleration in index subscription run rate growth was complemented by asset-based fee run rate growth of 26%.

MSCI saw a record $67 billion inflow during the fourth quarter into equity ETFs linked to its indexes, with growth very strong with inflows into ETFs linked to MSCI ex-US indexes.

For reference, as we can see below, US ETFs linked to MSCI grew assets under management by +18%, but emerging markets and Developed Markets ex-US ETFs linked to MSCI grew assets under management by +46% and +41% respectively, more than double that of the US.

This was a key part of the investment thesis as I stated earlier that I expect inflows into ex-US markets to be a key driver for the Index segment.

The investment thesis is starting to play out and there is strong evidence that this is happening.

MSCI also shared that they are extending the ETF agreement with BlackRock through 2035.

Newer client segments driving acceleration

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Hedge funds and wealth managers continue to be underpenetrated client segments for MSCI.

In my view, both hedge funds and wealth managers will provide strong idiosyncratic growth opportunities for MSCI, driving upside to revenues in the following quarters.

For hedge funds, MSCI achieved 13% subscription run rate growth, including 26% recurring net new sales growth.

MSCI secured a large deal with a top global hedge fund for MSCI’s new extended custom index model, spanning 5,000 custom indices, which really highlights the growing adoption of the index product ecosystem and the strong demand for MSCI tools.

For wealth managers, MSCI achieved 11% subscription run rate growth, including 15% recurring sales growth, by driving further adoption of its index and analytics tools among home offices and wealth platforms of large investment managers.

Wealth managers make up 7% and 5% of the subscription run rate of the Index and Analytics segment.

In the fourth quarter, MSCI closed 2 major CIO office deals for its multi-asset class factor models, helping the company achieve its best year yet in new recurring subscription sales in the wealth segment in APAC.

The asset owners client segment saw 11% subscription run rate, including the strongest recurring net new sales growth in 5 years due to private capital solutions and analytics.

MSCI is seeing rising demand across regions from pension and sovereign wealth funds for its total portfolio solutions spanning public markets, multi-asset classes and especially private markets as clients increase their private asset allocations.

Lastly, for the core asset manager client segment which makes up 45% of its business, management noted improvements in this client end market (45%), particularly in EMEA.