Despite being a growing reservoir of funds under management, this critically important pool of capital is confronting mounting problems collating and disseminating key data in a timely manner.
The ratings house is pinning its growth strategy on a revamped methodology that increases the emphasis on governance to 25 per cent – a timely move considering APRA’s proposed reforms.
Aussie first: MSCI launches non-US domestic index range
The MSCI group has launched a swathe of indices for the Australian market, its first single-country domestic indices outside the US. There are 52 Australian indices to choose from on top of custom indices, the first two of which are about to be launched by a big super fund.
As well as a full range of 16 Australian shares indices – from all-cap, through large, mid, small and micro-cap – MSCI has developed 16 factor indices, nine ESG-orientated indices and 11 thematic indices for Australia. More new domestic indices are planned to be rolled out elsewhere in the Asia Pacific region.
Ironically, the new indices come at a time when MSCI Inc is reminding its 7,800 active clients around the world that it is more than just an index provider, the service for which it is best known. The company, which started as a form of joint venture between Morgan Stanley and Capital Group is a research company first and foremost, according to Simone Bouch, the head of client coverage for Australia and New Zealand.
She was appointed to the role in May last year, responsible for the four “pillars” of MSCI’s activities: indexes (the preferred plural of ‘index’ used by the New York-headquartered firm); analytics and risk; ESG and climate, which has been a rapid growth sector for the group; and, private markets, which is currently mainly real estate. “We provide tools to help clients make better investment decisions,” she says.
The long history of MSCI was always international in its focus. The business was started by the US-based global fund manager Capital International in 1968, which designed and published US market indices for non-US clients. In 1986, Morgan Stanley licensed the rights to the indices and branded them Morgan Stanley Capital International Indexes. In 2004 MSCI enhanced its research capabilities with the acquisition of California-based Barra Inc, which had a Sydney office of five or six people, and started to integrate the new research business into the group. In 2007 Morgan Stanley wanted to divest its interest, which was completed in 2009 after an IPO.
The MSCI Index business has more than 230,000 equity indices calculated daily, with more than 12,000 custom indices and a further 12,500 calculated in real time. More than US$13 trillion of assets under management are benchmarked to an MSCI index, including 1,300 ETFs which are based on MSCI indices.
Simone Bouch, who oversees about 20 people in the Sydney office, says MSCI will be growing out its private markets business. Early this year MSCI announced it would spend US$190 million buying a “significant minority interest” in Burgiss Group LLC, a data analytics firm which focuses on various private markets segments.
MSCI has a Climate Research Centre which does a lot of work on both transitional and physical risk, including for private markets. The Sydney office has a specialist consultant, Brendan Baker, covering ESG issues. He started his career as a research scientist at Alcoa and has a master’s degree in environment and resource management from Vrije Universiteit in Amsterdam.
As certain businesses and sub-sectors in the financial services industry are reporting, there has been heightened interest in MSCI’s services during the COVID-19 crisis. “For example, we are doing a lot of work around liquidity,” Bouch says. “Clients often think of us as a bit of a think tank. They also often work with us around portfolio construction.”
With the new Australian indices, they have been designed for Australian investors to be able to integrate seamlessly with their global counterparts, she says. “The Australian series is in response to client demand. It has been in the works for a while. We’re getting a good response from the market. Because we tend to partner across an enterprise, including CEOs, CIOs and other heads of department, we have a lot of touch points among clients,” she says.
