MSCI Aktie

Good day, ladies and gentlemen, and welcome to the MSCI Third Quarter 2026 Earnings Conference Call. As a reminder, this call is being recorded. [Operator Instructions] I would now like to turn the call over to Jeremy Ulan, Head of Investor Relations and Treasurer. You may begin.

Thank you, operator. Good day, and welcome to the MSCI Third Quarter 2026 Earnings Conference Call. Earlier this morning, we issued a press release announcing our results for the third quarter 2026. This press release, along with an earnings presentation are available on our website, msci.com, and 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 relies 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 a discussion of additional risks and uncertainties, please see the risk factors and forward-looking statements disclaimer in our most recent Form 10-K and 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; Andy Wiechmann, our Chief Financial Officer; and Alvise Munari, our Chief Product Officer and Head of Client segments, will be joining for the Q&A session. 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. In the third quarter, MSCI delivered strong financial and operating metrics, including historic net new sales in index, analytics and private capital solutions, plus another record quarter for asset-based fees. We have built impressive momentum across these 3 product lines.

While sustainability and climate continue to face challenges, we believe that our recent acquisition of First Street will help accelerate a return to higher growth in climate. These results show that MSCI is expanding our mission critical role in global investing, even as we transform our business to an AI-first company.

Since our IPO 19 years ago, MSCI has demonstrated a strong and consistent track record of execution. This foundation positions us well to capture expanding opportunities, both across client segments and a growing range of solutions. We have multiple dimensions of growth and a compelling opportunity to compound over the long term.

Financially, our strong Q3 performance included total revenue growth of 12.4%, ABF revenue growth of 25%, subscription revenue growth of 8%, adjusted EBITDA growth of 12% and adjusted EPS growth of 14%. From July 1 through October 19, we repurchased $627 million of MSCI shares at an average price of $562 per share. Since the beginning of 2024, we have opportunistically repurchased nearly 8 million shares for $4.4 billion. During the same period, I have personally purchased an additional 57,000 shares for $30.1 million. These purchases unequivocally demonstrate our strong belief in the potential of the MSCI franchise.

Operationally, in Q3, MSCI achieved total run rate growth of 12%, fueled by a record ABF run rate of almost $1 billion. Our ABF performance reflected record AUM levels in ETFs and non-ETF products linked to MSCI indices including inflows of $76 billion. There are now nearly $23 trillion of AUM benchmarked to MSCI indices. Of that $23 trillion, roughly $15 trillion is actively managed, while $8 trillion is indexed.

We also posted subscription run rate growth of 9% after adding nearly [ $55 million ] in recurring net new sales, and we delivered a retention rate of 95%, an improvement of 30 basis points from Q3 of last year.

MSCI is a long-term compounder driven by both ABF and subscription growth. On the overall subscription side, Q3 was our best-ever quarter for recurring net new sales in analytics and private capital solutions, along with our best-ever Q3 for recurring net new sales in index. Compared with a year earlier, recurring net new sales grew by 88% in ETF, 63% in analytics and 40% in index. Notably, MSCI saw robust demand by both our traditional and newer solutions. In fact, we continue to see consistent growth in recurring sales from our newer products, and importantly, our higher pace of innovation is strengthening sales of our existing products as we continue to deliver greater value to clients. Virtually, all those newer products are powered by artificial intelligence.

Q3 also showed our diversified strength across regions. Recurring net new sales grew by 74% in EMEA, 36% in APAC and 26% in the Americas. Indeed, we achieved our best-ever quarter in APAC, driven by analytics.

MSCI is unlocking additional growth layers through our recently announced partnerships and acquisitions. In Q3, for example, we formalized the landmark agreement with UBS that we first announced back in July. This agreement will extend the reach of our private asset solutions, strengthen connections between GPs and wealth managers and promote greater transparency across private market. Similarly, our acquisition of the AI-native platform [indiscernible], now the MSCI Private Assets Diligence Platform, enable us to complete a major deal with a large U.S. bank.

At the client segment level, MSCI achieved a record quarter with asset owners, more than tripling our recurring revenue sales from a year earlier, driven by demand for our total portfolio solutions and our integrated risk and portfolio management analytics.

Our largest deal of the quarter moved MSCI from a vendor relationship to a strategic portfolio analytics partner for one of Asia's biggest and most sophisticated sovereign wealth funds.

We also closed a number of major analytics and index deals with top hedge funds, including deals for our equity models and custom index modules.

Finally, we maintain our steady performance with asset managers globally while achieving a strong quarter in EMEA where we posted 35% recurring net new sales growth.

Despite the ongoing retention pressures in sustainability and climate, we entered Q4 with solid momentum and a strong client engagement across the whole MSCI franchise.

We are incredibly excited about the expansion of MSCI's offerings through new use cases for newer client segments such as wealth managers, banks, [indiscernible] lenders, GPs and insurance companies in their underwriting processes. We are delivering and expanding MSCI by leveraging what we already do for our more traditional clients such as asset managers, asset owners, [indiscernible] and hedge funds.

MSCI truly is a one of a kind company that is uniquely positioned to benefit from the biggest transformations reshaping the global investment and finance industry.

And with that, let me turn things over to Andy.

Thank you, Henry. Hi, everyone. Our strong results reflect a rapid pace of innovation, our effective go-to-market execution and the growing ecosystem around our tools. We believe this momentum is sustainable and we continue to have an attractive pipeline of opportunities.

MSCI is a powerful compounder, and the run rate algorithm was on full display with continued double-digit subscription growth in index, high single-digit growth in analytics, accelerating growth in private assets and outsized secular growth in asset-based fees.

Across client segments, we saw double-digit growth with nonasset manager segments and mid- to high single-digit growth among asset managers. This algorithm, combined with inherent operating leverage and ongoing capital optimization allows us to fuel consistent compounding value creation. And the momentum in the business is evident with LTM recurring net new subscription sales up 26%.

Drilling down into index, organic subscription run rate growth accelerated further to 11.7%. Powerful indexation trends drove double-digit subscription growth across hedge funds, banks and brokers, wealth managers and asset owners of 32%, 15%, 10% and 10%, respectively, and the retention rate was over 97% across index, including a retention rate of 98% with asset managers. Additionally, asset-based fees were fueled by $76 billion of equity ETF cash inflows concentrated in developed markets ex U.S. and emerging markets. This was our second highest quarter of inflows behind only the first quarter of this year.

Within Analytics, we had organic subscription run rate growth of 7.5%, driven by several large strategic client wins with asset owners and wealth managers. These clients are seeking to modernize their investment platforms, integrate risk and portfolio management workflows and enhanced investment decision-making alongside sustained demand for our factor content. As we have mentioned, analytics operating metrics will be lumpy quarter-to-quarter, but the trend has been encouraging, with LTM recurring net new up 18% over the prior LTM period driven by strong momentum in key areas.

In Private Capital Solutions, subscription run rate growth accelerated to 19%. We see growing demand across existing solutions like our transparency, private capital intel and total plan offerings, and we are building momentum in newer offerings like our data and diligence platforms. Additionally, we are seeing good traction in landing benchmark wins across asset owners.

In Real Assets, organic subscription run rate growth was 2%, supported by improving client retention and client seeking broader data access through Snowflake.

In the Sustainability and Climate reportable segment, we executed over $5 million of new recurring sales and sustainability and over $2 million of new recurring sales in climate. We saw elevated cancels with 1 sizable down sale related to a client rightsizing its sustainability spend.

Meanwhile, in climate, run rate growth across MSCI product lines was 8%, excluding the impact of First Street.

Demand for our physical risk solutions, including from recently acquired First Street, is growing. The integration of First Street remains on track and client engagement has been very strong.

As we mentioned last quarter, the pressures on parts of the sustainability franchise are expected to continue through the fourth quarter. We expect the Sustainability and Climate reporting segment to have recurring net new sales that are roughly flat to slightly positive in the fourth quarter.

Turning to our guidance. Adjusted EBITDA expenses in the third quarter were in line with the level we indicated in September, driven by the impact of recent acquisitions, higher performance stock-based compensation and higher severance as we unlock efficiencies ahead of schedule. Given these items, which enhance the franchise heading into 2027, and the strong top line momentum this year, we expect to be at the top end of our expense guidance ranges for 2026.

To provide more color on the elevated expense items in 2026, acquisitions are expected to add roughly $20 million of additional expenses this year. The incremental accruals of performance stock options, which are mostly driven by higher-than-expected AUM growth and products linked to our indexes and the strong business momentum are expected to add roughly $15 million to $20 million of noncash expenses, and severance is expected to be roughly $10 million to $15 million higher than originally planned, reflecting the acceleration of efficiencies and the AI transformation across the organization.

Despite our high level of investment and the addition of 4 acquisitions, headcount has remained roughly flat compared to a year ago. This reflects our ability to leverage AI to transform the company for the future, accelerate the pace of innovation and drive faster growth. Additionally, we increased the interest expense guidance as a result of higher revolver balances to support our opportunistic share repurchases.

We also narrowed the tax rate guidance for the full year to 18% to 19.5%. Overall, we remain well positioned for and committed to delivering very attractive profitability growth while investing for the long term.

In summary, our Q3 results show consistent execution across product lines and client segments. We are pairing continued investment in growth areas with strong financial discipline, and we have the flexibility to adjust as conditions evolve. We look forward to keeping you posted as we deliver on our priorities.

And with that, operator, please open the line for questions.

[Operator Instructions] Now first question coming from the line of Toni Kaplan with Morgan Stanley.

Henry, I wanted to ask a longer-term question on analytics. I was wondering how you're thinking about the future in terms of the product platform and distribution? Just given the advancements in AI, how do you think customers will be interacting with your data, with your platform? Just trying to think of, from a long-term perspective, over the next few years, how you think that this is going to change.

Thank you for the question, Toni. The first thing to keep in mind, you know well is at MSCI, we run a fully integrated in which each product line fits off and fits into other product lines. In the past, maybe more distant past, we viewed analytics especially a risk management platform, risk and performance management platform as one of the more important product line. In the recent past, we have begun to develop a strategy that help us take this extremely important product line and make it much more strategic and much more value added.

So for example, in our risk management platform, we get enormous amount of portfolio data that, in general, we have rights to anonymize and aggregate and things like that, that could develop new products. Secondly, we know risk management and performance platform. We know what the clients are doing every single day by them having their portfolios and running reports in our platform. So we're developing plans to propose to the clients why don't you do this? Why don't you look at this? Why don't you think of this new product, this new idea [indiscernible]? And AI is going to help us do that because otherwise, we will have to have humans do that.

So anyhow, so the last point that I will make, therefore, is MSCI is an analytics company in totality, where by history, we're a modeling company basis, therefore, analytics company, models, the index methodologies are modeled. The risk, the factor model, the other risk models, the ESG ratings and models, all of that. So we need to -- we are in the process of integrating the company into a more holistic analytics shop with proprietary data and very advanced new AI technology to gather the data, process the data and help our clients consume the content, the data and the models much more effectively.

So that's the vision of analytics at MSCI.

Our next question is you coming from the line of Alex Kramm with UBS.

You talked about strong momentum in the business continuing. So maybe you can be a little bit more specific. I know we're only 20 days into the quarter, but if you think across the business, you talked about sustainability being weak again in the 4Q. But where are you seeing strong momentum as it relates to maybe last year because the 4Q was the strongest sales quarter usually in the year? So just any more color around pipelines to give us some comfort for the momentum to your end, please?

Sure. Alex, it's Andy. So as I mentioned in the prepared remarks, we see an attractive pipeline here. We've got tremendous momentum across the business. If you look at where that momentum is, we saw an acceleration in index, saw an acceleration in PCS, we saw a pickup in analytics and we've seen it across non-asset manager client bases. And so those are all things that are sustainable trends and we see good momentum. Obviously, the third quarter was a very solid quarter. We continue to expand and do more for clients, and we are -- as a result of that, we're having many large deals. These types of deals are reflective of repeatable types of strategic sales that I think we're going to see more and more across the business and are going to be a key component of growth into the future.

There will be some inherent lumpiness related to the timing of these deals. And as we've alluded to, I wouldn't really focus on one quarter. But I would say the overall pipeline is quite robust. The momentum is there. Q4, as you said, is a very strong quarter for us for a number of reasons, notably, there are things like concentration of contract renewals, client budgets, the year-end for our sales organization. And so yes, we're looking at an important fourth quarter here, and we've got the opportunities and the momentum to deliver. And I think we're seeing good momentum, not only into the fourth quarter, but heading into next year across those key growth engines for the firm.

Our next question in queue coming from the line of Manav Patnaik with Barclays.

I guess I just wanted to follow up on that in terms of the big -- you called out a bunch of large contracts this quarter. It sounded like, Andy, you just said you expect more of those to continue. So we shouldn't treat these as timing perhaps. Just trying to get kind of a level check on the growth rate there. And then I just wanted to clarify your comments around how First Street is going to help the growth on the sustainable side, please?

So look, I think as we expand MSCI into new use cases, new client segments, there is an incredible amount of innovation and new product launches at MSCI. And as we engage with clients, the number of large deals is going to increase.

Now each quarter, we're going to have a lot of large deals and it will make it a great quarter like this one and some deals will slip to the next quarter. And it may appear that the quarter wasn't that great. It will be a mistake to interpret it that way. The best way to analyze our performance is on a multi-quarter basis because these large deals are going to create differences quarter-by-quarter. And therefore, when we have a great quarter, we're going to get really excited. When the quarter is a little less -- is a little softer because a few deals, large deals, great, to the next quarter is going to look like excited and everyone is going to start worrying. The trend here is very positive. The trend is that we're picking up growth a little bit in asset managers. We're stable in asset managers with slightly higher growth, but importantly, in the no-asset manager segment, of course, as a base piece within index and ETF and all that. But in traders, and in hedge funds, in GPs, in [indiscernible] and asset owners, as you saw in this quarter, et cetera.

So I think that my best advice to all of you is to evaluate the -- not the financial metrics. The financial metrics get smoothed out by the accounting process. But the operating metrics in recurring new sales and retentions and cancels, you need to evaluate them on a multi-quarter basis. Otherwise, you're going to go crazy that you're going to feel very good one quarter and you're not going to feel not as good next.

Next question in queue coming from the line of Alexander Kramm with JPMorgan.

Yes. And just wanted to see if you can get you both to elaborate on the qualitative and the quantitative and something in your prepared remarks in the press release. You noted robust demand for both traditional and newer solutions. Maybe we could have Andy start off with dimensioning how much are newer solutions contributing to the net new number? And then maybe from Alvise or Henry, how we should think about what's resonating in market right now? And Yes. And then also, if you don't mind me tacking on, any comments you can offer on the largest deal you closed and what was different about that specific transaction?

Alex. So let me give some color on the quantitative side. And as you said, I'll turn it over to Alvise to give some color on types of products where we're getting traction. He can comment on that big win we had, which is very exciting for us. As you know, we have seen not just this quarter, but this year, we've seen a meaningful increase in the contribution from new products to sales. That is something that is a key driver of growth, and we expect that to continue. In the third quarter here, that contribution to new sales from new products increased more than 50% compared to a year ago. And so we have seen a significant step-up in new products launched this year, but importantly, the monetization of those new products.

I would also highlight beyond just the monetization of the products themselves, that innovation, that development, the enhancements that we are making are also critical in driving improved retention, they also helped to support price increases, and they are key enablers for broadening the relationship with many clients. So this innovation is a key part of our growth algorithm on many fronts, not just the new sales contribution, but it's something that we think is really helping to fuel the repositioning of the company and opening up additional use cases and new client segments, new parts of the market and new solutions for us. So with that, why don't I turn it to Alvise to give some more color.

Thank you, Andy, and thank you, Alex, for the question. So we see a continued sustained demand for new solutions for portfolio [indiscernible]. The demand from all angles of the market for more customized, more bespoke portfolio solutions continues and that allows us to continue accelerating the success of our customer index franchise. We also help accelerate our mobile franchise, so we launched a custom model service. We're also building new factual pace. And we also are accelerating the new specialized data sets we are making available to our clients in the market. These are on a range of different aspects, portfolio constructions. There are some very specific new type of signals that we're putting out through our signal library effort on crowding, on specifics of factor models. And there is also new solutions where people build the optics [indiscernible]. And so this is all driving this continued growth of the portfolio ecosystems and is offering us, frankly, a very, very positive environment for the next several quarters to continue the expansion.

The other area that I would highlight is portfolio solutions. So on the one hand, a significant appetite for new total portfolio solutions, and we have very successfully gone to market in Q3 with a new total portfolio management offering for asset and wealth managers and also a new offering, specifically for wealth managers. This, again, are solutions which we see getting more traction in the quarters to come, and we'll continue supporting our growth.

We also delivered a substantial innovation in the multi-asset class risk space, namely by enabling a substantially lower latency intraday capability that will transform our complex multi-asset class investment organization can bring risk to the front office to inform decision-making.

Finally, I want to highlight what we're doing in the PCS space, the Promarket solutions, where, as it was alluded in the introductory remarks, thanks to the advantage of acquisition, we've brought to market a highly differentiated and valuable [indiscernible] and document management solution that is getting a lot of traction. And we also see that continuing and massively expanding its appeal to investors.

Our next question in queue coming from the line of Scott Wurtzel with wolfe Research.

Similar question on the product side, maybe switching more of a kind of AI-focused topic. Wondering if, in your conversations with customers or any other deals that you're seeing with customers who are adopting AI products, are you seeing any uplift in deal size associated with that? Any color on that would be great.

Yes. So the solution I alluded to in my earlier answer, especially in the private market space, these are all natively genetic solutions. And it is not that people are buying them more because they are agentic, it is that they couldn't be delivered built without the support of latest chain NMS technology because -- simply because the amount of syntactic analysis that has to be done is only possible, thanks to the usage of latest gen NLM technology with the right training in the right context specifically for the analysis and understanding of private asset object.

So additionally, in the portfolio construction space, all the newest data sets we are releasing, again, are only buildable and can be delivered at scale and with the right consistency because of a massive use of agentic capabilities and clients understand that. So they see that this is intel, it's IP with a transformative value that we could have created before half.

Look, there is another step which is that we also are agentifying the way the clients can actually use some of these capabilities. So we delivered within our solution agents that are specialized and actually doing some of this portfolio construction capabilities for clients. We see this as being a game changer. The biggest limit, frankly, would be not our ability to build, but it will be the ability for the clients to accept this solution in their environment given that we are building agents.

Our next question coming from the line of Faiza Alwy with Deutsche Bank.

I actually wanted to ask about operating leverage and profitability going forward. I know you've historically talked about reallocation of expenses and maybe AI-related efficiencies that are being reinvested in the business. I'm curious if your thoughts have evolved around is there a time where we can start to see higher operating leverage, maybe more margin expansion and potentially a decline in expenses?

The answer is no margin expansion. MSCI is a company with incredible opportunities in a new world, which is a world of large amounts of data, huge number of models to help people understand portfolios, either investment portfolios, loan portfolios, insurance risk portfolios. And of course, the use of technology to do all of that. So in the past, one of the biggest problems of MSCI is that we've had an enormous number of very attractive organic investments that we haven't been able to fund because we didn't want to touch the margin. So now with AI, which I call [indiscernible], we have an incredibly positive algorithm, which is we're applying AI to the -- we divided up MSCI into running the existing business and the enhancement [indiscernible] and what we call growing the business, a lot of the new innovations, the new products. And in the running of the existing business and the enhancement of the existing business, we're applying AI significantly to gradually lower the growth rate of EBITDA expenses from mid- to high single digits, to the low single digits and eventually to negative growth. And then we want to put all that money into the growing of the business with all these opportunities that I mentioned earlier in order to expand into new use cases, new client segments, of course, new solutions powered by more data, more models and more technology.

So we believe that we have -- we're going to have probably a triple benefit of AI. The first benefit is the ability to free up capital to invest. The second benefit is that the products that we're creating, as Alvise described, we couldn't do them without genetic processes. And therefore, we can now do that, and we can expand faster, and the payoff is going to be larger per product as the second benefit.

And the third benefit is that we think that eventually we'll be able to disrupt the SaaS software, the SaaS industry by which our clients consume content from us, content means data and models and analytics with the agentic processes rather than this incredible investment in SaaS software that needs to be made and the like. Allow me an analogy here. I used to be a media investor in my private equity firm. And in cable -- I mean, in media, the transformations went from over-the-air transmission of media to cable transmission of media to streaming media. So the SaaS industries, the equivalent of cable. It makes -- it is an incredible investment to wire every house, every building, every day with copper wires and fiber optic wires etc.

So there came a streaming technology that for anybody who has access to an Internet connection, you can have access to all the content in the planet. So we believe that the cable TV type of industry is the equivalent of SaaS, and the streaming technologies is the agentic technology that could bypass all of that and we could get a big benefit as well and increase the number of users of our content all over the world. Instead of having 100, we now have maybe tens of thousands of users in our client organization. We got hundreds of thousands and eventually millions of user of our content and significantly expand our white space.

Our next question coming from the line of Kelsey Zhu with Autonomous Research.

Could you talk a little bit more about your investment into agentic-based AI solutions. And I know you just talked a little about that. the private market space earlier. But what new products and features are you building in the other segments? And how do you see that changing the competitive landscape for you?

Yes. Thank you for the question. So as I alluded to, another area that is being completely revolutionized by agentic capabilities is our model creation factory. So it used to take us several weeks to build and fully calibrate a new model. We can now do it in the space of a couple of holes. At some point, we'll be able to do it in the space of minutes. That transforms what these models can do because we will be literally capable of creating models on demand targeted exactly to the needs of a specific users in a way that it was never possible before. And this done with the same level of quality, integrity and the dependability that the MSCI [indiscernible] for decades.

Another area is the creation of new specialized data sets. So the ability to do fundamental analysis of not even companies, assets, both assets pointing to public companies and product companies through the use of different artificial intelligence technology is completely transformational. And this allows us to create product offering that are completely different than what we used to do before. So for instance, our geospatial offering is an example of that. We have just launched a few specialized data sets to help understand the AI value chain. And all of this depend on the agentic ability to basically map company's characteristics, company's revenues, company's assets, to very specific characteristics that it would be impossible to do just with humans.

Our next question in the queue coming from Owen Lau with Claire Street.

I have a question about your free cash flow guidance. It's being maintained even though you did the results by quite a bit. I saw that interest expense weighed by $6 million. And Andy, you also mentioned higher investments, and we had lots of conversation about this investment already. But I'm just wondering, like, are these the main drivers of maintaining the free cash flow guidance? Or there are some conservatism baking your guidance? And also, do you expect some kind of incremental revenue or maybe lower expense in 2027 or beyond because of these investments?

Sure. Yes. So I would highlight a couple of things. So free cash flow, as you know, can be a little lumpy quarter-to-quarter. So what we saw in the third quarter was heavily driven by 1 factor in particular, which was interest payments. So we had a significant increase of $50-plus million of additional interest -- cash interest payments in the third quarter related to the financing that we did last year. There can also be lumpiness related to tax payments, even timing of collections, other payment items. And so I wouldn't focus too much on any given quarter. The reason why we keep the full year guidance and we're confident about the outlook is the collections have been strong, so business growth to put it front and center. So as we continue to grow with the top line, as we continue to expand with clients, that translates through to cash collections, and that is what's powering the overall free cash flow for us, even though we do have, as you alluded to, higher expenses in areas.

I would highlight one of those items that I called out that's leading to higher expenses this year, namely the performance stock options and the additional accruals related to those as our financial performance improves. That's a noncash item. So there are some noncash items in those expenses that aren't going to impact cash flows.

Punchline is, as I said, there will be some lumpiness quarter-to-quarter. The timing of some of those items can push swings, but we continue to be confident about the momentum of the business and the top line growth, and that will over time translate through to better cash flows for the business.

As you know, that's a key part of our financial algorithm. We are always focused on driving very compelling EPS growth and free cash flow growth and particularly free cash flow per share growth over time.

Our next question coming from the line of George Tong with Goldman Sachs.

You mentioned double-digit growth across your non-asset manager segments. Can you put a finer point on where within the double-digit range that growth is running and whether that year-over-year growth accelerated from the prior quarter?

Yes. And listen, I don't want to get too specific because the amounts can move around a little bit quarter-to-quarter here. But if you look on an organic basis across the organization, we saw solid double-digit growth with asset owners, as we alluded to, so north of 12%. Hedge funds, we continue to see as our highest growth client segment. So I think it was roughly 18% growth with hedge funds. You see roughly 10% growth in areas like broker-dealers and banks and elevated growth in other pockets as well. And so that collection of opportunities has been fueled by innovations that we've been making. As we've alluded to before, we've continued to develop new products and solutions that are fit for purpose for many of these client segments. We're also enhancing our go-to-market efforts around many of these client segments. Those are translating through to elevated growth, and that's going to be a key part of our financial algorithm driving that overall double-digit top line growth is continuing to fuel the opportunities across these client segments.

Our next question in queue coming from the line Curtis Nagle Bank of America.

Maybe a 2-parter. Just going back to how to think about sort of the expense structure. So appreciating you're not making a change to the, I guess, the net savings, right, because you're going to be reinvesting and it sounds like an accelerating rate. But in terms of the time line, Henry, to your point, getting to very closer to low singles, right, and maybe even negative on a gross basis. Is that something we should be compensating for next year? Or is that perhaps a longer time line? Just trying to think through, again, how to think through the reinvestment cadence and when that starts to maybe even accelerate further.

Yes. And just to be specific on Henry's comments, I think you got this, but to be totally clear, the low single digits and potentially negative in the future, referred to or run-the-business expenses. So these are the expenditures in the business that are supporting the existing franchise and existing products as they are today. That's an area where AI is being transformative for us. So in our production environments within our data operations, our technology, organization, these are areas where AI is dramatically enhancing productivity and efficiency, and that is what's enabling us to take down the rate of growth on the run-the-business expenses.

As Henry alluded to, we intend to reinvest those savings. So those productivity enhancements are going into fueling these very attractive organic opportunities that we have in front of us. And so we do intend to reinvest. And so the overall expense trajectory and the financial algorithm is not changing per se, it's just AI is enabling us to invest more. And that is, if you will, I guess, I could say it's supercharging that algorithm. So it allows us to invest more, which is going to fuel more top line growth, as Henry said, with the same inherent operating leverage or inherent margin dynamics, and that's going to fuel over time, higher profitability growth for us.

And so it's kind of supercharging what we've done in the past. As we head into next year, there are some items that are positioning us well. So things like the severance which is running higher than we anticipated at the beginning of the year. A lot of the transformations that we've talked about are happening quickly and will continue to happen. Those are things that will help position our expense base for next year. There are also a number of broader initiatives that are positioning us well for next year.

Now we do intend to, as I said, reinvest a lot of those savings and productivity enhancements, but we've got the levers in our business to make sure in all environments, all dynamics, we've got the ability to flex up and down and continue to drive not only those investments, but also fuel very attractive profitability growth going into next year. And so I don't want to comment specifically on expenses or any targets for next year other than to say we're very confident in our position and the momentum we have in the business, and we think we are setting up well nicely for next year.

Our next question in queue coming from the line of David Motemaden with Evercore.

I just had a question on the MSCI connectors and what you guys are seeing so far as clients are building a genic workflows with embedded MSCI data. I'm just wondering if you have any insight into MSCI data consumption by agents and how that compares to human users? And then maybe how we should think about that playing out as agentic use cases continue to gain traction here?

Thank you for the question, David. Look, it's early stages. So we have built connectors for all the main LLM providers. And we've also agentified the experience through our own applications. And for the time being, the evidence is the clients prefer to use our content to our own directly trained and created capabilities. And look, there's 2 reasons for that. Reason number 1 is that the convergence rate is actually higher, not massively higher, but it's a few points higher. And so you get the better experience going directly via the MSCI application. And the other one is that the client space only has by and large limited capabilities at this point.

Look, most of our clients only have access to Microsoft Copilot, right? And so this will naturally make for a relatively slow rate of adoption via the mainstream connectors and a faster rate of adoption for the directly controlled connectors because you're just connecting to MSCI as you always has done historically.

That said, that will change. And so look, we're doing 3 things. On the one hand, we are accelerating our connectivity to all the main platforms, whether they are large companies or large cloud data provider company like Snowflake and Databricks. We are also, as I explained, continuing to invest in our direct agentified access capabilities. And then we're also building own agent capabilities to enable the content on the client side, as Henry alluded to, to transform the experience. but we don't know which 1 of these 3 will prevail, but we are preparing to support all 3. And then brad the market will show us what works best. As I said, it's very early stages right now for the reason I said the MSCI [indiscernible] are the most balance.

Our next question in queue coming from the line of Craig Huber with Huber Research Partners.

I want to talk about index recurring subscription run rate growth. It's obviously accelerated here in recent quarters, I guess, 10.7% in the first quarter this year, 11.5% in second quarter, now it's 12% here in the third quarter, obviously, up from 8.5% to 9.5% the prior 8 quarters. Can you talk about what's going on there in terms of how much AI is potentially helping those revenue growth numbers there? It's quite impressive acceleration there.

Yes, Craig. So it has been encouraging. We've got good momentum there. As you said, we continue to see an acceleration. I'd say the themes at this point are consistent with what we've talked about recently. So we have a huge focus on building the trading and liquidity ecosystem around our indexes. And correspondingly, we have a very strong traction with hedge funds and traders. Within index, we saw a 32% growth with hedge funds, on the subscription run rate side, we saw a 15% growth with banks and brokers. A lot of that success was on the heels of many of the new modules that we have released. And as Alvise indicated earlier, our ability to develop these modules, these content sets is enabled by AI or ability to get to market faster is enabled by AI. So AI is definitely helping on the piece of innovation, the productivity front and that is helping to enable the sales.

I would say more generally across index, we are seeing good momentum, including in areas like asset owners and wealth managers where we're seeing 10% plus growth. And so we're seeing momentum across the board. Asset managers have been reasonably steady for us, but they are licensing more content from us. We're helping us -- helping them by licensing solutions that help them in, as you know, active ETFs help them move to be more systematic in their investment processes. And so we've seen pretty steady momentum with asset managers. And a lot of that is fueled by innovation, better services, access to more content that is fueled by underlying AI.

I would say looking forward here, there are dynamics that can even enhance that further. So I know we've talked about this a little in the past, but clients -- many clients are starting to want to have access to our content to be able to train models to use more content involved in an agentic investment process. This is very early days. And so the impact has been small to us at this point, but those are things that can create additional demand on top of all the great things we're doing today.

The last thing I would highlight, and we've talked about this a lot in the past, custom indexes, which are a reflection of that move towards systematic investing, and we are best positioned to be able to help clients make that transition. We saw 26-plus percent growth in custom index run rate, subscription run rate. And so we continue to have very strong momentum on that front. Our capabilities there are enabled by AI, and we continue to broaden our ability to do more custom indexes with a faster turnaround and that's something that's enhanced by AI.

So listen, we're very encouraged overall by the momentum in index subscription. It is fueled by the innovations we've been making and AI is an accelerant on that. So all good things for us on that front.

Let me add one other comment when we sort of sit back and look at the totality of our index subscription business. In addition to the significant growth that we see and the focus on indices, on the assets, a lot of our business on index has been focused on monetizing the amount of assets that are in the ecosystem of our index, $23 trillion, which $8 trillion is -- more than $8 trillion is [ partly ] managed.

In addition to that, we have found huge white space in developing products on the trading of the assets. the trading of the asset, not just the assets, but the trading of the asset. So what data sets are going to help traders, market makers, broker-dealers exchanges, help facilitate the flow of trading of those assets. And that's what you see this significant growth in index in traders and hedge funds, for example. And we're not even yet penetrating the market makers. That's -- we're working on that, but that's not yet even on the numbers.

So we believe that this white space is going to create another layer of growth in our index subscriptions.

Our next question in queue coming from the line of Ashish Sabadra with RBC Capital Markets.

I just wanted to circle back to an earlier question from Faiza on operating leverage. Henry, if I understood your comment that low margin expansion, did I hear that right? And is that just for -- I was just wondering if you could provide some time line around that no margin expansion.

And maybe just a follow-up there. Obviously, you've had a great track record of these investments. How should we think about the ROIC on these investments, but also how quickly do these investments translate into revenue growth?

That's a great question, Ashish. Look, as one of the largest shareholders in the company, I would love to see high valuations today and the next couple of years. But I'd rather see a company double or triple the size in 10 years compared to what it would otherwise be if we let the margin rise. So we, for sure, have a huge inherent pressure, if you want to call it, in the operating leverage increasing. And it's not easy when you see that and having to mobilize to invest the additional sort of revenues, additional cash flows coming from the operating leverage.

When we sit down every year to analyze all the investments that we have, we have to stop. We have to draw the line on organic investments in places that have sometimes triple-digit returns, high double-digit IRR with relatively short payoff because we don't have the organic capital to do that, meaning we do have the capital, it's just that you got expense it first before you generate the revenues, and we do not want to lower the margin. for sure, but what we can do is not let it increase.

There will probably be a marginal increase in the margin because every time we budget on so, we build a cushion and lection typically doesn't get eaten. And therefore, there is 20, 30, 50 basis points of increases. But that is just because of the nature of our budgeting process and our conservatism, not because we're we're targeting an increase in the margin.

So the end result is our strategy is that we're going to like this company a lot better if it's 2, 3x bigger than it would otherwise be if we get the margin right because of the opportunities we have. So that's the process of doing all of this.

Now as I mentioned to you, we have a huge installed base of customers. We're gradually moving into new customers and new client segments. Everything we built is on top of an already existing infrastructure. So the larger the infrastructure like an index, the higher the payoff relative to a lower infrastructure. So the profitability of these organic investments are huge because as the sort of some costs of the infrastructure is built, the incremental money required or capital for a particular amount of payoff, the incremental capital goes down for the same payoff. So it's going to increase the operating leverage even more than before.

You next question in queue coming from the line up. Alex Kramm with UBS.

Just a quick follow-up from my part. On the asset manager customer base, first of all, Andy, I don't think you gave a specific number about the run rate growth. You usually do that. So it would be great to have that. But then more importantly, it sounds like a lot of the momentum, and this is a good thing, is coming from some of the new products and the newer customer bases. I think in the past, you may have talked about some of these newer products also applying to asset managers. So I'm just wondering are sales cycles longer there? Are you still confident that some of these new products can at some point also click into gear? And then do you have to change anything to maybe do a better job on the sales front with that customer base?

Sure. So yes, just for reference, asset manager organic subscription run rate growth was around 6%. I mentioned within index, it was around 8%. As I alluded to, that's been reasonably steady for us. Retention is pretty steady as well, maybe slightly up -- very slightly up from a year ago.

Listen, there has been some benefit from several years of equity markets rising. We see reasonably healthy dynamics in many areas with asset managers and you can tell from [indiscernible] metrics and solid retention rates. There are still those secular pressures on asset managers and those are likely to continue. But as you alluded to, we are in a position to help them. And so we are innovating. We're enhancing our servicing model. We're helping them transition to those areas where they see asset growth and fee stability. And so we are in a good position to help them overall. And so we think asset managers are going to be an important part of our client base. They're an important part of the investment ecosystem, but they're going to be more of a steady grower, and we're expecting outsized growth from other areas.

And if you look at the environment and the backdrop for other client segments, we see it being pretty constructive in areas like hedge funds, banks, traders, asset owners, wealth managers. It's a pretty constructive backdrop with them. And obviously, index managers have been doing exceptionally well, and we've been doing well with them.

So overall, it's a pretty good environment. We've seen steady progress with asset managers, and we think we're in a good position to help them continue to evolve and adapt to changes in the investment process and the investment industry.

Our next question coming from the line of Jason Haas with Wells Fargo.

This is Jun-Yi Xie on for Jason. I'm curious what you're seeing from your hedge fund end market, and particularly quantfunds that have been consuming more of your data and new product launches. Do you think that there's a potentially cyclical component to this and some of this growth could moderate in fiscal year '27. Are you seeing these funds remain highly profitable with continued inflows that could potentially lead to more funds immersion that you can sell into?

Thank you. Very important questions. We see this as being a structural trend in the market, especially in the equity market, but we believe that the this income market at some point will also follow the same path. And the path is the following. The unit of conversation in the market has gone from being the single stock to being the portfolio. The portfolio, in all possible ways, possible -- logic possible designations. This is something which intrinsically requires a higher ability to make marketing complex objects at scale, at speed. And this is why, in the face of capital limitations from the traditional players, i.e., the broker dealers and the massive, massive increase of the demand from this portfolio ecosystem is making a very big opportunity get even bigger for the most sophisticated market makers and the hedge funds that effectively play the role of market makers to create an investment function.

Because this primacy is supported by very significant investment in the technology capabilities and superior access to the market. I think this is a trend that is there to stay.

Now can there be short-term reversal? Yes, of course, it can be, right? Market never goes in just one way all the time, but this is a structural transformation. And because, you said the unit, our conversation is the portfolio, and we are the portfolio guys. We're going to be in massive beneficiary of discontinued trend.

Our next question coming from the line Alexander Hess with JPMorgan.

Maybe just a quick follow-up on 2 initiatives that you guys are pretty -- that were pretty prominent for you and the story maybe a year ago. I would like to hear a bit more about the latest on active ETFs. And then has anything changed with respect to the Moody's private credit ratings partnership? I know they had an announcement out there with a third firm, so I would be interested to know on latest updates on both those fronts.

Yes. So on the activity front, as Andy alluded, we've seen significant growth because essentially, the vast majority of asset management firms of traditionally active asset management firms are converting many of the products at an accelerated pace into ETFs. The process of doing so entails a couple of ingredients. One, most of the time, the conversion takes the products to be closer to being systematically built products, which, of course, creates a lot of opportunities for our tools and capabilities throughout the managers do the transition. So Alex asked Andy earlier if some of the tools we've built for the broker dealer trading and hedge fund and market-making communities at some point will be usable for asset managers, the answer is absolutely yes. Because the growth of this activity at market will entail this obvious being managed more systematically at greater scale with greater level of customization and the cost we built to help create edge and book an tides market make us to do that will absolutely be fungible for us and managers.

And so we see that continuing and being a trend which we also facilitate Same for a lot of capabilities we're building in portfolio creation, [indiscernible] creation and the specialized data set that can be used to create specific flavors for this new activity of objects. So I said, I see the trend continuing and I see the trend being very positive for us.

And I'm showing there are no further questions in the Q&A queue at this time. I will now turn the call back over to Mr. Henry Fernandez for any closing remarks.

Thank you, operator. Before we sign off, I would like to share that this is the final earnings call in which Jeremy Ulan will be serving as MSCI's Head of Investor Relations. At the end of this month, Jeremy will move to a new and exciting role at MSCI as the lead finance director for client segment or solutions. And as we expand into a variety of new client segments, we need better financial management for that, and Jeremy will provide that leadership in addition to his current role as [indiscernible] of the firm. Craig Carter, currently, our Head of Corporate Development, will take over as Head of IR.

I want to thank Jeremy for all his incredible contributions to the IR team, and welcome Craig to his new position.

Looking ahead, MSCI continues to expand our footprint with client segments, traditional client segments and newer client segments across the investment ecosystem as we accelerate our product innovation using AI and other advanced modeling and technologies. We have a great franchise for the age of AI. AI is the most useful in places where you have large amounts of data, big number of modeling and the use of a lot of technology, and that's what the MSCI is. We remain intensely focused on delivering long-term compound growth and long-term value creation for our shareholders. Thank you for listening, and we'll keep you posted throughout the quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.

All right. Good morning, everybody. We'll start on time here. Thank you, everybody, for joining us at Barclays' 24th Annual Financial Services Conference. My name is Manav Patnaik. I cover business and information services for Barclays, a lot of the financial information services companies, and one of them includes MSCI. So very happy to kick off our contribution to the conference today with Andy Wiechmann, CFO of MSCI.

Andy, thanks for being here.

Absolutely. Happy to be here. Great event. Great turnout, and fun to be jumping into it in September here.

Exactly. So Andy, maybe just a broad, high-level question. Obviously, the markets have a lot of macro noise, rate noise, geopolitical noise to decipher. But for your business specifically, what is kind of the overall sentiment and some of the observations from -- you're getting from your clients and how they're interacting with you?

Yes. So it's a dynamic environment. There is not only the macro geopolitical dynamics that you alluded to. There's the AI change taking place, but there are structural changes taking place within the capital markets and the investment industry. And so you're seeing this move towards more systematic investing is the term we use. You see that manifest itself in more multi-asset class portfolios, things like direct indexes, basket trade, the total portfolio approach. You're seeing it in structured products, fixed index annuities.

And so all of these parts of the investment industry, you're seeing these shifts. As you all know, you're seeing higher allocation and intense scrutiny around private markets and private asset investing. And so those are all things that impact our business. So you have those broader dynamics you alluded to on top of the structural changes taking place in the investment industry, it's a busy time for us. And we are seeing strong engagement from our clients.

The exciting thing is there are opportunities out there. And so you are seeing many parts of the investment industry thriving, capitalizing, taking advantage. And we are in the epicenter of providing those tools and solutions that can help them take advantage of those trends that I alluded to earlier. And for those that need to restructure, we're providing those frameworks, those tools, those solutions, the support they need to transform their business models. And so all parts of the industry, we are heavily engaged with. We're seeing attractive opportunities.

As we mentioned on our second quarter earnings call, we've got a very attractive pipeline of opportunities out there. And so business is busy. As we were talking about earlier, we see a lot to do. There are a lot of demands and the opportunities are ours for the seizing here. So we're excited.

Got it. And just a follow-up, maybe a little bit specifically on that. So a couple of years ago, there was a lot of budgetary pressures or that was the headlines with your clients and put some pressure on your business. How would you characterize that -- the budget specific, I guess, to the areas you're targeting?

Yes. I mean, listen, there are secular pressures on traditional asset management, which I think we're all aware of [ tonight ] and I alluded to. That's not new. That's something that's been around since the financial crisis. It was probably most acute in 2022, 2023, 2024.

And I think given the runs that we've seen and some of the stability we've seen in equity markets, it's been helpful to active management. It's more constructive than it was a couple of years ago. Those secular pressures still persist. And as I alluded to in your last question, there are areas where organizations need to change. They need to restructure. We can help them, but there are pressures on those organizations. But it's generally more constructive.

And then layered on top of that, we have seen over the last couple of years, the last 18 months, a rotation in the international markets. So we've seen tremendous flows into international markets, and that's something that cyclically benefits us as well given our core franchises on the Index side are anchored to international investing, emerging markets, developed markets outside the U.S., global investing. And so that's also added to the opportunity set in front of us.

Got it. And when we talk to our clients, I mean, I think they still complain about the budgets and the budgetary pressures. But is there an aspect of you kind of taking more of the existing wallet by innovation? Or how would you characterize any shift in that aspect?

Yes. So to that point, for sure, we do see those pressures, as I alluded to, with -- I mean, traditional active managers is kind of the epicenter of that pressure. We continue to grow with these organizations, and we can unlock additional value through a couple of channels. So one is we can be helpful in making them more efficient in how they operate. So we can help them replace internal systems. We can help them displace other providers and save money in consolidating providers.

And probably most importantly, we are in the areas where they want to move to. And so we can help them build those strategies, those approaches, those teams that are in areas where they can attract assets, charge higher fees, really differentiate themselves in the market. And so we are both helping on the efficiency side, but we're also -- we call ourselves a revenue center. And you've heard us talk about moving more towards the front office with a lot of these organizations.

So not just being a benchmark, a middle office enterprise risk solution, but actually something that is used by the CIO, the portfolio managers, the research analysts day-to-day in developing their portfolios, in making better decisions and ultimately delivering better returns for their clients.

Got it. And maybe just to put some kind of qualitative numbers around that. So I could argue that maybe the Street got ahead in terms of expectations for the net new number last quarter. But from your perspective, how do you think that trended versus your expectations? And what does that tell you about the environment today?

Yes. I mean, listen, the market is ultra focused on our recurring net new every quarter. We see it. You alluded to it. I understand why. I mean, our subscription run rate growth is a core part of the franchise and a key indicator of the momentum of the business and the opportunities in front of us. We believe we've had good momentum. As I alluded to, we have attractive pipeline of opportunities. If you look at our year-to-date recurring net new, it's up 24%, 25% over last year. If you look at the trailing 12 months of recurring net new as of 6/30, it's up 20% over the prior LTM period.

And so we have good momentum. We're delivering recurring net new that is well ahead of our current subscription run rate growth, which means we're accelerating. We're accelerating at a nice pace. There's going to be periods where it can be a little lumpy, as you all know. We don't overly focus internally on the timing one quarter to the next quarter here. But overall, we see that pipeline building. We see attractive momentum, and we see enormous opportunities. And so we're confident about the momentum in the business.

Got it. And just -- I know like you said, the quarters can be lumpy or some timing move, but anything seasonal about the remaining half -- second half of this year that we should keep in mind the comps versus last year?

No, nothing that I would call out specifically other than what I alluded to with the very attractive pipeline in front of us, and that is something that is anchored to real opportunities. We monitor that full inventory of opportunities at different stages. And I'd say across most areas of the company, we've got a very attractive building pipeline. There's going to be some lumpiness quarter-to-quarter, especially on large deals. It's just the nature of our business. But even in the second quarter, it still was up, I think, 8 and change percent over the prior year.

And as I said, year-to-date, we're up 24%, 25% compared to the prior year. And so we are confident about the momentum, excited about the outlook. And if you look at what underpins that, what's driving it, these are driven by those secular trends I alluded to earlier. And so on the Index side, we are seeing good momentum in custom indexes and that cuts across many different use cases, many parts of the investment industry. Yes, we've had some big wins with hedge funds, but it is a lot more than that. We see it with the broker-dealers on structured products, over-the-counter derivatives. We see it as custom benchmarks and active ETFs with asset managers. We're seeing it in areas like insurance, as I alluded to, with fixed index annuities and within wealth.

And so there are many layers to these secular trends that are fueling our business and indexation, even within market cap indexes, continues to grow very attractively. You see Private Assets. You've seen -- if we look at the subscription run rate growth as of 6/30 this year compared to 6/30 of last year, yes, you've seen a nice increase with Index, nice increase across Private Assets and the trends that are fueling Private Assets are both industry trends, but it's also the progress that we've made in innovating and delivering solutions. And so we're confident that there's good momentum there.

And then you can even see the acceleration across client segments. Yes, we've seen very strong growth with hedge funds. But over that last year, we've also seen accelerations with asset managers. We've seen accelerations with asset owners. We've seen acceleration with broker-dealers. And so we see it across big parts of the company and big addressable markets where we are delivering solutions that are mission-critical, and we have been ramping up our go-to-market.

Got it. I want to go back to the NPI and the secular trends you talked about. But first, the other thing or the other item that the market pays a lot of attention to is your fee rate on the Index side. And I know typically, that trend has been kind of steady down, but it had ticked up a bit in the last quarter in particular. I know there were 2 or 3 different factors. I was just hoping you could help us appreciate that again.

Yes. Yes. So we did see between Q1 and Q2, a notable step down in the basis points. I do want to start with and underscore, and I mentioned this on our earnings call, our primary focus is driving run rate growth and ultimately, asset capture with our ETF partners here. It's not to sustain the basis points. And so what we saw between Q1 and Q2 was more than $400 billion in AUM growth in equity ETFs linked to our indexes. That is the largest amount we've seen in a quarter.

So extraordinary growth in AUM linked to our indexes and ETFs over that 3-month period. And what drove that drop in basis points was extraordinary growth in lower fee hyperscale ETFs out there that just are at lower fees. And so from a -- it was purely a mix shift or almost entirely a mix shift driven drop in fees. So it wasn't our partners dropping their fees and ours dropping. It was just lower fee products that attracted a massive amount of assets over that 3-month period. And so we saw a drop in the weighted average basis points. That's something we believe is healthy.

If you look at the run rate growth in ABF run rate growth was 25% growth. If you look at even a growth in asset-based fee run rate from the first quarter to the second quarter, I think it was north of 8% just quarter-over-quarter. And so again, our big focus is on driving that run rate growth, not just preserving or not preserving the basis point fees. And we continue to believe there's a massive opportunity to continue to drive both the asset growth in index-linked products, but also our run rate growth. And we think we are very uniquely positioned to capture a significant amount of the market share of new flows into ETFs, but partnering with the largest providers positioning ourselves for those areas of innovation where there is higher growth and oftentimes, there can be higher fees as well.

Got it. I think the mix shift obviously anecdotally makes sense. I think maybe some of us underestimated how much it could impact it. So could you help us with a little bit of the mix in the business? Like how much is your flagship versus these emerging indices?

Yes. And it really is dependent on how assets move in any given quarter. So the asset growth that we saw, again, in the past quarter was heavily anchored to developed market products. And we saw tremendous flows, but also asset appreciation in developed market products. And those oftentimes, especially the hyperscale ones, so the biggest ETFs linked to our indexes covering developed markets are ones that oftentimes have lower fees. And so you will see when there's big growth there, that's going to weigh the overall basis points, weigh on the overall basis points.

Similarly, if we saw a tremendous growth in emerging markets, we saw a tremendous growth in non-market-cap-weighted products, those will tend to be generally on average, not always the case, but on average, higher fees. And so that will cause resilience in the basis points. And it is worth noting, we definitely don't cheer for this, as I said, our goal is run rate growth, but you did see this happen back in late '21 and '22 when assets decline or if assets decline, you can see the basis points rise. And so the basis points is not an indicator of the health of the business. Ultimately, it's that run rate growth that we are focused on. And as I alluded to, there are different products that tend to have different fee loads.

Got it. And then just one more item in here, which also I think goes to here, you're looking for the run rate growth, not for the basis points. Just your BlackRock contract, can you just talk about -- I think you had quantified the impact of that in the next few years. So just remind us of what's in the base, what's left? And then just a little bit on why you did that with BlackRock.

Yes, yes. So just as a quick reminder, we signed a new agreement with BlackRock extending for 10 years out. It was largely reinforcing, underscoring the power of the mutual relationship that we have that's benefited both of our organizations. As part of that, we did adjust the fee construct on a subset of products out there. The rationale was we had certain floors, and we have generally floors in our fees in certain categories of products. As they declined to their fees over time, which is naturally the case in the ETF market, our capture of the overall economics was growing. It was growing to levels that were unintended, and part of that is a function of just the assets growing so significantly that we were capturing a significant portion of the overall fees in these products.

And so we did, again, in certain products, adjust lower our fee level, and they were on some of those bigger products, as I alluded to. The overall impact to the basis point fees was 0.1 basis point adjustment, and that was measured as of 12/31 of last year. So as of 12/31/25, the overall basis points with the fee adjustment would come down by 0.1 basis points, but it takes place in 2 phases. The first phase occurred in the first quarter of this year. So there was a 0.05 basis point impact. And then similarly, there will be about the same impact in the first quarter of next year in 2027. And again, those adjustments were based on the assets as of 12/31/2025. And so those 2-step adjustments.

Other than that, as I said, we extended the agreement 10 years, very healthy relationship. We see a tremendous trajectory of growth, and we're paving the way in new markets that we believe can be very big. And it's not just areas like custom indexes, it's areas like Europe, where you're seeing the ETF market grow at an outsized pace. And our capture of flows into ETF products linked to our indexes has been really, really exciting. It's been significant. So 30%, 40%, even sometimes higher than 40% capture of all new flows into European-listed ETFs are going into products linked to MSCI indexes, just creates tremendous opportunities to establish that ecosystem that pays dividends for a long time to come and translates through to a lot of derivative opportunities in other over-the-counter markets, listed derivatives, the market-making community with hedge funds. So it's an exciting frontier for us.

Got it. If you can go back to the topic of innovation, new products, NPI, you referred to it a lot. I mean, you guys have always been an innovative company, but it feels like the last 18 months, maybe there was a shift in how you approach NPI, maybe you over-indexed one area. I was just hoping you could help us appreciate what's been going on at the company there.

Yes. Yes. So it's an excellent point. It has been a deliberate focus of ours. As you alluded to over-indexing, we had this extraordinary growth in Sustainability and Climate. We had a tremendous amount of innovation around that offering, and it was not only within our Sustainability and Climate segment, but it was also sustainability indexes, sustainability analytics tools, climate risk solutions, even within private assets.

And so we, as an organization, as of a couple of years ago, as you alluded to, not only shifted to other areas, but we put a deliberate focus on the pace of innovation. And that's something that has been driven by Henry at the top, but Alvise, our Chief Product Officer and Head of Client segments, has been driving that as probably his key initiative as an organization. And so we have been really supercharging the pace of new product releases, new product introductions, but also doing it in a way that is capitalizing on the market changes we alluded to and taking advantage of AI.

And so AI has enabled us to invest more within the same expense base. So it's allowed us to moderate the pace of run-the-business growth even more than we have in the past, increase the amount of change of business investments, what we call investments is the change of business so those discretionary spend areas and drive a faster pace of innovation as well as enhance our go-to-market in many of these client segments that I alluded to, where we've had a deliberate focus on building and growing.

You can see that AI benefit within our headcount. So over the last year, our headcount has been roughly flat. So it's been pretty flat over the last year. That's even with acquisitions. As you know, we've done several acquisitions over the last year. And so even with those acquisitions, we've had flat headcount. That has led to us being able to invest more. So even though overall headcount is flat, we are investing more in a lot of key areas than we have been hiring, which means we are restructuring in many areas. You've seen us reduce heads in many parts of our data, our technology organizations, but also across all functions at the organization. And so that has been something that has accelerated in recent quarters.

And actually, I would call out that we have elevated severance on the year, but also in the third quarter here. And so because of that elevated severance as well as the very, very high AUM levels in ETFs and other index products linked to our indexes, which continue to hit new all-time highs, we are tracking towards for the third quarter adjusted EBITDA expenses of, I'll call it, the high $330 million. And we're probably for the year, going to be tracking towards the higher end of our expense ranges.

But again, this is driven by actions that are positioning our overall expense base to be lower growth, structurally better for the future, moderating that pace of the run-the-business expenses and allowing us to innovate more, it's just leading to higher severance for us in the near term here. But these are all exciting things, and they're also translating through to revenue opportunities for us as an organization.

Got it. Just to quickly follow up on that point. Thank you for that update. The severance, I guess, eventually leads to some cost savings down the road. So can you just help us qualitatively at least understand what that could imply?

Yes, yes. So in the past, our run-the-business expenses have been growing and it depends on the year you look at mid- to even high single-digit type of growth rates. We are able to, with this restructuring that I'm alluding to, the AI-enabled efficiencies, productivity enhancements to be able to bring that down to low single-digit type of growth rates. And so to your point, this is something that gives us a structural cost advantage going forward, allows us to drive even more operating leverage in the business, positions us better to invest more, but also creates a more attractive profitability profile going forward.

As I said, this year, we are seeing elevated severance expense. As we alluded to before, we see some elevated expense from acquisitions that we've done. And then the AUM-driven comp adjustments that are not only in our incentive -- our annual incentive plans, but also in some of our stock-based compensation leading to elevated expenses this year, but position us very well going forward here for more moderate expense growth.

Got it. Yes, that's pretty impressive, mid- to high single digits to low single digits. But just to maybe put that into perspective, just to clarify, I mean, Henry in the past has said, obviously, AI has been a godsend. But he's also said that he's not going to show us the margin like he's going to keep it for yourselves to invest in the business. So before we all start modeling low single digits and show some crazy margin, just some perspective on that.

Yes, yes. No, thank you for highlighting that. So again, it's low single-digit run-the-business expenses, not our total expense base. And so again, our dual mandate and what we are committed to is driving top line growth, very attractive top line growth, and we are accelerating that growth, so accelerating from where we are and continue to believe there's upside to drive faster growth than where we are in the trajectory that we're on.

And we're doing that through increased investment. That increased investment is enabled by the lower run-the-business expenses. But we can do that while also delivering attractive profitability growth in the business. Our goal is not to drive faster margin expansion. Our goal is to drive faster profitability and free cash flow growth. And so yes, the message we've been giving is no change to the overall financial algorithm of the company, continue to drive faster top line growth and very attractive profitability and free cash flow growth, although AI is enabling us to drive even faster top line growth.

And ultimately, that will trickle through to higher bottom line growth and higher free cash flow growth. But it's not to push through all those AI savings down to the bottom line. It's to reinvest them and accelerate that algorithm to make a more attractive trajectory on both the top line and the bottom line.

One of the, I guess, the AI-driven benefits on the top line has been the new product innovation you talked about. I don't remember the stats, but I know you can help us, but the whole -- this year, you produced in 1 quarter as many as all of '24, et cetera. But as you remind that, just how do we think about how that converts? Like what the sales pipelines now look like? And because it's some impressive numbers, but like how do we start modeling that?

Yes. So the contribution to -- the stat is the contribution to new recurring sales in the first half of this year is 40% from new products. So the contribution to new recurring sales from new products in the first 6 months of this year is 40% higher than the contribution from a year ago. If you look at the number of new products that we've released, it is multiple -- we're on a trajectory for multiples of where we were a couple of years ago in terms of the number of new products that we've released. And so for sure, that has been a big contributor to the acceleration in growth that you've seen over the last year.

And if you look at the places where this is most noticeable, you saw it earlier, it's on the Index side, where you've seen our growth accelerate from mid-8% to over 11% in our recurring subscription run rate. And for sure, there are secular trends fueling that, but a lot of that has really been driven -- and cyclical benefits, as I alluded to earlier, but a lot of that has been driven by new products that we've been releasing. The other place where we've seen the acceleration is on the private asset side. And that's probably the place where we've had in terms of number of new releases, some of the most new product introductions, enhancements to our services solutions.

And so we've got tremendous momentum on the private asset side. And so those are areas where we continue to fuel that pipeline of innovation. You've seen us come out with new frameworks, new content sets, importantly, new services and solutions that are, as I alluded to the beginning, helping our clients transform how they operate and capitalize on some of these shifts that are taking place in the investment industry. And all that is translating through to ultimately a faster top line growth for us.

Got it. Let's just touch on some of the potential risks of AI, I guess, to a certain extent. I mean, look, I think -- on the Index business, we all agree there's benchmark asset, probably not much disruption there. On the Analytics side is where often there's a little bit of a debate. And then you have the Sustainability side where people feel like you could be disrupted, but you're using AI to your benefit to expand. So I was just hoping for Analytics and Sustainability, if you could just walk through how you see the risks there?

Yes. Yes. So listen, we -- industry is changing. Technology is changing. We need to move extraordinarily fast. But these are net opportunities for us. If we sit on our laurels, listen, it can impact us. And that's not just the case in Analytics and Sustainability. That's the case in every part of our business. But we are seeing AI as a net opportunity, particularly in those areas that you highlighted. So those standard benefits being the industry standard, that common language that you alluded to on the Index side, we see much of that on the Analytics side as well.

And so our factor models where we've had the highest growth we've seen in a long time, it's a combination of us being the generally accepted framework that people focus on and think about when they think about factors, market factors, but also innovation. So creating new frameworks around those factors, new insights around the factors, and that is stimulating additional demand for us, and that's something where we are just getting started. You've heard us talk about our Basket Builder, which we've just come out with our Signal Library, micro sector insights. These are all things that are enabled by AI for us and creating tremendous demand.

When you think about the multi-asset class risk part of our business, one big underpinning there is our factor framework. So that reinforces the demand there. The other thing to highlight is we have extremely unique content and proprietary models that are built on proprietary data. The one big differentiator for us on the multi-asset class side and the enterprise risk and performance side is our private asset risk models. And that is built on the truly proprietary unparalleled data that we get via our Private Assets segment. And so we have private credit model, private equity model, private infrastructure model, real estate model.

These are things that can't be replicated. And then we also benefit enormously from the fact that one, we are a leader. So we sit on the portfolios of companies that manage $50 trillion plus, and we sit on every part of their investment portfolio. And so we have deep insights into the market. But we've also developed a very unique, robust, trusted framework that allows investors to understand the performance and risk and optimize their portfolios using really unquestioned models around every instrument type, every security type that the world's largest investors sit on. And those are not things that AI is going to replace. AI is going to supplement.

And so we have not seen AI as a replacement for us in Analytics. As I alluded to, if anything, it's been stimulating more demand, and it's creating opportunities actually to take that content that we have and expand the wallet with our clients. And so some of the big opportunities that we've seen and continue to see some of those attractive opportunities we see in the pipeline are really, I would say, bringing that tremendous content we have for risk and performance to the investment office.

And we are helping many organizations who are starting to become more systematic, embarking on a total portfolio approach, want their investment teams to be thinking about systematic drivers of risk and performance and be more calculated about how they build portfolios. We're helping them develop those tools and solutions that their investment teams use. And so it's much more of a net opportunity for us, and AI is unlocking all of that.

As you alluded to on the Sustainability and Climate side, listen, we are a standard there as well. And so there's a big part of that business that is organizations that have made commitments, organizations that are communicating to their clients, and we are the trusted name to represent what their climate position is, what their climate exposure is, their climate risk, think about ESG factors and considerations in a way that systematically assesses financial risk to their portfolios is very unique relative to others. And AI has enabled us to not only enhance those signals, enhance those insights and do it in a more efficient way, but it's allowing us to add additional insights.

And so as you see us expand and grow at an outsized pace in areas like physical climate risk, our geospatial asset location data set, even understanding exposure to geopolitical and macro risks, even AI exposures, which is kind of an emerging risk that revolves around the broader sustainability investing, the tool, the AI available to us, the data that we're getting access to is enabling us to unlock additional insights and create opportunities for us. And so we don't today see AI as a threat but more of an opportunity. We do need to move quickly and innovate and the opportunity is ours, but it's one where we, as an organization, feel confident about our position and the opportunity in front of us.

And maybe just going back to the severance point that you mentioned, is there one -- should we think about that as weighted towards one segment or the other? Or is it in the broad-based...

Yes. As I alluded to, the big areas where we see that is around our data and technology organization. Those are some of the places where we see some of the biggest benefits from AI and some of the retooling and restructuring. Those are oftentimes heavily weighted towards our bigger segments. So Analytics, also even on the Index side to a certain extent. But it does, to your point, it touches all parts of the business. So I don't want to be too specific at this point. It is pretty broad-based and relates to us kind of retooling much of the infrastructure and processes that we have, not only in one segment, but across the organization.

Got it. I wanted to quickly touch on Private Assets. You mentioned earlier that's one area you're seeing a lot of acceleration in new product, et cetera. Can you just help us, is that a lot of Burgiss? How important is the Moody's partnership? Are there other areas? I don't know how you can bucket them, but...

Yes. So we've seen a modest acceleration on the real asset front. There's probably a good chunk of that, that has been us enhancing the management team, the focus there, reinvigorating the new product introduction machine as we were talking about earlier. There have been some green shoots within the commercial real estate space, which are probably helpful. It's early days on that, but we do see good momentum there, and we've released some very cool insights and products that are getting traction within real estate.

But as you alluded to, the area where we've probably seen the most momentum is around the PCS side, which is the old Burgiss business. We've accelerated from -- is not where we want it to be, but from, I think, 12% to 13% subscription run rate growth up to north of 16% in the most recent quarter. That is definitely stimulated by a couple of factors. So one is a lot of the frameworks and tools that we've released over the last couple of years, enhancements to what we have been doing.

And so we now have those tool sets out there that we think the industry needs around classification standards, around benchmarks, risk models, liquidity insights, importantly, connecting those to the total portfolio, so allowing investors to understand their total portfolio that has a meaningful private asset allocation insights into value. So nowcasting more real-time indexes, a whole host of tools to help understand exposure within Private Assets and get at the heart of the value that managers are providing.

And so we've got the tools out there. We are also benefiting, to be candid, from the fact that the industry is now recognizing the importance of these tools. And so you are seeing many private asset investors who are concerned about their exposure to software companies within their private equity investments. They're concerned about their exposure to private credit and the risk that they might be taking that they're not aware of. And what that means also for the liquidity when they can expect to get distributions or if they decide to sell their position, how easily they can get out of a position on private equity or private credit fund.

And so there's a bigger focus from private asset investors and you're seeing that predominantly in places where MSCI can be helpful. So pension funds, insurance companies, wealth management organizations. These are all areas where we historically have not had a big footprint, but they have used our tools on the public asset side or on the total portfolio side. And so we've got great momentum there, continue to be very bullish about the outlook and believe the growth can be well ahead of where it is right now on the PCS side.

Got it. We have 2 minutes left. So maybe kind of capital allocation broad question. You've talked about -- many times you mentioned the industry is changing fast. The world is changing fast, technology is fast. How is that altering your capital allocation priorities or even rates within that?

Yes. I'd say no major changes to our approach to capital allocation. We are fortunate that we believe we have most of the capabilities, most of the content, most of the data that we need to drive this revolution in how investors build portfolios and invest ultimately. And so our primary focus is on organic investment, driving organic investment. And so from an M&A standpoint, we will continue to look, but the acquisitions that we do will likely be bolt-on accelerators. So the types of acquisitions you've seen us do over the last couple of years.

And these are acquisitions that accelerate the things that we are already working on. So we're not looking to add a whole new vertical, a whole new business segment. We don't feel like we need to diversify our business because of pressures in one specific area. But there are oftentimes unique opportunities to accelerate what we're doing, which is what you've seen us do on the custom Index side, what you've seen us do within the Private Assets side, where we've been able to build out capabilities, technology capabilities, but also data insights into areas like pre-IPO private companies and leveraging AI to do pre-investment due diligence and analysis to expand our value proposition into a broader part of that investment process.

So you'll see us continue to look at those. It doesn't need to be acquisitions. We are very actively engaging in partnerships as well, partnerships with data providers, other technology providers, our clients as ways for us to continue to broaden that value proposition. And as you know, oftentimes, the best investment we can make, and we continue to be laser-focused on it, is not only investing organically in ourselves, but buying our stock back. And so that's one where we will continue to look for those opportunities to, in size, buy our stock back at attractive prices.

Okay. I guess we're just almost out of time. So that's a good place to end. Thank you, Andy, for your time.

Appreciate it. Thank you.

Thank you, everybody.

Good to see you all. Appreciate it.

Good day, ladies and gentlemen. Welcome to the MSCI Second Quarter 2026 Earnings Conference Call. As a reminder, this call is being recorded.

[Operator Instructions]

I would now like to turn the call over to Jeremy Ulan, Head of Investor Relations and Treasurer. You may begin.

Thank you. Good day, and welcome to the MSCI Second Quarter 2026 Earnings Conference Call. Earlier this morning, we issued a press release announcing our results for the second 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 a discussion of additional risks and uncertainties, please see the risk factors and forward-looking statements disclaimer in our most recent Form 10-K and 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 Wichman, 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 all for joining us. In the second quarter, MSCI delivered very strong financial results along with an acceleration in run rate growth in both index and private assets are 2 key engines of growth in the company. We also showed strength in recurring net new sales across client segments and geographies despite continued challenges and sustainability. Meanwhile, record ETF and non ETF AUM balances in products linked to MSCI indices, help us achieve our best ever asset-based fee run rate. MSCI is building momentum in the second half of 2026 with a strong pipeline of opportunities an exciting AI fuel innovation. AI is enabling MSCI to move even faster in building new products, enhancing our existing solutions and strengthening our foundational mission-critical role in global investing and a rapidly growing ecosystem around our solutions.

MSCI's Q2 financial metrics included organic revenue growth of over 12%, adjusted EPS growth of nearly 19% and adjusted EBITDA growth of 14%. We further demonstrated our commitment to driving attractive shareholder returns and our confidence in MSCI by repurchasing $147 million of MSCI shares at an average price of about $558 per share during the quarter and through yesterday. Our Q2 operating metrics included total run rate growth of 12%, fueled by ABF run rate of $948 million, growing 25%. This reflected record AUM levels in both ETF and non-ETF products linked to MSCI indices, supported by another quarter of solid inflows of nearly $40 billion in ETF linked to MSCI indices. Over the past 15 months, total ETF AUM linked to MSCI indices has grown by more than $1 trillion. During credible scale of MSCI's ABF franchise, and the recent volumes of inflows into products linked to MSCI indices is the ultimate endorsement of trust in our IP, research and standards.

Turning back to our Q2 performance. MSCI achieved organic subscription run rate growth of over 8% with a retention rate of over 95%. This growth is enabled by our success in scaling our footprint across key client segments. Among traders and hedge funds, a category that collectively includes market makers, patients, broker-dealers and exchanges, MSCI delivered subscription run rate growth of 15%. Among hedge funds, specifically, we posted our best quarter on record with 19% subscription run rate growth and nearly $15 million in recurring new sales and recurring net new sales for a growth of 75% including 3 separate 7-figure deals in index analytics.

So for example, MSCI won a 7-figure index deal with one of the world's largest multi-strategy hedge funds, covering our ETF link unknown ETF linked custom index modules along with our constituent AUM packages. All told, we more than triple our index recurring net new sales with hedge funds from a year earlier reaching $8.6 million in total. These results highlight 4 overlapping trends in the segment of traders and hedge funds for us. First, MSCI's indices are becoming increasingly embedded in the core trading and liquidity infrastructure used by active and passive investors alike. Second, the growth of systematic and quantitative investing has contributed to rising demand for our index content. Third, as traders and hedge funds have expanded their role in global investing, MSCI has gained new opportunities to make our index franchise more diversified and resilient. And fourth, as clients demand faster, more specialized indices and structured products and derivatives in larger volumes, AI is helping us accelerate our index production and deliver customization at scale.

Shifting from traders and hedge funds to asset owners, we delivered 9% subscription run rate growth, along with our best Q2 on record for recurring net new sales at $8.4 million and growing 43%. For example, one of the world's largest pension funds -- public pension funds, signed a major new agreement for MSCI's private capital indices and expanded access to our private capital Intel solution.

We also completed a 7-figure deal with a large sovereign wealth fund for our total portfolio solution, which includes private assets and analytics. Among asset managers, we posted 6% organic subscription run rate growth, along with 9% recurring net new sales growth. This includes a large deal with one of the world's largest asset managers for our enterprise risk and performance tools to support their ongoing initiatives to incorporate factors and enhance the risk reporting across asset classes. In addition, we continue making steady progress with our ETF and other tradable product solutions for active managers.

During the quarter, we signed a handful of clients to support their launch of active strategies, leveraging MSCI's Index universe, research and IP. Overall, some of the biggest themes of Q2 included the rapidly expanding ecosystem around MSCI indices, our momentum in private assets and a rapid pace of innovation has enabled by our AI transformation and laser targeted acquisitions to unlock additional layers of growth.

Turning more specifically to our product lines. In index, we delivered 41% growth in recurring net new sales, 17% growth in total run rate more than 11% growth in subscription run rate and a retention rate of more than 97%. In Private Assets, MSCI achieved 57% recurring net new sales growth with more and more pension funds and sovereign wealth funds embracing our total portfolio solutions. Earlier this month, we announced a new strategic partnership with UBS that will extend the reach of our private asset solutions and enable wealth managers to better connect high net worth clients with GP opportunities while promoting greater transparency for the entire investment ecosystem.

By combining MSCI's independent data, analytics, models and AI power platforms with UBS's global client insights and expertise in alternative investments, we can help make private markets more understandable more accessible and enable stronger connectivities between GPs and the wealth channel. This private asset platform for wealth channels is only 1 example of how we are using AI to improve our solutions and the client experience. We already have over 1,000 clients using index AI insights, which we just launched in February.

Meanwhile, hundreds of companies and end users are now accessing our total plant manager and private capital intel solutions through their preferred AI models. Innovation remains the lifeblood of MSCI's product development, but we're also expanding our capability through highly strategic acquisitions. Last month, for example, we announced that MSCI would acquire First Street, a leading provider of physics-based climate risk data and analytics enabling physical risk assessment across over 2 billion building infrastructures. Combining our respective tools will help us deliver the insight clients need as physical risk becomes a more immediate priority. We're also addressing the broader category of emerging risks, along with issues such as energy access, tariffs and supply chain and AI. Much of our product innovation in sustainability and climate is now focused on this emerging risks, which have become increasingly significant to investors.

At the same time, MSCI working climate is separate and distinct from our work in sustainability as we are seeing the opportunities there. Sustainability faces persisting market challenges, and we do not expect that to change in the near future. Even still, MSCI remains the provider of choice in this industry and our sustainability tools continue to help us in other business areas, most notably in index. They are now close to $1.3 trillion in index fund assets benchmarked to MSCI sustainability and climate indices with over 1/3 of those assets benchmarked to our climate indices.

MSCI also took several other steps to advance our AI transformation. In Q1, we brought into the firm Dinesh Gupta from Goldman Sachs to serve as our new Chief Data Officer and Global Head of Operations. In Q2, we welcome [indiscernible] from Intuit as our new Chief Technology Officer and Head of Product Engineering and we announced that [indiscernible] will lead the creation of a new MSCI office in Silicon Valley focused on AI, product engineering and technology. Given his background, Kashi is the perfect leader to help us maximize the benefits of AI across client segments, product lines and asset classes. We have also established a technology and data committee of our Board of Directors.

Looking ahead, we remain confident in our pipeline. In our resource allocation, and in our ability to leverage AI. MSCI plays a key role in virtually every stage of the global investment process, and we are well positioned to save new opportunities for growth. And with that, let me turn things over to Andy.

Thank you, Henry, and hi, everyone. We're excited to see the large pipeline and strong momentum in key growth areas across the business with further accelerations in our index and private asset segments. As Henry mentioned, we have had several large client wins that reaffirm the growing ecosystem around our frameworks and solutions. Index subscription run rate growth accelerated to over 11% driven by a strong quarter for recurring net new subscription sales of over $28 million, which was up nearly 41% year-over-year. This reflected some large deals with traders and hedge funds across numerous modules, including our custom index modules. These help power the custom index organic subscription run rate growth to 23%, excluding contributions from the Compass acquisition. And the retention rate among hedge funds within our index product line was in line with the overall index retention rate at more than 97%.

Additionally, we saw another quarter of very strong growth in asset-based fees, with the ABF run rate reaching nearly $950 million and growing 25% year-over-year. This growth was fueled by close to $40 billion of cash inflows in the quarter, driving AUM and ETFs linked to our indexes up to more than $2.8 trillion. The asset growth and cash inflows predominantly occurred in clients' products linked to our developed markets ex U.S. and all country indexes, some of which carry lower fees. Within Analytics, we had organic subscription run rate growth of 7% driven by demand for our factor content and factor solutions, where we continue to innovate rapidly.

We are also seeing steadily growing demand for multi-asset class total portfolio solutions, including for front office use cases. Analytics organic revenue growth was 7% tracking with run rate growth. In Private Capital Solutions, subscription run rate growth accelerated to over 16%. During the quarter, we had solid traction across existing solutions like our transparency, private capital intel and total plan offerings. We also see growing demand with new offerings like our data platform and our asset and deal level metrics. The acceleration is supported by both our deep private asset insights and our strong multi-asset class total portfolio capabilities.

Additionally, we are seeing success with Vantage having already closed a few sales of our diligent solutions offering. In real assets, organic subscription run rate growth accelerated modestly as we benefited from recent product and service enhancements. And we won a large deal to be the exclusive provider to a large property technology firm that will leverage RCA content and our global index intel offering delivered through Snowflake. In the Sustainability and Climate reportable segment, we drove nearly $6 million of new recurring sales and sustainability in Q2 and over $3 million of new recurring sales in Climate.

However, cancels, particularly in the Americas, were a significant headwind as clients are rightsizing their sustainability spend. As Henry mentioned, we are capturing share gains in a consolidating market and are strongly positioned from a competitive standpoint based on our trusted reputation for quality, depth and breadth of coverage as well as the broad suite of interoperable solutions that we offer. Meanwhile, in Climate, run rate growth across MSCI product lines was nearly 12%. And we are seeing significant demand for physical risk solutions, which are increasingly woven into the investment process.

In the quarter, we won several physical risk deals, including a large deal for a geo-spatial and asset location solution with the European bank. And MSCI's announced acquisition of First Street, a company which has developed a truly unique climate forecasting models, enables us to capture the increasing demand for physical risk and broader climate solutions across a wider range of client segments and use cases.

Upon the close of the acquisition in Q3, we would expect First Street to add about $10 million of subscription run rate to the SNC reporting segment. Between the significant emerging opportunities and the pressure on parts of the sustainability franchise, we expect recurring net new sales to be roughly 0 to slightly negative for the combined sustainability and climate reporting segment across the next 2 quarters. As always, we remain intensely focused on driving strong capital returns to shareholders, and we will continue driving value creation through capital allocation, as we have done year-to-date between our disciplined repurchases and acquisitions.

On expense guidance, we've seen strong AUM growth within investment products linked to MSCI indexes. These AUM levels have been higher than the assumption we noted last quarter. When we released earnings in April, we indicated that we would be towards the high end of the expense guidance ranges based on the assumption of relatively flat markets in Q2. Given the strong top line momentum and very attractive opportunities, we've been investing in key growth areas.

Additionally, there are a few notable factors driving the increased expense guidance range. Firstly, the impact of the recent acquisitions with the largest impact expected from First Street. Secondly, performance stock-based comp and bonus accruals related to the significant increase in AUM and products linked to MSCI indexes. The adjustment to the D&A guidance is driven by the First Street acquisition and the increase in the interest expense is driven by the higher revolver balances related to the First Street acquisition and recent share repurchases. Importantly, we have the levers to flex investments up and expenses down based on the environment and business performance, which allows us to consistently deliver strong results.

We remain well positioned and committed to delivering attractive profitability growth in all environments while investing for the long term. Overall, I'm incredibly excited by our growing momentum and a strong pipeline across the business. We are only just starting to see the benefits of the new and enhanced solutions that we've recently introduced and which are adding to our momentum. We look forward to keeping you posted on our progress.

And with that, operator, please open the line for questions.

[Operator Instructions]

Our first question comes from the line of Manav Patnaik with Barclays.

Henry, I guess, in your commentary, you talked about a lot of record new sales and categories and so forth. So just broadly, in terms of the environment for subscription sales, like looking forward, how would you characterize the momentum there versus maybe the numbers this quarter, I guess, fell a little short of expectations. Just curious on anything seasonal or any other characteristics you would call out?

We are pretty bullish on our outlook and you know me well, Manav, that I speak my mind and I basically tell exactly what I believe. And we have introduced a very large number of new products, 80-plus in the last 2 quarters compared to 40 plus in all of '24. Many of those new products are just beginning to show traction in sales because in our business, it takes time. It's an institutional budget, it's an institutional setting. So it takes time to go showcase it, discuss it, go through the use cases, go through the approval processes in our clients, et cetera.

So that is why I have -- Dan and I have made the specific comments a few times in our remarks about a very good pipeline in the next few quarters. I think we need to look at this quarter in the context of the progression that we have seen in the last few quarters, starting mid last year, and I think we had 3 quarters of outperformance relative to consensus. And the feeling by us that our prospects and the pipeline are pretty good. And therefore, 1 quarter in a process like ours of reigniting much higher growth in the run rate, we're selling what we got and also with a lot of new products at launch, I think we need to be cognizant that there will be more variability quarter-by-quarter because many of the new products we're launching have high ticket items, high value adding. So they may -- if they fall in 1 line versus another line of the day, at the end of the quarter, then we flip from one place to another.

Lastly, Manav, what I would say is we're very aggressive risk takers but we're a very prudent financial manager -- prudent financial management. The reason why we are indicating a higher expense guidance is not because things are being forced upon us is because we voluntarily feel that we will want to invest more in the business because we remain more positive than we have in the past. Alvise Munari, one of our key senior managers was telling us this morning is if we have the pipeline that we have to -- if we have had the pipeline that we have today, last year, we have felt a lot better, right, meaning it's -- a lot of things have changed. And of course, the overall environment is pretty positive among hedge funds and traders and given the active managers, I think we are making more progress than in the last few years because we're putting in new products.

Our next question comes from the line of Toni Kaplan with Morgan Stanley.

I wanted to follow up, Henry, on you just mentioned maybe higher volatility because of the higher ticket price products, higher-priced products. I was wondering if you could maybe talk about your having really good success selling to hedge fund clients. You mentioned the tripling of net new sales there. Does that inherently lead to revenue volatility in the future? I know right now, it seems like that's not an issue, but does that lead to volatility? And then maybe also -- like are you getting traction and adoption on selling data through MCP and does that lead to increased pricing this year, but then when you lap it in the future, does that sort of add some volatility as well?

Toni, I believe that there will be some, not a lot, but some volatility quarter-by-quarter as we ramp up growth. But I don't think that, that volatility will necessarily come from traders and hedge funds. Historically, when you come back quite a few years, there was a meaningful amount of volatility in that segment. And a lot of it was because there was a long tail of hedge funds that we were selling into, which would disappear or I go out of business or they would cancel.

Our strategy today is much more focused on the largest hedge funds that are multi-strategy, much more stable than has been in the past. So that is one factor that I don't think will lead to volatility. The other strategic factors that I would want to mention is, for a very long period of time, we had MSCI in our index franchise, we're very focused on the assets, the AUM levels of our clients our price increases with the active managers were kind of correlated to that, our solutions were correlated to that. And of course, the ASPs were highly correlated to to the level of assets. What we have discovered in the last few years that there is a large trading and liquidity ecosystem around the AUM, which we were not strategically focused on as much. And that's what we've started to do in the last year or so, and we have started launching new products and the like.

So I think that, that is a secular and consistent source of profitability of sales, of course, but profitability for us, and it's not like a yoyo, it doesn't go up and down. It's very secular, very structural.

Our next question comes from the line of Ashish Sabadra with RBC Capital Markets.

I wanted to drill down further on the analytics front. Particularly, you talked about really strong demand for factor content and factor solutions, but if you look at the subscription sales growth there, that was a bit soft. So I was just wondering any particular puts or takes that you would call out? Is it mostly around tougher comps? And how do we think about the pipeline and analytics going forward?

It's all lumpiness. The pipeline going into the second half of the year is pretty strong in analytics. And therefore, I would really advise you not to focus too much attention in this quarter's softness, so to speak, in the analytics results because it's very, very largely lumpiness from one quarter to the next.

Our next question comes from the line of Alex Kramm with UBS.

Hopefully, this is not a repeat, my phone just dropped. But I wanted to come back to the index sales, in particular from hedge funds because you did point out strong demand, and I think this was mentioned again just now in terms of the multi-managers, but there's obviously been a bunch of articles around how much money some of these firms are minting in terms of index arbitrage strategies, et cetera. So just wondering, do you think there's a large TAM for this? Do you think there's a lot of firms that you're talking to that want to get bigger in that space? Because clearly, there's money to be made? Or do you think it's a very concentrated group of folks that you can sell to here? And then hopefully, at some point, do you meet that demand, but maybe it's finite.

Alex, I think it's both. Definitely both as I was saying, probably when your phone dropped. The very strategic sort of breakthrough that we have had in the last kind of 12, 18 months of MSCI is that we used to sell to the traders and hedge funds as a derivative almost like we would take the products that we will sell to the active managers and sell it to them. And we started recognizing that in addition to the very large AUM levels of active and passive managed AUM linked to our indices. There is a very large ecosystem around that. trading ecosystem, liquidity ecosystem around that, that needs lubrication that needs products, data products and models and all of that to make it flow better, and we're the ones that can provide that because we help create that AUM levels. So I think the large hedge funds, we're definitely getting paid too little for the index arbitrage, right? [indiscernible] For sure. And there are a number of other hedge funds that are obviously wanting to get into that, especially given the recent good news about the profitability there.

But there are a lot of other venues for growth in terms of custom index. One of the things we've been highlighting to our hedge fund clients is they are focused very much on the market cap index arbitrage, but 30-plus percent of the AUM of the ETFs linked to MSCI indices are not in market cap. They are factors and ESG and climate and many of them are more customized.

So we're creating those data sets for them to do to the index arbitrage. Now remember, the index arbitrage also helps the active managers and passive manager, particularly [indiscernible] managers because somebody's got to supply the shares in that 1 last hour of trading in the quarter when people are rebalancing. And the people that do that are the hedge funds and the broker dealers. So there is a big ecosystem that we're just beginning to scratch the surface area.

Our next question comes from the line of Owen Lau with Clear Street.

Could you please add more color on the drivers of the fee compression for the asset-based fee in the last 2 quarters. The drop was quite meaningful for 2 quarters compared to last year. How much of that was because of your kind of like the tier pricing structure? And how much of it is driven by competitive dynamics? And how should we think about this fee rate going forward?

Sure, sure. Yes. So Owen, first and foremost, it is important to keep in mind that our primary focus is on driving overall run rate growth and revenue growth and maximizing the AUM capture with our ETF partners. And you've seen tremendous success on that front with nearly $1 trillion of AUM growth and 30% growth in ETF run rate over the last year, 25% overall growth in asset-based fee run rate and so that is our predominant focus. As we commented on with the year-end earnings, around the new BlackRock agreement, the extension of the BlackRock agreement. There was a change to the floors on certain products, which caused the drop in the first quarter of basis points.

When you look at the second quarter, it was predominantly driven by tremendous asset growth and mix shift. And so we saw significant growth in AUM skewed towards developed markets outside the U.S. and all country products where we tend to have a wider range of pricing schedules, particularly relative to emerging market exposure. Correspondingly, you saw far less cash flows in emerging markets in the second quarter relative to what we've seen in the past year recently. And so there were a number of dynamics at play. In this case, it was heavily mixshift driven. I do want to highlight, and we mentioned this at year-end, we do now have lower floors on certain large products and we've got a somewhat dynamic framework built around the pricing.

So the overall basis points are going to be dynamic and a function of how much growth we see and where we see that growth. And if you do see significant growth in lower fee products, you can see a higher contribution from mix shift as we saw in the second quarter here. The opposite can be true as well, where when you see a higher contribution from the higher fee products. You can see stability or even increases in the basis points. So it really is path-dependent here, but overall, our focus is on driving overall run rate growth and we continue to be very bullish about the opportunity here. And even over the last few weeks in the third quarter, we've continued to see exceptional cash flows in the ETFs linked to our indexes. And so continue to believe there's a long trajectory of upward movement there.

Our next question comes from the line of Alex Hess with JPMorgan.

Could you briefly refresh us how much -- what is your AUM level to end the quarter in non-ETF products? And then shifting to the active ETF discussion. I know you guys threw out some points there. But just maybe give us an update on how active ETF penetration is going. Should we expect more attach of subscription products in the back half of the year for nascent active ETFs. Any sort of dynamics about how that should flow through your P&L in the back half of the year and just the momentum in that business would be really helpful.

Sure. So the non-ETF passive AUM is around $5 trillion as of June 30. It continues to be an area where we see tremendous growth across a number of dimensions. The revenue growth can deviate from ETF growth because of a number of factors, including different AUM growth dynamics, less impact from inflows, contract adjustments through ups true-downs in certain cases, we can have mandates that shift their assets, which can cause impact to run rate and revenue, which is why you've seen some lower growth in non-ETF passive relative to the ETF growth, but we do expect this to continue to be an attractive longer-term growth opportunity for us.

On the active ETF front, this is an exciting area for us. As you know, we've got a notable presence as a benchmark provider to many of the -- actually, most of the managers that are launching active ETFs, and we are increasingly having dialogues with them about how we can help them beyond just being the benchmark and play an integral role in the active portfolio construction through using our content sets, our tools, our analytics.

And so we have started to get traction there. So we actually recently launched our active financial product license, which is a specific license to an active ETF manager where they have the ability to use our content as a key input into the active management of their strategies. And so we have had some wins on that front in the second quarter, and we are in active dialogues with many organizations to do more for them on that front. So this is something that's benefiting us both on the subscription side and we believe over time should help play a role on the asset-based fee side of the equation as well.

Our next question comes from the line of Kelsey Zhu with Autonomous.

Analytics margin was a bit softer than expected this quarter. Could you maybe talk about the main drivers there? And how we should think about the margin trajectory in the second half of the year?

Yes. As you know, firstly, I would say we don't focus heavily on the margin in any specific segment or even in a quarter. Our overall goal is allocating our investment dollars and our resources towards the highest returning areas. So I wouldn't read too much into one quarter's margin or expense growth just to provide a bit more color on analytics expenses. I would highlight that a year ago in the second quarter, we had a sizable contingent consideration reversal associated with the contingent consideration on the Fabric acquisition. That skewed a little bit the year-over-year expense comparison and ultimately, the margin comparison.

We did also have, as I mentioned in the prepared remarks, we had elevated comp accruals and performance stock expense impacts, a chunk of those end up hitting analytics. And beyond that, there are factors like FX and capitalization in any given quarter that can cause the margin to swing around. But within analytics, as Henry alluded to, we continue to see very attractive opportunities, we continue to invest behind areas like or factor franchise areas like our total portfolio solutions integrating our private asset capabilities. But there are parts of the analytics where we are much more measured on our investments. But overall, as I said, I wouldn't focus too much on the margin or expense growth in any one quarter.

Our next question comes from the line of Craig Huber with Huber Research Partners.

I want to focus on all other private assets segment. What do you guys think these change here to sort of get out of this. You have about 8% subscription run rate growth this last quarter, yes, that's an acceleration from recent quarters. Although it's not strong as I think you think the potential is long term or what it used to grow historically for some quarters. What needs to change in the marketplace? Is it more the product? Is it the sales effort and sales team size or some of the change in the marketplace? Is it an education to the marketplace? What do you think is a change to accelerate that even further?

So Craig, in some much higher growth rate and all of the above. We're just getting started on the acceleration of private assets. And we took control of Burgiss on 3-plus years ago. It took us maybe 1.5 years to make sure that we were totally comfortable with the data sets, with the collection processes, with the existing client base and all of that. And then it took another year so to change the management team of the business. These kinds of people are not easy to find. So over the last, say, 18 months, we put a new management team and with, let's say, half a dozen to a dozen senior leaders there. We started innovating significantly launching a lot of new products. And all of that, at the moment, it's only beginning to show -- only beginning to show in the growth rate of what we call PCS.

On real estate, I think that the approach we have been taking before, which was not the right one was we had a management team there and it was basically focused on all places, all things and all that. So we've brought in a great new leader to that space about maybe 3, 4 months ago. We're beginning to show the results of that to revamp the strategy. Real estate is a huge asset class, and there are a lot of subsegments of real estate, some of which are growing pretty fast, like private debt into real estate and infrastructure and some of which are challenged like [indiscernible] City office space, right? So it's a question of picking your spots and creating new products for that. So overall, we feel that the growth rate, so in saying all of the above is new products, new management, new management team, expansion into new client segments.

So for example, in PCS, the older business, we were very much focused on the institutional LP, you saw our announcement on -- with UBS on focusing on the wealth LP. One of the biggest contributions we can make is creating transparency and valuations and private asset funds for the wealth segment, the wealth channel, that will significantly increase the allocations in wealth, and we will do that starting with our lead client, UBS, and talking to -- all the talking and subscribing all the big wealth managers in the world. So that's a significant opportunity. And then we have also taken significant steps of creating products and penetrating the GPs in which our run rate for private assets and GPs is extremely small compared to the potential that exists there, which is very, very large.

Our next question comes from the line of Faiza Alwy with Deutsche Bank.

I wanted to ask about new product traction. I know historically, you've given us some metrics around the percentage contribution from new products. And I was hoping if you could get some metrics like that. But I guess more broadly, I'm trying to understand the new product traction from maybe your nonhedge fund trading ecosystem. And just trying to disaggregate sort of how much of your growth is really being driven by, again, that hedge fund ecosystem versus incremental new products?

So let me answer the second part, and then Andy will give you the second -- the first part, which is the more quantitative answer. As you know, every quarter, we try to focus attention on specific area so that we don't diffuse in all effort, right? So this quarter, obviously, we've been focused on traders and hedge funds especially index analytics products in order for you to see the potential of that. But there is a very large potential that -- on index across the whole spectrum. I mean we're doing a lot of -- we're ramping up significantly the custom index factory for institutional investors that want customized indices or portfolios and the like. So obviously, we're customizing this for EPS and all of that. So that's an area that we are only beginning to see the fruits of the expansion in custom indices.

On analytics, we've talked a lot about AI in analytics. We've been very successful. We are pushing pretty hard the total portfolio solutions capabilities with the PPA approach, the total portfolio approach that the Canadians have allocated, a lot of pension funds are coming to us and discussing what of the ways that our infrastructure, our models and our data and our technology can help them achieve that PPA approach to investing for pension funds and [indiscernible] funds.

So that we're only beginning to see traction there. It takes time, as I said. And on private capital solutions and real estate solutions will launch a lot of new products that have not yet stated contributing because it's early. I mean the launching of these new products have been in the last 6 to 9 months. So it's just beginning -- we're beginning to obviously discuss with our clients to do testing, do a lot of trials and it will help the user convince their management and they should spend a lot more on this, et cetera. it's very early days on that for both what we call PCS and what we call real estate [indiscernible].

Faiza, just to dimension it, when we look at the contribution to new sales from new products in the first half of this year, it's up around 40% compared to a year ago. And so we have seen a bigger and bigger contribution from new products. As Henry alluded to and you're asking about the area we've seen the most impact is with the traders and hedge funds scenario where there is generally a shorter sales cycle and path to monetization but we are seeing traction across a broader range of index areas, particularly custom indexes as well as on the private asset front, we are seeing some good traction and there are a whole host of really impactful new solutions that we are just -- have just rolled out recently and are coming out with in the near future across both private assets and index as well as within analytics.

So things like -- we've talked about before, basket build or signal library advanced factor insights. These are areas where it's very fertile new product introduction. They do oftentimes have a longer sales cycle, as Henry said earlier, but these are areas where we're very encouraged and bullish about the opportunity set on the impact of new products moving forward here.

Our next question comes from the line of Scott Wurtzel with Wolfe Research.

I just want to ask a more high-level question. We have seen this elevated level of subscription run rate growth and traction from the hedge funds and the traders. I'm just wondering if you can maybe share your thoughts on what what inning you believe we are in sort of the kind of demand and product uptake cycle with these 2 end markets and if and how long we could potentially see this elevated level of growth for?

In 9 inning baseball game, the first 2, 3 innings would be my guess. Now I can translate that into 90 minutes of soccer, but I won't do that. You can do it [indiscernible] right. But we're very -- on that segment, we're very bullish, but it's not the only segment we're very bullish. We're very bullish on wealth managers as it relates to private assets. As I said, we're only getting started with the UBS announcement, of course, which is not in the numbers, by the way. The announcement is just the agreement -- the sort of term sheet agreement to proceed, which we thought it was important to publicize so that we can get traction with other wealth managers in the world. So we feel very good about that. We feel very good about the custom index ecosystem. We feel very good about analytics of accelerating the growth rate of analytics gradually.

Nothing comes suddenly and the like. We feel very good about physical risk in climate, we -- what ESG and transition risk and then physical risk did to us with a major sort of strategic breakthrough what all these things are, are nontraditional -- nontraditional sources of risk and return. So we started focusing on that because they have significant effects on portfolios, tariffs, energy supplies, energy dependence, energy transition, obviously, AI impact on companies, other supply chain impacts and the like. Our client base is clamoring for data sets and models that help them understand. So for example, with the closure of the Strait of Hormuz, clients have come to us and say, can you get us data set to understand the electric utilities in East Asia that depend on gas coming from Qatar or oil coming from Kuwait and therefore, try to assess the risk and the opportunity associated with the shares of those companies or the depth of those companies.

So of course, one of the highest products in demand right now is can we use a ranking of companies that are going to have a good positive impact from AI and the companies that are going to have a negative impact on AI. Well, the first thing that I told them is MSCI is in the category of very positive impact from AI. But they're looking for the broader sets across all securities.

So we're very busy at work extremely busy trying to do that. So I mean, look, I think that one other thing that I would say is that we -- we try not to have company speak or in my case, CEO speak. We tried to tell you like it is, like we see. I stood here almost a year ago exactly and telling you things were not looking that great because we haven't launched a lot of new products, the active management segment was a little more challenged, and we were not in a great trajectory in sustainability. But we have taken a lot of big steps.

Well, those big steps began to show the way in the third quarter, in the fourth quarter and in the first quarter of this year, and I'm, therefore, telling you the opposite right now. The opposite is that we see a big trajectory here. And I know and respect people that have a different view and and they want to sell their shares. And that's capitalism and free markets and listed company for Randy. But given our conviction and our franchise and the growth prospects that we see, we're prepared to put a bid on the other side of that rate.

Next question comes from the line of Surinder Singh with Jefferies.

For the Sustainability segment regarding the challenges that you're seeing, is this something that we can get through mostly this year? Or is this something that you're going to have to digest maybe over a longer period of time? And then maybe related to that, can Europe and maybe the rest of the world just continue to offset here? Or how should we think about the longer-term dynamics?

Well, I used to think that it was going to be like a couple of year process. Overreaction is not panning out to be that. I think the -- we're in a protractive cyclical downturn on the use of sustainability, but I want to emphasize, cyclical, not secular. I think sooner or later, there will be more demand for these factors that create opportunities and risk in portfolios, but it's only logical. I mean think about -- let us think about this. Who is going to say that in the future, governance is going to be less important. Who is going to think that in the future environmental matters are going to be less important. Who is going think that in the future, social issues where most developed market economies in the world, their local -- their local white population is declining and they need to bring peoples of color and people of all the religions in order to create economic growth and the adaptability of companies to a social system of multicultural society needs to be taken into account and the return of security. So I think we just -- we're seeing another reaction, which is prolonged and protracted. I don't know how long it will take, but it will take long. And right now, for us, it's a consolidation play. We are consolidating -- our clients are consolidating to us because we're the committed player, we're the one putting some investment, we're the one servicing them. So our market share is increasing in this space, in some cases, rapidly. And we're going to be the last big entity standing when this all settle in this space. and benefit from the upswing when it comes.

The other part of this, as I said before, is sustainability of the old ESG terminology open our eyes to climate initially transition and then physical and we opened our eyes to this whole field of emerging risks. Most of what MSCI has done as help clients understand traditional sources of risk and return, market risk, credit risk, in some cases, operational risk, whether it's factor risk or stress testing risk or all of that. And what we have begun to realize is that the world is changing fast and therefore, there are nontraditional and emerging sources of risk and return that need to be captured into portfolios, and we are the player to help them do that.

Our next question comes from the line of Curtis Nagle with Bank of America.

Great. Maybe just a quick one on the cash flow. So EBIT expenses, Op expenses is up a little bit, but you did raise the free cash flow guide. So just wondering, I guess, what the offsetting stronger conversion is related to?

Yes. So I mean it's driven by a pickup in collections. So we've seen really good traction across the business, as you know, some good top line momentum, and we've seen strong collection activity. That is somewhat offset by higher cash taxes some higher comp-related expenses as we've talked about with the expense guide. But overall, we're seeing strong business momentum, and that's trickling through to free cash flow. As you know, free cash flow can be a bit lumpy because of items like tax, timing of expenses and collections. But overall, we see good momentum and continue to be confident about driving attractive trajectory of both free cash flow growth and free cash flow conversion and free cash flow per share are all things that we're confident in.

Our next question comes from the line of Jason Haas with Wells Fargo.

This is Keegan on for Jason. I've got another one on the traction you're seeing with hedge funds has there been any step change in the underlying demand? Or would you categorize all of this acceleration is coming from your new product developments. And what I'm really trying to understand is you mentioned that your product development in 2026 has already doubled that of 2024, but you're only starting to see the benefits. So should we expect this to continue to accelerate as you continue to benefit from the accelerating new products on a lag?

So the impact from new products, we expect to continue to grow, as Henry alluded to earlier, specifically within the hedge fund and trader community, that's the area where we've actually seen probably the most notable impact from new products so far. Those are areas where there is oftentimes a quicker path to monetization and shorter sales cycles. But as Henry alluded to earlier, we're in early innings there. And so these organizations are both growing the areas where they are growing and accelerating, we can help them, which is index rebalance strategies, systematic, more systematic strategies, things like basket trades understanding factors and signals in more detail coming up with custom factors. These are all areas where we're just releasing new capabilities and plan to release new capabilities in coming quarters. So as Henry alluded to, we've got a long way to go. But hedge funds and [indiscernible] is probably the area where we've already seen the most notable impact from new products. I think the comments generally were across many other areas as well where where there's longer sales cycles and many of the products that we've released, we should be monetizing going forward here, but haven't seen as big of an impact to this point.

Our next question comes from the line of George Tong with Goldman Sachs.

You mentioned asset managers grew 6% in subscription run rate this quarter. Can you elaborate on the demand environment among active managers and whether you're seeing any catalysts that could drive an acceleration in growth?

Yes, George. I mean I think there is not a huge amount that has changed in active managers. Obviously, their AUM levels have risen, but the flows are still muted. And with indices like ours, of course, right, are performing well because of concentration in countries like the U.S. or concentrations in technologies like oversea technology in emerging markets and things like that, they will tend to underperform and have more pressure. So not a huge amount, it's stable. It's a stable kind of client base, but it's not a huge amount of change. I think the approach that we have taken is that this client segment, which we know very well needs our help in transforming themselves. And that is where we're extremely focused on. These are helping activity [indiscernible] 80-plus percent of the active ETFs are actually quantitative. So I would not quite. I would say systematic type of ETF as opposed to stop picking ETF. So we have a lot to add there for them and help them with that. We are -- a lot of them are generally going into parts of the private asset space like growth equity in private or private credit and the like, and we're helping them there as well.

A lot of them are trying to penetrate the wealth channel in addition to the institutional channel. So we have a lot of sales enablement tools there, et cetera. So I think you're going to see a gradual increase in the growth rate on this client segment because of the new strategies we're putting into place.

Our next question comes from the line of David Motemaden with Evercore ISI.

So last quarter, you guys were talking about some of the clients -- some of your clients wanting to license more content through AI-enabled deliveries. So I'm wondering three months later, how those conversations are progressing? Are you seeing any signs of monetization of that content license -- licensing. And is that -- is any of that showing up here in the run rate yet? Or is that here coming here in the next few quarters? Or how do you think about the progression of that?

Yes, yes. So it is showing up. It's little today. We do expect this to be a nice tailwind for us. And so we actually very recently signed our first training license. So this has actually given a client the right to train a model using certain content of ours. We think that's something and we see the demand across a wider range of clients that want to do the same thing, and that can be very attractive for us even beyond the training needs. We know, as Henry alluded to, our clients are becoming more quantitative. They are leaning on AI-driven tools and want broader access to more content sets across broader parts of their organizations. And so that piece has been fueling some of the growth across numerous client segments and fueling some of the demand for more content. But in both cases, we're early in that journey. Those AI-driven investment processes are at a formative stage and we can play a critical role in helping our clients develop those and give them the key inputs that need to be more more risk-aware systematic, thoughtful and clear about what they're doing to create better outcomes. And so it's an area we are excited about, but it's been a relatively small contributor to this point.

We have a follow-up question from the line of Alex Hess with JPMorgan.

Just real quick. Can you give any color on pricing dynamics year-to-date and maybe what you expect prospectively, just to round out the picture on that net new.

Yes, sure, Alex. So I would say, overall, the contribution from price increases to new recurring sales has been relatively stable for us. It fluctuates a bit up and down in different parts of the business, different client segments, but the overall contribution has been pretty consistent with what we've seen in recent quarters. I'd say the puts and takes related to things like client health, usage, innovations, and importantly, we are taking a long-term view with our clients.

And so in many areas where we could increase price more, we want to be a constructive partner to our clients and position ourselves to do a lot more with them going forward here and the enhancements, innovations that we are making are helping add additional value to our clients as well as supporting price increase here. And so we're confident about the trajectory of price increases. We think it's going to be a strategic and sustainable part of the growth algorithm for us.

But overall, it's been pretty stable, and we're being pretty measured around it, although in some areas where we are dramatically enhancing the value we're providing, we can use price as a mechanism to capture that value.

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Henry Fernandez for closing remarks.

Thank you, everyone, for joining us. As we described, our footprint is growing across client segments in the investment ecosystem as we accelerate innovation to position us for higher levels of growth in the future. We have a tremendous franchise and are only in the early stages of unlocking the full potential of that franchise and especially through AI. We, of course, remain intensely focused on delivering compounding growth and long-term value creation for our shareholders. We are not a company that makes a break every quarter. We're a company that would like to focus on the adding the addition of every single quarter over the year and over the years in order to create compounding growth year in, year out, year in, year out. In the short term, our sales pipeline seems strong, in terms of the number of opportunities, including some large potential deals that could benefit also in the second half of the year. We are very excited about all the opportunities in front of us, and we're laser-focused on capitalizing them. And again, thank you for joining us. And obviously, please reach out to our team in case you have other questions or comments. And we keep -- we look forward to keeping you posted on the tremendous progress we're making on the transformation of MSCI into a higher-growth company.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Good morning, everyone. I'm excited to welcome you to today's discussion about our Private Asset business. I'm Jeremy Ulan, Head of Investor Relations and Treasurer here.

Before we jump in, I just want to read our usual disclaimer. Today's discussion may contain forward-looking statements. These statements are based on current expectations, involve risks and uncertainties, and our actual results may differ materially from what we discuss. Please review our filings with the SEC for more details. Also, you'll see on the website that we posted a presentation. It is not something we're going to walk through, but it is supplemental, and you can review it at your own pace.

Jumping in here, I'm pleased to be joined today by Luke Flemmer, our Head of Private Assets, as well as Alex Kramm from UBS, who, I think, everyone knows. He will help us moderate the discussion today.

So let me now pass the microphone to Alex.

The virtual microphone, I guess. All right. Well, thanks for having me, everyone. Luke, thanks for doing this. Maybe just given that a lot of people probably don't know you that well, haven't met you, why don't we just start there? You joined MSCI 18 months ago, but you've had an interesting career before that. So can you just give us some more detail about you, your background and why you were excited to join MSCI in that particular role that you have now?

Yes, absolutely, and great to be here. Alex, thanks for your time today. So my background has always been around fintech and data. I started -- co-founded a firm in the early 2000s called Lab49, which was a technology consultancy really working a lot on electronification of Wall Street. So worked on a lot of fixed income systems and really at kind of a ringside seat to the transition of our fixed income from being a voice-brokered white-shoe business to being super low latency, central limit order book world that we know today. So got to experience a lot of technological and data change in the 2000s. Sold that business in 2015. I worked at the ION Group for a few years post that acquisition, working in capital markets, data and software.

And then I went to Goldman Sachs. And I got offered a very interesting role at Goldman, to run digital strategy for the alternatives business. So Goldman was really focused at that point on consolidating their private asset businesses, moving them off balance sheet and really creating a third-party sort of multi-strategy manager within that platform, which they've done a terrific job of. So I spent about 4 years at Goldman working on the target operating model design and sort of digital infrastructure of how to do fundraising, investing and sort of portfolio management at scale. So learned a lot there.

And then was approached by MSCI. I was very excited to come into this role. I was excited to be back running P&L again. And I've known MSCI for a long time. I think it's a terrific company. And so to be on an entrepreneurial platform, building data and tech for alts at global scale just seemed like a terrific opportunity.

All right. Fantastic. So thanks for that background. And I think there's going to be a lot to unpack here over the next 35, 45 minutes. The way I want to do this as we talk about the private asset business, I'm going to start the discussion about -- with the current state of your business, then maybe talk about the big picture strategy a little bit, get into some specific opportunities and of course, AI and then maybe close with like the long-term growth outlook of the company.

So let's just jump in here with the current business. So the real assets business is the larger part of the private asset business, of the 2 parts. We'll talk about the other one next. But can you maybe just remind us what the biggest offerings are in that business today? Why growth has maybe been a little bit slower and what really needs to happen for that acceleration to come here again?

Yes, absolutely. So the real asset business is what was MSCI's original foray into private markets. So we got into real assets 15 years ago at this point and have had a strong and growing franchise in the -- global franchise in there for several years. The core offerings that we provide there, we really help investors understand fully real asset portfolio. So we help them understand the drivers of performance. We have a very rich set of global benchmarks in various markets that are well adopted. And we also help them understand the dynamics of transactions, both from a debt and equity perspective. So we really try to give both managers which are originating risk and managing risk and the asset owners that are clients of that a fulsome understanding of the dynamics of that business.

In terms of the recent market dynamics, the industry has definitely been in a little bit of a secular slump. Obviously, with the significant rate increases in 2022, that was somewhat adverse to sort of core real estate. And that, coupled with the COVID dislocation in a lot of CBDs, has really taken a while to sort of work through. And it's quite interesting, though, and I think this actually legs into where we see a lot of opportunity, which is the nature of the vehicles and the investment opportunities is actually shifting in the real assets business. So the traditional core, core-plus vehicles have been somewhat in retrenchment as a function of those drivers that I talked about.

But what we're seeing is a lot of growth in opportunistic and value-add because there's a tremendous amount of real estate, commercial real estate in particular, which is being repurposed, transitioned from commercial to residential, redesigned, et cetera, et cetera. There's a lot of opportunistic capital that's moving into those assets. And so that -- the traditional shape of our business that was heavily core, core-plus focused is shifting. And we see the 4 growth areas in opportunistic and value-add, and I can talk about some of the offerings that we brought to market there. And also crucially, we see infrastructure as a very significant growth area, which we consider part of the real assets business.

We'll definitely get into that in a bit. But similar question on the PCS business first, which is the Private Capital Solutions, which is growing faster, and I think people are more excited about. But the business came to MSCI clearly through the Burgiss acquisition in 2023, but you've also made a few acquisitions here this year, actually, recently. So again, similar question, what are the biggest offerings today? And when I think about the 16% growth that you just had in the recent quarter, is that still mostly driven by the core offerings that came with Burgiss? Or are they actually new initiatives that are also contributing already?

Yes, great question. So a couple of comments on that. Burgiss was a terrific acquisition for us. It's a fascinating business. Obviously, it has a multi-decade lineage of data, right? Burgiss was in the business of collecting private assets data, really before anyone, and collecting it at scale. And so that gives us really an unreplicable data set, and we leverage that heavily to do a lot of the work we do around pricing and modeling, and we'll talk about some of the things where we're innovating there in a minute. But that data set is a really unique asset that unlocks a lot of potential for us.

Within the Burgiss business, there were really sort of 2 key capabilities that we're doubling down on. And so I would say we're very much strengthening the base of the franchise, and that's accelerating growth. And then we're layering enhanced capabilities, new products on top of that, that are expanding it. But they're broadly aligned with the core shape of the business. And what I mean by that is, Burgiss really was in the business of doing 2 complementary things. Thing number one was a data management service. So making sense of all of the plethora of manager reporting, all of the unstructured data flowing in. I think, at last count, we process 3 million or 4 million documents a year on the platform from about 7,000 different managers. So it's really a scaled operation. We'll talk about AI a little later. Obviously, AI is a huge accelerant for us in the platform. But that data ingestion, data management, data structuring service is fundamental.

And then the second component is really the portfolio analytics, portfolio management of that private asset portfolio. Where we've really enhanced both of those offerings? On the data side, we've launched self-service data products. So that just competes with a number of the newer sort of AI-native vendors in the space, and we have some very compelling capabilities there. We've also expanded our capabilities in pre-trade and diligence, which are all driven off the same data platform. And then on the portfolio management side, we've really been leaning into total portfolio management, and we see that as a key strategy for the business.

Burgiss had acquired, actually, a business called Caissa, that came as part of Burgiss, which is a very, very strong product, and we've made significant investment in that product. It's now called Total Plan Manager, and it forms really a key dimension of our go-to-market for our entire asset owner community. And we're really innovating in that space of total portfolio, i.e., how do I have a deep and comprehensive understanding of my private assets and their characteristics, but also in the context of the total portfolio, my public equity, public fixed income exposure. And that's where we're really building on MSCI DNA to bring that whole story together. So definitely, the core is solid and growing, but there's a lot of innovation that we're driving off that.

Excellent. Thank you. All right. Then jumping into the bigger strategy. So you've described the real opportunity at MSCI as not just bringing order to the private markets in isolation, but actually, I think you just touched upon this a little bit, unifying the total portfolio. So giving investors a single view across public, private assets, strategies, geographies, et cetera. So why is this still such a big problem in 2026? And what is MSCI doing to really solve that problem?

Yes, absolutely. I mean the view that we sort of espoused in the private assets is, it's an asset class that's really grown in some ways a little faster than the infrastructure that underpins it. It's become a very material allocation in institutional investors. In some cases, it's 20%, 30%, very material. And then increasingly, there is a really a public policy in the U.S., in Europe, even in Asia, where they're encouraging wealth flows into the asset class, right? So in the U.K., we have Mansion House rules. In the U.S., obviously, we're discussing 401(k) adoption of target funds, et cetera. This is the global phenomenon, right? And so we're going to see more and more capital flowing in from a broader range of investors.

And our view is that the infrastructure is not really there to sustain that at scale. And so we need more systematic data extraction. We need taxonomy and classification. We need fit-for-purpose benchmarks, and we need a risk and performance framework that can stretch across that. And especially as you start to move into wealth exposure and individual investor exposure, you really can't get away from the total portfolio question because no fiduciary, no adviser can really recommend a material allocation to an asset class if they can't make sense of it in terms of a diversification -- cash portfolio. So we think there are huge secular tailwinds behind total portfolio.

Maybe a follow-up question because it's the same theme of private and public convergence. You just mentioned some of these large LPs already have 20% to 30% or so private assets. So maybe just going a little more into detail, what does MSCI offer to those investors in terms of the unified view of the public and private that you just talked about? And what really does the product suite look like for people if they're using MSCI for both, private and public data?

Yes. So this is really where we've been driving a strong set of integrations between the Private Assets business, with the business I look after, our traditional Index franchise, our Analytics franchise, Barra, RiskManager, et cetera, and our Sustainability and Climate franchise. And we're really unifying a significant amount of our IP to serve these institutional asset owners. And so what we're looking to do for them is really provide a sort of a layer cake of capabilities where the foundational capability is very rich data ingestion and data management and normalization. And so we do that, as I mentioned, on the private side, where we need to digitize a lot of unstructured data and make sense of it.

We do it on the public side where we have a very rich set of feeds that we bring in both on the public fixed income equity and on the liquid alternatives on the hedge funds. So we can really bring in the total portfolio from a data perspective. And we then put that on a -- and we'll talk maybe a little bit more about this, but we put it on a common taxonomy and convention. So we can classify funds and fund strategies on a uniform basis, and we can classify the underlying operating company exposure on a uniform basis. Obviously, we have GICS, very well known on the public side. We've been extending GICS on the private side for a cohesive framework.

And then once we have the -- once we pulled in the total portfolio and sort of made sense of it, now we can start to provide fit-for-purpose benchmarking, and we can actually use the classic MSCI factor model approaches to start to think about factor exposures in the total portfolio. And we've done a lot of very rigorous methodological work there to actually extend those factors so that they work in a common way across the total portfolio.

So we can help investors understand exposures, concentration, performance, cash modeling and then also scenario planning, capital markets assumptions, shocks, et cetera, that they can do uniformly across the whole portfolio. So we think it's really a very compelling and innovative product as it stands today.

So then maybe digging a little bit deeper on this theme, but then talk about the competitive landscape. Obviously, you clearly have a major brand in the public markets. But why do you think you can be competitive in the private market space? Some of those -- that you just talked about. But look, there are other very well-capitalized incumbents that are out there. They're also trying to get into the private market data analytics business basically.

Yes. It's a very reasonable question. And certainly, we're not, in any way, complacent about the competitive landscape. I think we face, as you say, well-capitalized and scaled incumbents, and we also face smaller disruptor, AI-native firms, et cetera. I kind of think of it as a bit of a competitive barbell, if you will.

We're not new to this business, as I said. We've been in the private assets business for 15 years plus at this point. So it's not a new business for us. And we've served thousands of clients in that segment and we have for many years. So we have a very established franchise. Burgiss really scaled that for us, and it brought in several thousand asset owners now that we have on the platform. So it's a scaled platform from an asset-owner perspective. And again, we're serving all of these clients already. We're integral to their workflows and process. For many of them, we're actually managing even the capital calls and distributions at scale, et cetera.

So we're very much plumbed into this ecosystem as it stands today. And we're very committed to the business. We have very strong sponsorship from the top of the house down. We're very committed to growing and winning in this business. And we think that our combination of deep private assets expertise, the ability to also then bring in sustainability and climate dimensions and start to unify the financial and the physical portfolio is extremely interesting and differentiated capability. And then as I said, the ability to do total portfolio benchmark and index at scale with high methodological precision, there are not very many firms that are positioned to do that. So I never say we have a right to win, but I think we're well positioned to win if we execute on these themes.

Good. Another theme that's been well documented, and you actually touched upon this as well, is the expansion of private markets into the wealth channel and the growth of, for example, evergreen fund structures, et cetera. So what infrastructure needs to exist for that channel to actually scale? Again, I think you touched upon this a little bit. And again, where does MSCI fit to build this out?

Yes. It's a very topical question, right? And as I'm sure you and folks on the call are aware that those fund structures have been somewhat tested recently, right, particularly in the regime of private credit. And I think these kinds of market shocks as long as they're not too destructive, right? And we seem to be weathering -- this seems to be working its way through. But they're actually good for the market because they literally stress test dimensions of it, and I think people become more thoughtful going forward.

And I'd say the 2 main dimensions of evergreens that have become more front and center of people's minds, question number one is, the portfolio construction, right, do we understand what's in these products? And in the recent case of evergreen in private credit, I think a lot of the dislocation or concern there came from, was there an overweight exposure to enterprise software, right? And it wasn't necessarily easy to understand that because classifications weren't consistent, et cetera, et cetera. So I think MSCI can really help, and we're working with a number of clients on this, bring standardization and clarity from a classification and a benchmarking perspective. So we're talking about apples and apples and oranges and oranges.

And then the second dimension was a liquidity issue, right? And you saw pretty much all of the major players breaching their redemption limits, right, and having to gate redemptions. And this essentially is a case where the liquidity design of the instrument is not really matching what investors need. And I think that -- I wouldn't be surprised if that drives some further innovation in product structure where people are like, "Maybe not all products do exactly the same thing." But in terms of where MSCI is helping, we're working very actively with clients. We have a liquidity stress test model, which is built, again, on Barra, in our factor architecture, to help managers understand much better the characteristics of funds and liquidity and communicate that to investors.

So again, in pretty much all of these thematics, the role of MSCI is to try to bring order and clarity and transparency for the growth of an orderly market. We're also doing some stuff in pricing, which maybe I'll come back to later because that's bigger than just evergreens, but it's also relevant to evergreens.

Yes. Let's do that. Last question on the kind of big-picture strategy and going back to real assets for a minute here. So the commercial real estate transaction data set that you guys have is very deep and established, maybe the deepest and most established. Feel free to chime in on that. But look, there's a lot of enthusiasm in the real estate industry about infrastructure opportunities, data centers, energy assets, et cetera. So how is MSCI positioned in that particular growing market?

Yes, absolutely. So yes, the firm that we bought a few years ago, RCA, I think, reasonable to say, it's considered sort of the gold standard for that transaction data, debt and equity transaction data, a very rich data set, very timely, huge contributor network where we gather data there. And as I said earlier, we see a lot of opportunity in commercial real estate itself. So the shift out of the core, core-plus and more into more of the opportunistic and closed-end fund structures opens up a lot of product opportunities for us there. We're bringing products to market focused in that area. We also see real estate debt as a growth area, and there's quite significant growth in that debt complex in order to fund a lot of these transitional projects.

But you're quite right, infrastructure, data centers a subset of infrastructure, but infrastructure as a broader asset class has done very well, has continued to show double-digit growth over many cycles. And data centers is just one example of that tremendous growth. We do have data center products in market. We have some deep information on data centers. We have clients that are using that to underwrite data center initiatives. And increasingly, we are, again, coordinating that with our physical risk data because data centers are a great proof point of where sort of the financial and the physical world are colliding, kind of through AI.

I think -- I actually think it's extremely interesting. Because you have issues with data center construction, you have land availability, you have local concern and resistance, you have water availability issues. And so you can't ignore the physical dimension of this infrastructure investment. And so we're really leaning into that space with a number of products, and we expect to grow our infrastructure footprint quite significantly.

We do already have a very well-established global infrastructure index. It's broadly adopted. It's one of the strongest indexes in the market. So we're not new to infrastructure, but we think there's a lot more that we can be doing in that space.

Very good. All right. Moving then to some specific topics and starting with AI, everybody's favorite topic these days.

So thanks for sending your avatar today, by the way.

I do have one. So look, MSCI's senior management has talked about how AI has helped ingest data better, I think you talked about this briefly before, speed up time to market, et cetera. But you've also, I think, launched some kind of AI-enabled products. I think there's the diligence platform, there's the Private Assets Data Platform. I'm sure some other things. So maybe can you just talk about what problems AI is now able to solve for you that you weren't able to do before for clients?

Yes, absolutely. So I'd say sort of 2 or 3 dimensions of it. So dimension #1 is just from an operational perspective, we get a huge amount of efficiency and uplift from AI, really tremendous. And that's a function of ultimately, these were manual processes, right? We used to do document ingestion in sort of emerging market locations, cost-efficient locations. Even pre-large-language-model transformation, we're already using a lot of machine learning and data science to automate those processes, but we've accelerated that dramatically over the last couple of years. And so the use of AI in those pipelines to really scale the data processing and completeness has been very significant for us. And so not only can we process more data faster and cheaper and more accurately, but we can go much deeper in the data sets, and we can extract even more information from this unstructured data than we did before. So that's a huge uplift.

The second dimension of it is we are now exposing those capabilities to clients. And so you mentioned the data platform and the diligence platform. What we're doing here is we're trying to solve an unstructured data management problem where our clients also meet those problems. So in the case of diligence, we are helping clients underwrite their investments into new funds. So we have a platform that will pull in an entire data room, the fund prospectus, all of the track record and information. It will use AI to digitize and extract all of that information, and it will then contextualize it, obviously, with the client portfolio and MSCI benchmarks, et cetera. So very rich kind of AI-enabled platform.

The data platform itself is a self-service extraction capability. So we're making -- we're allowing clients not just to have us provide the managed service, but also to bring their own documents and for us to bring order and completeness to that, and that's been a very well-received product in market.

And then the sort of third dimension is actually allowing clients to use AI to do their jobs and interact with our data. And so we have conversational interfaces embedded in most of the products at this point, so you can query interactively and interact in the product. And we also have a series of MCP plug-ins that we're making available. And so we have customers consuming those in Claude, in ChatGPT. We have one coming for Copilot soon.

So we're really trying to meet clients where they are from an AI perspective, but we have -- we're definitely leaning into AI native consumption of our data sets as well.

Since you just mentioned MCPs, yes, you made your private market data available, Claude, OpenAI, you mentioned, I didn't know about the other one. But like -- can you talk about the uptake you've seen from clients here already and then maybe also what the economic perspective is from an MSCI perspective? Like how specifically is the growing data consumption that a lot of people are expecting actually helping you? Or how is it priced?

Yes. We've seen very good uptake from MCP, a lot of enthusiasm, a lot of client adoption. We expect that to grow. I'm going to give you a 2-part answer to your question, not getting too technical. But the MCPs themselves don't actually use a lot of tokens because it really -- it's actually an API endpoint that the client is consuming the tokens to call. So the cost there is fairly managed. But we certainly are leaning into kind of agentic delivery. And in that case, we are consuming tokens on our own side.

And so we have -- without getting into exact specifics of the pricing model, but we have a model that puts appropriate kind of guardrails on token consumption so that we're managing our cost structure there. But we're not charging on a sort of per token consumption model. We're charging still more on a data licensing model for clients on that side. But it's definitely something we're thoughtful about. And obviously, those models are evolving, and we're staying close to those.

Okay. Good. Moving then on to benchmarking, if that's the right topic, maybe it's also reference data and index, can lump a lot of things into this next section. But you introduced PACS in Private Assets and GRACS, is that how you say it, for real estate as classification standards. So maybe you can talk about the adoption you've seen so far? And how do we actually measure progress in that?

Yes, absolutely. So the Private Asset Classification System (sic) [ Private Asset Classification Standard ] really focused on operating companies and debt, and then GRACS is focused on physical assets, so identifying a building or a bridge and the geocoding and all of the things associated to that. The interesting point is, these emerged out of internal data modeling that we've been doing for many years. So these standards are already embedded in our products from an asset-owner perspective. And so when asset owners go in and look at their portfolio, they're already looking at it through those lens. So we have actually strong adoption already from an asset-owner perspective.

Where we've been leaning in is with managers and custodians and other market players to adopt this as a uniform way to talk about these assets because there's a -- this goes back to my point of the infrastructure needs to scale, right, if we really want to do this efficiently at scale. And we really need to have a common language. We can't have an asset owner looking at things through one lens and then a manager using their own classification system because then we waste a huge amount of time in investor relations calls and data calls between the parties to sort of do that reconciliation, right? And we also don't have as much investor confidence if the manager -- I don't want to say managers do this, but if ex post, there can be a reclassification, right?

So in private credit, we talked about -- if you asked the industry pre the sort of Anthropic SaaSpocalypse or whatever, how much of this fund is enterprise software, they have said lots of it because enterprise software was a good thing, right? And then you have the shift in sentiment. All of a sudden, people are concerned about aspects of that segment. You can have potentially sort of ex post reclassification, and it wasn't really enterprise software. It was more like healthcare or whatever. That's not good for the market, right? That's not an orderly market. And so we think these classification systems are very compelling for managers. We're hearing from managers that they like them, they want to adopt them. We're seeing interest from custodians and other scale players that need to make sense of all of this complexity for their clients, and we think this can be a terrific tool.

So that's -- as you said, that's definitely an area where we track adoption very closely. And we see it as a flywheel product that will be very accretive to the business as we drive more adoption.

All right. And then very specifically on indices and maybe return trackers. So you've had offerings here for quite some time. So where is the, I guess, benchmark business today in terms of penetration? And what is really the path towards maybe investable private market vehicles?

Sure. Those are closely related, but separable questions. So I'll take each of them. So from a benchmark perspective, we have a broad range of private asset benchmarks in market. We have about 400 of them across real estate and private capital. That number is big because it ends up being kind of the product of region and strategy and whatever. So you end up with a lot of those. Last year, we launched frozen benchmarks, which is a methodology whereby, as new information comes in, we don't restate the benchmark. We actually freeze it at a point in time, which is -- makes it a lot more applicable for certain sort of performance benchmark use cases, et cetera. And that was very well received.

In general, again, similar to the PACS thing, and again, our benchmarks derived from PACS because in order to create a fund benchmark, we need to be able to classify the funds that are of a similar form, and that constitutes the benchmark. And similarly, on the asset level benchmarking, we need to be able to classify operating companies or loans as being of a sector so that we can again create the benchmark. We definitely see that again as a sort of a flywheel or an ecosystem driving area. And so that's something that we're really focused on. And we've been having great success with benchmark adoption.

There's been a degree of kind of evangelism in that market where, historically, a lot of people use public market benchmarks, right? They would use -- for private equity, they'd use Russell plus a spread or they'd use the Agg plus a spread, very coarse-grained benchmarks that wouldn't really fit for purpose. And so we've done a lot of work, a lot of thought leadership, a lot of client consultation. And I think clients are really starting to understand the value of private market benchmark. And so I think the -- effectively, the TAM is expanding there as more and more asset owners see the value of those benchmarks. And we're having very good success going after that market on the benchmark side.

On the investable product side, is a really interesting question, and I think lots of people are talking about it. People are trying to do it to varying degrees. I'm not telling anything you don't know, but there's a real sort of duration liquidity mismatch between underlying illiquid assets and a more liquid or investable wrapper. And I think these evergreen BDCs we were talking about in the redemption pressure is just one example of that. But we are very active in that space working with clients. We do actually have a couple of investable products already in market.

We did a product last year with Goldman Sachs, which is a private equity replication strategy. So it's essentially a synthetic replication of buyout performance that we were able to develop because we have such a deep data set and modeling capability. But effectively, what that is, is it's replicating as closely as we can, the performance of buyout with a basket of publicly traded equity. And Goldman has an ETF that expresses that because you can actually buy and sell the underlying in real time.

We have another product which builds on our capabilities in late-stage venture. And that product tracks some number of late-stage venture names, right, the SpaceX prior to IPO, Databricks, et cetera. And that's actually an interval fund structure, which is directly investable. And the manager goes and redeem and buys in market to actually track our index there.

So we are already doing investable product in market. We're doing a lot of innovation on pricing. And we think that some of the things that we're doing in pricing are going to open up new opportunities for investable products and either synthetic or direct strategies. But it's a great question, and it's definitely a super interesting area that we're very focused on.

Good. And the final one on benchmarking, and I just wanted to touch on real estate for a minute because I think most of this has been more, like you said, like venture and private equity and so forth. But you have the MSCI Market Intel. So can you just talk about what you can offer here that others really cannot, just to bring us home on that topic?

Yes, sure. 2 things. There are a lot of benchmarks out there. So having a benchmark is not a unique thing. We have a very, very deep data set. So we have a data set which goes back 30-plus years, a couple of trillion of assets in it, 30-plus countries, very, very comprehensive data set. And so the richness and completeness and depth of that data is differentiating. But we combine that with our capabilities around portfolio analytics, performance attribution, risk. So it's data, but it's data in the context of an analytical framework, which is very powerful. And so we think that offering is quite differentiated.

And again, as the market moves forward and as things become more interconnected, right, like we talked about data centers, data centers bring together -- they bring together the credit side, they bring together infrastructure, they bring together physical risk, they bring together debt, like all these things, right? And so the ability to help investors think about that whole problem set is quite differentiated. And we think the sort of Venn diagram of capabilities is quite unique for us.

Good. A few questions to kind of close it out for the day as I look at the time. So one topic we really haven't talked about that's been everywhere is private credit. You mentioned it briefly actually. Significant growth in that asset class, but then also some stress here recently, which you touched upon. So where -- or what role does MSCI really play here in helping investors understand and manage their private credit exposures? And then more specifically, I think you touched upon earlier as well, the daily pricing service you are now providing, like is that gaining traction? Where do we go with that?

Yes, sure. So we do a number of things in private credit. And again, my overall comment on that asset class would be the same as my general comment, which is, it has grown very rapidly, has scaled very rapidly. And maybe there's a need for investors to have a little bit more tools to sustain, again, the orderly growth of that market. Obviously, private credit, direct lending, in particular, serves a very important role in the economy. And as banks have retrenched from that space, obviously, nonbank lenders have really stepped in there. It continues to scale and be an important segment. But again, I think the thematic is the same, which is that asset owners are getting more demanding and more critical of understanding their exposure to these asset classes.

So the total portfolio is one dimension of that. There may be emerging concentration or multiple exposures to the same name through public debt and private credit structures. Many asset owners don't have the tools to actually be able to see that. We're able to identify that for them. We have a terms and conditions product. So for all of our asset owners, we make sense of the terms and conditions of these underlying loans and present them in a uniform and comparable way. We did a partnership with Moody's last year. So we integrate Moody's Analytics into our platforms, and we're able to provide implied ratings on the loan books, which is quite powerful.

And then as you mentioned, on the pricing side, an area where we're very focused is this timing mismatch between public and private markets. So as you know, the managers, historically, have reported quarterly. In some cases, folks are reporting monthly in some of the evergreen structures. But generally, there is a big delay between private reporting and what happens in the public markets. And this causes a lot of problems for folks, right? I think the private credit BDC issues are actually -- in a sense, they're a timing issue, right, where the last known NAV was struck at a point in time. The next one is not going to be struck for 3 months. In between, the public market does all kinds of crazy stuff, right? And I think a lot of this redemption pressure is people saying, "Gee, my prediction is the next NAV is going to gap down, right? And therefore, I should exit the position." It's not really what these products were designed for, like the liquidity, the semi-liquid feature was really just supposed to be a sort of cash release mechanism. It wasn't supposed to be an arbitrage mechanism.

And so there are a lot of reasons why investors would like to have a better sense of like where is the stuff in the intra-mark period, if you will, right? And so we've launched a couple of, I think, very compelling products, one for private equity, one for private credit, direct lending, and then we will have products for real estate and infra later this year. And what we're doing there is we're essentially doing a NAV forecast. So what we're doing is we're saying, if the manager were to mark today, right, on Thursday, where would they mark? Not going to mark for another 2 months, but where would they mark today? And we built a very powerful kind of econometric model that allows us to impute that based on a lot of different observables, including public market observables.

And so now we're able to provide clients with a view of where is the NAV today, but as imputed through that model. And we're now extending that with clients to actually provide more real-time pricing on their funds. And so we see this as a tool that can really help the industry accelerate the pace of reporting in those products that makes sense or for institutional clients, to have a more real-time view on where their portfolios are.

Interesting. Then maybe before I finish on the numbers, so second last question here. I think we talked about the biggest building blocks in the business, hopefully, but you've also launched a lot of new products over the last couple of years. So I mentioned that, and we talked about a few of them, I think. So maybe just, almost in closing, like what new initiatives are you particularly excited about that we actually haven't really touched upon yet?

Yes. I'd call out a couple. I think the acquisition of PM Insights earlier this year. We talked about Vantager, which is the due diligence AI platform we bought. We also bought a firm called PM Insights that provides real-time pricing and market information on these late-stage venture firms that I mentioned, they're a leader in that space. So that's a very interesting acquisition, and we're integrating a lot of those data capabilities into our products for our asset owner and manager clients. So I think that's -- the whole game in the private assets is how do we bridge the dimensions between public and private, right, whether that's depth of data, completeness, timeliness, et cetera. And I think that's a really interesting building block for us in the space.

The other area that I'd call out is the work that we're doing in the GP segment. We're really expanding the work that we're doing with general partners. I mentioned the liquidity stress testing tools that we're providing. But we're also doing a lot of work around secondaries investing, broader sort of portfolio management, more real-time portfolio management that the larger GPs are needing to do now given the kinds of products they have in market, and we see that as being a significant potential growth area for the business.

Good. And then maybe last one, and as I promised, finishing on the growth again. So the business, as disclosed, the segment because I think there's some revenues may be captured in other areas related to private markets. But the segment is about $300 million in run rate today. The momentum in PCS, in particular, has been very strong. I mentioned the 16% last quarter. So as we look ahead, how should we think about the growth trajectory in the business? What are the biggest 1 or 2 growth drivers investors should be focused on? And then, of course, what's the biggest risk to the outlook?

Yes. I think we feel positive on the growth outlook. I think we've been building visible momentum. We're showing the momentum in the business. And I think that the engagement with clients, coupled with, I think, some very exciting new products that we have in market and more that are coming to market, we will continue to build on that momentum. So I expect to see us continue to build there. Thematically, I think the whole area of benchmarking, classification, indexation is going to be a growth driver. And then total portfolio, I think there's a huge amount of opportunity for us in that space that we're going to be pursuing.

In terms of outlook, I'm not too concerned about the secular -- the sort of market context. The -- whether private credit is sort of in favor or out of favor on any given day, the reality is there is a huge amount of assets in this industry. People need to track them. They need to make sense of them. For the most part, we see institutional investors' long-term outlooks are flat to growth, still in private assets. So I think we feel confident on that.

I think the risks to the business are really -- we just need to win competitively, right? As you say, I think we have significant incumbent competitors, and we need to move faster with them, engage more deeply with clients, provide differentiated services. And then from an AI or disruption perspective, we just need to make sure that we stay at the cutting edge, which I think we really are doing, but that people continue to understand that MSCI is the source of truth, the source of the best quality data and insights and whether that's delivered through an agentic framework or a more traditional data feed or software application that -- what they're going to get is going to be differentiated, and that's where we're focused.

Excellent. Well, I think it's a good place to stop. So again, thank you very much for making yourself available. Jeremy, thank you for helping set it up. And if there's any follow-up questions, please reach out, and I'm sure we'll get them answered and put you in touch.

Terrific. Thanks, Alex. Enjoyed it. Appreciate it.

Thank you. Thank you, everyone for joining.

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 Wiechmann, CFO of MSCI. Thank you so much for joining us today, Andy. Really appreciate that.

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 formation data we track has definitely picked up globally and in Europe as well. And MSCI's net new sales have been beating Street expectations for the last 2 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 in performance for MSCI?

Sure. Yes. 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 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 of dimensions here. If you look at what's -- where we've seen the acceleration in growth, it's been in areas like index. So index subscription run rate growth has gone back above 10% -- so organically, 10.4% organic subscription run rate growth in 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 fill 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 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 and 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 are -- 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 the strong growth at MSCI?

Yes. So the -- 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 focus from the top down from Henry, from Alvise on continuing to fuel that new product machine for us. And AI is an exceptional accelerant. And so AI has dramatically enhanced our ability and reduce 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 there 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 developed to these -- historically developed to these new client segments, we are 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 caused 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? But yes, help us think through.

Yes. So it permeates every part of MSCI. To your point, Henry has made it a condition of employment. So every employee gets access to a wide range of AI tools, and we provide the training and the mandate that they need to be active users of these tools, and they 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 derived 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 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 cost, if you will, are lower, which allows us to invest more. So the change of -- the portion of our expenditures going to change the business are higher for us. And so that relates to your prior question about pace of product innovation, expansion into new markets. And so AI, we've definitely seen AI as a boon on that front.

But then if you look 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 -- agentified workflow, we're making it easier for them and more efficient for them to operate. And so 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 provide insights into private credit portfolio performance for end clients, helping to do advanced analytics into some of the insights we get from client position data around trade crowding. 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 we call it asset location, geospatial dataset 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 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 really AI native, if you will, that are allowing clients to build baskets on the fly or basket builder, our tool we call signal library, which allows an investor to develop a custom factor, if you will, or a custom signal around our standard factor models with a very robust governed infrastructure around the factor content and factor frameworks.

Ultimately, it's things that we are using to connect market participants. So connecting the rich information we have about client portfolios, what their strategy objectives are with those providers that want to launch over-the-counter instrument or a tradable product that can fill that need. And so AI is a godsend across many layers for us. We can't move fast enough, but it's super exciting in terms of 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.

Yes. 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, our 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 an accelerant on 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. Maybe help us think about 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 there's all of these buyback opportunities and dividends and debt prepayments. So just help us think through some of those areas.

Yes. 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 the long term here. So it is an area we spend a tremendous amount of time. 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. We -- as we always have, we will do share repurchases when we have more excess liquidity, when we see more volatility in the market and 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 point in time. And so we'll continue to be opportunistic there, and that will 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 are 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 of 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 road map that we have.

And so we've done acquisitions around things like custom index now with the Compass acquisition. We brought in the ability to calculate digital asset, commodity, derivative indexes together with our 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, is 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 a 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 financially disciplined. So it's got to 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 got to 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. So let's dive into each segment of MSCI. For the index segment, in my view, 2 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 2 years, they were mostly in the U.S. market. So how do you think about your competitive advantage over some of the U.S.-based players like S&P and NASDAQ?

Sure. Yes. 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 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 the active managers to be healthy and 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's -- we'll 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 the kind of calculation of that portfolio and index at its core is a portfolio. And so we can actually -- they need to give us the weight 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, they typically 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 the 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 yes, 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?

Yes. 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 do the emerging markets perform.

But at their core, it's a dataset, a content set that is designed for that systematic asset allocation. Here's how I want to allocate between developed markets versus emerging markets. Here's how I want to allocate large cap versus mid-cap. Here's I want to 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 of 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 ACWI, ACWI ex-U.S., 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 and 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.

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 the investment industry. So that sounds like incremental revenue opportunity instead of replacing some of them.

Correct. Yes. All else equal, 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 a 24% subscription run-rate growth, which is very impressive. 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 custom-index products?

Yes. This 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 see it in direct indexing. You see it in even managed account investing. You see it in, we call it non-ETF passive or institutional passive where an institution wants 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 is familiar with out 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 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 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 an index-linked note to ultimately help that pension fund or maybe an asset manager hedge 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 one 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 this market? Or how are you thinking about the competitive dynamics here?

Yes. There have -- 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've seen some niche players that are willing to do it at a very low fee. And so AI, yes, does it make it easier? Probably does it make it faster? Does it make it cheaper? Yes, 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're going to help them attract assets and we are going to 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 increases -- 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 index 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 around 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. We have clients trialing it right now, which gives a natural language interface for a client to very easily build a basket of securities, crudely an index, we do differentiate between them.

And that's something that we could not do with AI, allowing 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 going to bring down any of our competitive advantages or enhance the positioning of these low-cost providers out there.

Got it. That's super helpful. I guess last year at our FSC, we talked about the profitability difference between custom index products and traditional market-cap-weighted index products. This year, with now 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 would say this. I think I mentioned this last year, all else equal, a custom index generally is a lower margin for lower incremental margin. It involves sometimes more research input and more involved selling process upfront. Having said that, it's still a very high-margin product for us, and it's one where you set it. And from that point forward, it's -- 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. Yes, 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 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 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.

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?

Yes. We're not seeing AI as a pressure. Similar to other areas, we view it very much as an opportunity. Just to 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, underlying that is 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-strategy 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 the risk function, but these organizations are starting to think about incorporating factor analytics and Risk Insights into the portfolio-management process 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, will AI enable clients to do analytics more efficiently cheaper? Yes. Can they do some of the basic analytics, risk analytics, and performance analytics with AI? Probably. 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, FactSet, 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 private.

So we've got the connections into the fund admins, into the custodians, into the broker-dealers, into oftentimes their order management and accounting systems to be able to source every position that they sit on for each position, every security or every instrument that they have. And this cuts across not just securities, it's commodities, it could be natural resources, 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 scenario analysis and sensitivities. If I put my entire organization through the financial crisis, that is a very mature, transparent, well-governed process that we use to do those calculations for clients.

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 their own. And so we are viewing 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 yes, could you -- for sure, you could go in the next 2 hours, develop your own factor insights on Claude around your portfolio, but it's not going to give you the unique MSCI 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 before a regulator before a litigator and be 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 FSC, we talked about one of the major -- or one of the headwinds to Sustainability and Climate portfolio at MSCI is really this regulatory murkiness 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, we've won some big mandates to support large government organizations, institution, 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 different -- continue to be different views on how to think about materiality, how to think about impact or double materiality investing, 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 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 point.

So 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 going to 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 is 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 is a standard that will require governance, strong governance transparency, 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 Burgiss acquisition is almost 3 years ago now. I guess where are we in the process of accelerating Burgiss growth to 20%-type top-line growth? And are there any cost synergies that you want to highlight?

Yes. So as you alluded to, and I said this when we announced the acquisition of Burgiss, we believe this Burgiss 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, 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 of quarters in the PCS, which is mostly that Burgiss franchise subscription run-rate growth, and we're seeing good momentum across those dimensions of getting traction internationally, which is an underpenetrated market for Burgiss, but also a less evolved private asset market.

So we're seeing very strong growth outside the U.S. 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 10 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.

Got it. 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 Assets? Help us think through that product road map for the next 5 to 10 years?

Yes. 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 our the legacy franchises of Burgiss 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 in the 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 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 foundation, a family office, huge portions of their portfolio are in 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 into 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 in penetrating a 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 is interoperable or how that risk relates to the risk in the broader 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 they 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, the 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 what is -- why is this an uncorrelated risk? What is the value that you're bringing? Is it really just leverage an 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 also -- I had mentioned earlier the geographic opportunities for us outside the U.S. And then there's a whole host of innovations coming down the pipe from nowcasting evaluated pricing, liquid benchmarks, 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.

All righty. Good afternoon, everybody. Thank you for being here. For those of you who don't know me, my name is Manav Patnaik. I cover business and information services for Barclays. We're very pleased to kick off our post-lunch session here with MSCI, and we have Alvise Munari, who's the Chief Product Officer, also the Chief Client -- Head of Client segments, I believe. Alvise, maybe just to start, if you could just maybe give us a little bit of a background. Some of -- you're new to a lot of the people in the crowd and on the audience. So maybe just a quick bio of how long you've been at MSCI, what all you've done and so forth.

Sure. I joined MSCI close to 11 years ago after spending quite amount of time on the sell side, working in Derivatives. And I initially joined as the Head of EMEA. Then I got promoted to look after our clients globally. That was about 6 years ago. And then about 2 years ago, just started 2 years ago, I was asked to become the first Chief Product Officer in the history of MSCI. Actually, it's interesting that a company like MSCI had product heads for our different product areas, but never had a single Chief Product Officer. And then about a year ago, I was asked to develop the segment effort, which is an important transformation in how we think of the opportunity set and the go-to-market at MSCI in that we want to focus on understanding in a lot more details what clients do in the day-to-day to essentially build more useful tools.

And we realize that a dimension that is sufficiently detailed but not too detailed to become client -- individual client specific is to look at basically industry segments, active asset managers, passive asset managers, pension funds, government foundations, wealth managers, hedge funds and so on and so forth. And therefore, we do have now a fully fledged segment strategy.

Got it. Just going back to your point and you're the first Chief Product Officer at MSCI 2 years ago. What was the catalyst for that? I guess there was obviously some deceleration in your business. Was there -- what was the behind-the-scenes thoughts on that?

So I was the chief of client, I had become very vocal with Henry about 2 challenges. One, that our solutions were not built on an integrated technology stack. And so as a result, they were not easily interoperable and they were not easily interoperable for us to create further solutions and also for our clients to operate within that stack. So that was challenge number one. And of course, it was clear to me that we were leaving value on the table because of that, and we were not helping our clients as much as we could because of that. And then the second issue is that I was convinced that we had lost focus on basic product creation discipline. And we did not have a clear function to connect the quantum of product needed to fulfill our growth model with a quantum of new revenues needed from new product quarter-by-quarter. So that was not done in a deliberate disciplined systematic manner. So for those -- look, I guess, 2, 3 reasons, I said to me, okay, you've been complaining a lot, go fix it. Okay.

Well, I mean, I guess, credit to you and maybe it's not a coincidence, but I know on the last call, Henry said that MSCI has introduced more new products in 1Q '26 than they did all of last year. And we've seen some of that momentum in the numbers as well. So what are some of the key initiatives that have led to that?

Look, first of all, I want to clarify one thing. So I think -- on the earnings call, Henry might have either not been very specific or might have gotten slightly carried away. So let's say that either of the 2, what is true is that in the first quarter of 2026, we introduced roughly as many new products as in the whole of 2024, okay? And then in 2025, we launched roughly twice as many products as in 2024. And so if you do the simple arithmetic, it would follow that in 2026, we will launch twice as many products as in 2025, which will be 4x as many products in 2024. And then the reality is that we hope that by the end of the year, our exit velocity in terms of new product launches will bring us to, roughly speaking, 5x where we were in 2024. That is our aspiration for exit velocity and new product creation.

Got it. And where are all these new products coming from? What are the key areas of focus categories?

Look, very good question. So we are innovating across the board because at the end of the day, to grow, to generate new revenues, you need to basically bring to market solutions that basically add additional value, right? So everywhere, we need to innovate. Now when I took over the charge of being the first Chief Product Officer of MSCI, I said, okay, well, look, where are we going to innovate first and most aggressively in those areas where there's a combination of 2 things. One, we have done enough work to our technology stack to be able to innovate faster. And two, we understand the usability of the new product better and therefore, the time to mine is going to be quickest. And therefore, we focused on our index business.

Why? Because look, it's obviously the business that MSCI has been in the longest is the one which I would say we understand the best holistically. And we had done already a lot of work to the tech stack leading to last year, and therefore, we could innovate faster. And so that's what we did. And so therefore, I think you've seen it in the last quarterly numbers, our index revenue run rate have shown an acceleration to a large extent because of that. So it's the contribution from new products, okay? Then we focused in areas where the market demand was stronger than usual. And we also had favorable competitive positioning. So that was in the ecosystem centered around private assets. So a lot of innovation there as well. Of course, we bought Burgiss in October 2023. And we then made further smaller but very targeted and specific acquisitions more recently, which helped propel our ability to bring to market new solutions a lot faster, new powerful solutions a lot faster.

And also did leverage a franchise that MSCI already had in terms of target clients and where we're quite reputationally established, so asset owners. And so in particular, total portfolio solutions. So TPM, which we acquired through the Burgiss acquisition and then we enhanced through some of the more recent acquisitions, proved to be something we could accelerate the market impact of quite quickly, and we see that accelerating further. So look, it's a very simple number game. Endowment, foundation and single-family office space globally has been very underserved in terms of fit-for-purpose total portfolio tools.

What endowment, foundation and single-family office do is nothing other than total portfolio management. I mean, of course, they need to then understand some more specific aspects of what they do asset class by asset class, et cetera. But the most important aspect of what they do is the management of the total portfolio and the optimization of the total portfolio. So we bring a fit-for-purpose solution, which actually has everything they need in the right place with the right data because we had the private asset data, thanks to the Burgiss acquisition. We power it up with some of the traditional MSCI strength like the factual analytics and all of a sudden, you have literally a best-in-class winning solution. If you add elements of sustainability and climate, which the asset owner community still is very focused on. All of a sudden, you have something that is really unique.

Got it. To your earlier point on the technological limitations, I guess maybe a 2-part question. Was it AI that helped bridge that gap or some of these new technologies? And then what is the -- you hired a new CTO. So what is the new CTO bring to the table, I guess?

Okay. We hired a new CDO.

Okay. Sorry, yes.

We are looking for a new CTO. And so let me start with the first part of your question. So there was, on the one hand, work that we were already doing in-house, which we continue and accelerated, partly thanks to AI. We did some very successful targeted acquisitions. So Foxberry was in that domain, Vantager also in that domain, more recently, Compass, which have literally given us bolt-on capabilities that have augmented the type and quantity of products that we can build and that we can service. And then also, we focused on restarting the search engine. So those 4 things together are all necessary, and I think that's what you will see continuing. Now from the point of view of the tech stack and data stack work, I think there was a recognition that MSCI is a financial tool and services company, but these financial tools and services literally consists of data, models and technology.

The models is what we've traditionally been excellent at, so it's research. The data and the technology had not been as clear and as great of a focus as it had to be. And so Henry took the decision to say, okay, we didn't have somebody focusing on the data object and data assets, data architecture and data strategy and to have somebody really focusing on the product engineering platform and architecture side, and that's the person we're looking for. And so as soon as that happens, and I'm confident it will happen soon, you're going to have an MSCI where the management team is equally focused on all these 3 ingredients as well, of course, as our clients.

Got it. Just touching on AI again, Henry talked about how AI has been a godsend for MSCI. And so from your perspective, can you just talk about some of the different avenues of how AI is improving MSCI? I know it sounds like new product innovation, but maybe some other client adoption examples.

Sure. So AI is, of course, a rich set of tools, a rich set of powerful transformative tools that allow to do knowledge work in a substantially faster, more ambitious and more impactful manner at relatively limited cost as long as you manage it reasonably. For a knowledge company like ours, this is revolutionary. That's why Henry calls it a godsend. So first of all, the complexity and the scale of the research problems we can now tackle is literally orders of magnitude more ambitious than what it was 3 years ago. And that, I think, will -- as we get better at mastering new technologies and we also realize new and different ways that it can improve and transform what we're doing, I think this will accelerate, okay? So as a researcher, you can now have 10,000 analysts working for you that can all process data extremely fast, can all read them extremely fast, all have access to a vast amount of information that they can absorb really quickly and keep the information current. That's unprecedented, okay?

So that's -- my view is, look, literally for an IP company, it's the most transformational event. Then, of course, there is the aspect of the efficiency, speed, scale and cost with which you can build all these new objects and then run them industrially after you actually conceptualize them, right? And of course, various type of AIs are of tremendous help there. So the quality, scale and size of QA you can do using machine learning is unprecedented. Now this didn't need LLMs, but you can use LLM to run machine learning even more efficiently to do even better QA.

I mean you combine the 2, all of a sudden, you can have incredible results. So you got better research ideas. You can build them more efficiently. And then the third substantial transformation is that AI can help make it a lot easier for your clients to consume the tool, the content and the services that you produce for them. And that, I think we are just at the beginning of discovering, right? Because it's not that this is just like a flick of a switch and everybody is ready to go. Both sides need to get ready. They need to make certain changes. They need to adopt certain technological protocols, and then it will become a lot easier for this to happen.

But in some of the more recent solutions that we have launched, of course, the AI empowerment is inbuilt in the solution that we built and then the client just sees the transformation. So we launched this new service called MSCI Index AI Insights. So at the first level, this is just a way to basically quickly and precisely retrieve information about MSCI Vast Index IP array, okay? So instead of having to call somebody who then call somebody who then call somebody and get some information, you access the tool, which is available as a stand-alone application to what we call MSCI ONE, but it's also available to MCPs and APIs in both Claude and ChatGPT. And my assumption is they will be available in many other ways as well, right? And you get a lot of answers very quickly, right?

So figuring out what's going on index, figuring out why the value is this, not that, figuring out what happens with the stock or that stock very easy. However, we've done more than that. So there is a very highly trained engine that basically we spent quite a while honing that you can use to do more sophisticated reasoning. And so you can start asking the engine to do a lot of things that beforehand, you would have had literally a team of people helping you do, then calling MSCI, then giving you back the answer and then iterate and then maybe after 2 weeks, get you what you needed and now you can actually do it in a matter of minutes.

Got it. One of the buzzwords being used is MCP and a lot of companies are trying to provide stats on their partnerships, et cetera. How do you look at your current relationship with the LLMs? Like what kind of revenue model, business model are you now? And where do you think it eventually evolves into?

Yes. Look, I think we're at the very beginning of the journey, right? So as it's always the case at the beginning of a transformation, you don't know exactly how the new world will be structured. You don't know exactly what patterns, what protocols will prevail at scale versus which one will not. But I think it's a fair bet to assume that at least for the largest users of our content and services, they will want a programmatic ways to interact with it. They already do. So by the way, we've been using APIs like many of our peers, competitors and larger clients already for 10-plus years, okay? The APIs were not architectured in the way you need to have it now to make everything easily AI fungible, but the concept is not new. Now APIs plus MCP is different because basically, you're saying, okay, I'm going to provide like a universal [indiscernible] guide that tells you exactly how to use and where to find my stuff in a way that basically means that you don't have to actually spend a whole lot of time figuring out how to go via the APIs. So that's a transformation.

And then if both sides develop agentic capabilities that are permeable through the APIs, I think that's where the real transformation begins, right? And I think that's what we are at the early stages of. To be honest, right now, we're seeing more direct tangible client impact on the capabilities that we have identified and make available to them by applications than by MCP and API. So for instance, MSCI Index AI Insight, we have many, many, many more users that come on to MSCI ONE than ones that go to the core MCPs. We do have a few that go to the core MCPs. I mean a few means, probably a few hundred, but we do have many, many more through MSCI ONE. Same thing with many of our more complex tool and services. For the time being, the client basically tell us, look, if you go through your own thing, we are more comfortable. We have -- we are more sure that we're going to get the right answer.

We're going to get the right reasoning. And so for the time being, we prefer to use that. Is that going to change? Look, it depends what you're using the engine for. If it's just retrieval and then you use your own logic, then I think you're going to go to generic APIs and MCPs. If you are very large-scale players, all you're going to focus on is the retrieval bit. And I think you're going to go through that. If you not such a scale player, and so you want to benefit from the specialized purpose-built reasoning that MSCI provides, I think you're going to go to our channels. Now your point about pricing models and the evolution of the economic curve. Look, any way this is going to shape up, it's clear that it will get people to call more data, more services, more functionality, more tests, more -- various scenarios because there is the possibility to do it. And a lot of these things is useful. They are useful, right?

So people didn't use to do it because it was very complicated. So you just really ask what you couldn't figure out yourself. But as it becomes easier and easier, you're going to say, sure, why do I want an answer, which is directionally correct? I want the exact answer. I'm going to ask the question. I'm going to do it programmatically, and I can ask 1,000 questions, 100,000 questions, 1 million question, 100 million question, right? So the way I think this is going to evolve is that we're going to have a layered pricing models, whereby you're going to have access to a certain set of modules of data and functionalities depending on what you decided to pay for. There will be then a consumption layer, okay, where there'll be a basic consumption pattern included in the basic fees. You ask 10 questions a day, we're not going to charge you more money. You ask 1,000 questions a day, maybe we start think about it. You ask 50,000 questions a day, we charge more money, right? Because we'll have to support all the traffic, right?

And so there will be charges for that. Then there will be the question of whether you actually ask the engines to do bespoke analysis for you, simulate a portfolio, do a stress test, try out a different score of this type of that type, build a custom index, build a custom model, okay? And so we'll charge you by objects. So you decide to build a new custom index, we'll charge some money. You decide to basically run money of it, and there is a clear relationship on how you're going to run the money, we'll charge you ABFs like we do today, if you are somebody who's licensing an indexed to an ETF. So I think that's going to be the evolutionary curve.

Got it. You mentioned custom indices, so let's touch on that. I think historically, people interchange custom indices with self-indexing and they thought that, that would be the death of all the index providers. That never happened. You guys have grown your custom indices business in the low double-digit rate for a long time. And last quarter, it was into the 20s. So can you just tell us what's been driving the good growth? What drove the incremental growth in first quarter?

Okay. So there is, I think, a long-term trend and there is specific events. So the significant growth in growth that you saw last quarter is driven by both. So on the one hand, we do have a strong long-term trend, which I can talk about in a second. And then we also had a very substantial licensing event with a big investment house that basically decided to substantially increase the amount of IP. They license from us in that space and that helped sales. Now that did not happen in a vacuum, okay? So we see that as literally as the logical manifestation of the long-term trend. What is the long-term trend? The long-term trend is that the financial industry wants more and more portfolio recipes. Why do they want more and more portfolio recipes because like no 2 human beings, no 2 institutions have the same portfolio objectives. They have similar KPIs potentially. They have similar challenges to tackle, but no 2 of them want exactly the same portfolio object.

And of course, because it really was not possible to build a truly customized and supportable individualized portfolio solution, we didn't do it. We found certain proxies. People used to have in a few off-the-shelf model portfolio options to offer to their clients, a few versions of the same basic building blocks and now various combination of this. Now same with indices, okay? MSCI built this reputation building benchmarks. And the philosophy was a benchmark for all, okay? It's important, a benchmark for all. So basically, everybody who has essentially the same KPIs should be happy with the same benchmark, right? Because you're saying to say, okay, what's the right way of doing X, Y, Z? Well, here is, here's the benchmark that tells you exactly what is the right way to do X,Y,Z. And so if you want to understand whether you're getting the right service, not the right service, where you should go a bit more left, a bit more right, you look at the benchmark and you see how much and why you're deviating from the benchmark, okay? You say, okay, great.

So we have all figured out the ideal ways to do certain things, but let's face it, none of us is that ideal person. None of us need the stylized benchmark portfolio. We need different things. And so you say, okay, well, can index technology help me to literally formalize the expression of what I need specifically for my personalized portfolio? And the answer is, of course, it can. In fact, it's the best technology available in the world to do that, right? Because you can literally encode all the KPIs needed by the individual investor, institutional or retail into a programmatic set of steps that you can then feed to a computer and of course, propagate forever unless the KPIs need to change in which case you can adopt them. And be sure that as long as the KPIs are still the one the clients need, the investment recipe will do the job the right way, okay? And so I say, wow, why shouldn't we do that? And that's exactly what has been happening.

So the technology has progressed first slowly, then much more rapidly to support this. People have understood first slowly and then more rapidly that this can be applied in all sorts of context, by the way, including in supporting active asset management. And therefore, that's what you are seeing. You're seeing that in all context of investment and financial life, people are starting to look at this. So whether it's in the context of building model portfolio for individual wealth management clients in the context of building multi-asset class benchmark for asset owners and insurance companies, in the context of building bespoke benchmark for investment institutions that want to make sure that RPMs are doing the job really as best as they could, whether it is for the more traditional applications, ETFs, whether it is to build structured products, whether it's to build customized systematic investment recipes for pension funds or hedge funds, you can do it by an index.

Got it. Maybe just a quick follow-up. Like in the indices business, especially on the custom side, I think Foxberry, you mentioned was an acquisition you made recently acquired Compass as well. What did those 2 bring to the table? Because the impression is you can index powerhouse as well.

So as I said, MSCI built its reputation and its business on the benchmark for all era, okay? Now many components of the infrastructure that you need to support indexation services at large were natively built during the benchmark for all era. Best-in-class corporate action engine, best-in-class way to calculate, including Foxberry that have to do with free float, market structure and so on and so forth. And a whole host of other things similar to this, right? When it came to enabling very specialized custom index portfolio construction recipe, the engine has not been built for that, right? Foxberry had been built exactly for that. So that's why we bought it. So it's okay, we have the best-in-class central engine that does all these things that are needed at scale for a standardized massive index business.

We then have the calculation engine that is very robust and reliable. We need to improve the portfolio construction engine. So we bought Foxberry, we sliced it in, and that's how you actually get a massive acceleration in the custom equity index business. Now again, MSCI was built to do benchmark for all, especially in equities. especially in equities, right? So we entered the fixed income business 5 or 6 years ago. We're now growing there. It's a very attractive proposition, but let's face it. We did not have the same capabilities. And so we started working with Compass to satisfy needs from, for instance, the structured product market, where people say, "Gee, guys, you're so good at equities, especially after you bought Foxberry. But we see demand for multi-asset class stuff, okay?

We see demand for nonlinear payoffs that embed option component, futures component. And we were doing that, but we could do it only small scale. So started working with Compass. We saw that they were truly excellent at it. They have built a really impressive engine that could do this at scale with a high degree of flexibility. So all asset classes, all type of payoffs, so long short, option-based, future-based, option and future based. They also handle commodities and crypto currencies. And so we said, okay, maybe we should buy them. And so we did.

Got it. Okay. That's super helpful. So I appreciate that. Maybe let's just touch on the 2 other deals you did recently as well, Vantager and PM Insights. I believe they both fall into your private assets category where Burgiss is obviously your main assets. So what are those 2 assets? How do they fit into the plans there?

Yes. So Vantager, we bought because of the private asset business, but also because the capability they develop, we think will be really helpful for us to have and then further develop across the board. So -- what manager had developed is a highly capable, highly specialized AI-powered engine for data extraction to a model in the context of private assets documentation basically take a whole bunch of PDF, a carload and basically tell the engine to fit a specific data model you pre-created in a very dependable and competent way. So you can actually turn millions of PDF pages into very highly conceptualized structured data that you can then use in the investment process. That's the way, right? This is, of course, immediately super helpful in our private asset business, but we think it's going to be helpful across the board. Why? Well, because look, we think that the future of the investment industry, on the one hand, we will keep on being about analyzing time series but on the other hand, it will be about building very specific knowledge about individual assets.

Some of it is done by the traditional financial analyst process, which does a fantastic job. A lot of it will need to be enriched by looking for all sorts of data sources in all sorts of unstructured forms where this type of capabilities will be critical to build, okay? And so PMI, look, we got to know PMI because, remember, we still are the benchmark guys, right? So we build all the possible benchmark that one could ever think of in the equity space. We now well, we're not doing in fixed income, although in fixed income, there's already other people so we need to find ways to differentiate ourselves, which we're doing. And then we say, okay, we're going to do it across public asset classes, thanks to the acquisition of Compass. And then we say, what about the private assets, right?

And in private assets, we've indeed started to build systematically fit-for-purpose benchmarks for all asset classes, sub-asset classes, different type of cuts, different type of regions and so on and so forth. However, those objects, they have the liquidity limitation that the underlying asset has. So if you want to start bridging the gap between public asset benchmarks and private asset benchmarks, you need to try and find something in between. So PMI had developed very powerful technology based on having all sorts of agreements with industry players in the secondary market to be able to essentially estimate valuated prices. And so we built with them e-ticking venture index. That worked out quite well. So we said, okay, well, we'd like to do this more broadly. And so we say, okay, we buy them, right? And so indeed, this will accelerate our ability to build really usable, in this case, not benchmark really indices for the private asset industry.

First, on the equity side. On the credit side, we're doing it, by the way, also. We're doing it in a different way. So there'll be something hitting the news soon, hopefully, there as well. But as we heard, I don't know how many of you heard the lunch presentation from Ares, which I thought actually was really interesting. At the end of the day, what our investors are asking them is how do you get your marks? How do you get -- and look, in private credit, I believe that probably the answer that someone like Ares would give their investors may not be perfect, but would be reasonably solid. Probably we can do better because that's what we do for living, but they are reasonably solid. In the private equity space, I think there's a lot of work to be done, right? And so we aim to bring transparency to the world, make it easier to start seeing the -- and comparing the returns across all ways of holding equities and therefore, help the investor community be more effective in how they allocate capital.

Got it. Okay. We've got 5 minutes left. Let me focus on analytics. So when it comes to indices, I think consensus is, it's a benchmark, probably not disruptive by AI, private assets is evolving. But on the analytics side, can you help us appreciate what the moat there is versus all these AI solutions that could potentially threaten that?

So look, the analytics business is a vast business. So there certainly are aspects of what people do, including ourselves in analytics that are substantially more prone to AI disruption, and there are other parts of what people refer to typically as analytics that are substantially harder to disrupt, okay? So let's talk about what is easier to disrupt. So anything that has to do with workflow easy to disrupt. And even easier if the workflow is not particularly proprietary, not particularly unique, not particularly insightful into what a specific client or type of clients are doing, okay? And so somebody who is providing relatively standard risk performance attribution on liquid public assets, that's going to get disrupted, okay?

At the other end of the spectrum is where you are building proprietary risk and performance models based on 40 years plus of very granular data that has been cleansed in an extremely disciplined and pedantic but fit-for-purpose manner across a multitude of markets that you can, therefore, use to understand the structure of your portfolio exposure across the board in a basically single coherent manner that is not so easy to disrupt. Now if you then also say, okay, let's think about the index benchmarking analogy. So we built the benchmark. The benchmark essentially a standard. The standards are useful because not only they tell you what the theoretical performance of a certain object should be, but they also help you crystallize norms that are going to be useful even if you do totally free style portfolio construction, okay? Same with models.

So enter new technologies, and we can now build new models and calibrate models in a way that is customized to clients in a matter of hours, used to take us months. So all of a sudden, we can innovate a lot more in the model space as well. okay? So my view is, therefore, there's going to be the opportunity to actually extend the moat, thanks to AI as opposed to seeing the moat get eroded because of AI, okay? So I think it's a question of where you are in this spectrum. So the model capabilities are the hardest to replicate. The very generic risk and performance analysis are the easiest to disrupt. The total portfolio of services may get easier to disrupt, but there is a lot of ingredients you need to understand how to put together in a coherent, systematic and dependable manner. So I think they are a lot closer to the far end of the model side than the other end.

So I guess MSCI makes us more to the far end is that what you're saying?

Well, what I'm saying is that look, I think that there is a way to do all of this in more intelligent and more value-additive ways using AI if you understand the finance first and foremost and you understand the client. But in particular, within the model and total portfolio solutions space, I think the advantage we have is so substantial that it will be very difficult for a very smart engine to actually replace us anytime soon.

Okay. In the interest of time, one last question, 30-second answer. Everyone talks about the slow decline of the asset managers, and that requires its own fireside chat probably. But you've been growing a ton on the trading and hedge fund side. How early are we in that segment penetration process? Could that keep growing to help offset that?

Listen, I always tell people, look, -- if you look at the large-scale trading operations and whether it's the trading operations of a broker-dealer, so it's officially called a trading operation or whether it's the trading operation of a proprietary market maker, so it's called the market making operations or it is a trading operation of a large platform hedge fund, so it's called the investment desk called the pods. The point is they all do equities and fixed income. Within equities, they do idiosyncratic linear, systematic linear, nonlinear, so typically often involving one or more world-based strategies, and they do much more complex relative value, okay? Right now, we play a significant role in equity, linear systematic. So we got plenty of adjacent areas to capture. Now what do I think is going to happen, okay?

The world of investment and therefore, of trading and therefore, all of finance is converging decisively to a portfolio-centric architecture, okay? The unit of conceptual exchange will be not the individual idiosyncratic risk will be the portfolio. I mean, of course, some people need to slice and dice idiosyncratic. Of course, you do this for a living, right? But the reality is the majority of people will understand portfolio. They won't even want to touch the individual exposure, right? In fact, it's probably best for everybody that the vast majority of people never touch it, right? In that journey, you need somebody that basically offers understandable rules that everybody can agree around and therefore, communicate with. That's what MSCI aims to do across all asset classes, all form of portfolio trading, linear, non-linear, convex, non-convex around the whole globe.

Got it. All right. Cool. We're out of time there. Thank you so much, Alvise. Thank you, everyone.

Good day, ladies and gentlemen, and welcome to the MSCI First Quarter 2026 Earnings Conference Call. As a reminder, this call is being recorded. [Operator Instructions] I would like to now turn the call over to Jeremy Ulan, 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 of 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 a discussion of additional risks and uncertainties, please see the risk factors and forward-looking statements disclaimer in our most recent Form 10-K and 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 Wiechmann, 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%, adjusted EPS growth of nearly 14% and adjusted EBITDA growth of almost 19%. 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 1 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 3 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% and 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 rotation 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 costs across geographic regions, product lines, client segments and asset classes. We did well in all regions in 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.

At gross 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. And at 10.7%, and we achieved a record level of Q1 recurring sales at nearly $33 million. These results were driven mainly by our market cap indices, but we also delivered 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 share success with the 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 crawl 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 delivered recurring 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 are helping allocators streamline the due diligence and evaluation of private fund managers at scale with our private asset diligence platform.p

Our recent acquisition of Vantage 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 recurring net new subscription sales of $8.2 million at nearly 55%, reflecting large wins and renewals of our equity offerings and enterprise risk tools. This 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 had an especially strong quarter with hedge funds and traders. Among hedge funds, specifically, we boast subscription run rate growth of 17% and 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 -- these wins included a 7-figure index rebalancing deal with a top global hedge fund. In analytics, hedge funds are also licensing our crowded trade data sets to support their alpha generation. Among banks and broker-dealers, we delivered subscription run rate growth of almost 11%, along with our best ever Q1 for recurring 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% recurring net new sales growth, including notably strong growth in analytics and a retention rate of close to 96%. And 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 disadvantages. To help us lead that transformation, the [indiscernible] that joined MSCI last month as our new Chief Data Officer and Global Head of Operations. Denese came to us from Goldman Sachs, where he spent nearly 3 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 strengthen 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 in the industry.

Index organic subscription run rate growth reaccelerated to low double-digit levels at over 10%, with record Q1 recurring net new sales of $25 million up 75% 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% and 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 to 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 continue to deploy significant capital into ETF and non-ETF products linked to MSCI developed markets ex U.S. 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 outflows 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 nonrecurring 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 in the muted growth and 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 3 acquisitions had a relatively modest contribution to run rate and ongoing expenses. On guidance, we updated our full year outlook on D&A 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.

[Operator Instructions] Our first question comes from the line of Alex Kramm from UBS.

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, Index analytics.

Alex, 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 run 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 -- in the end of March and also in the first 3 weeks of April.

Our next question comes from the line of Manav Patnaik from Barclays.

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 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?

Yes. So Manav, the in our own internal discussions and analysis, we have not seen -- let me -- the operating environment and the end markets that we're serving have not changed for the last few quarters. I've not changed almost at all. A few things a little better, a few things a little worse, but they have no change. 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 2 -- in 3 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 2 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 2025. And number three, a significant acceleration in adoption of AI tools in everything we do on the lines of what I said in my prepared remarks. So those 3 areas have helped us increase our recurring 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.

And our next question comes from the line of Toni Kaplan from Morgan Stanley.

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?

Yes, Tony, the basically, every product -- every new product we're launching as 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 the importance of AI is very big in the AI ones or just the ingredients that go into the launch of the product. So pretty much that's pretty much across the board in any new product. So therefore, we have been tracking last year on the revenues associated with 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 ball board. It started in earnest in AI data -- 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 helco that we have rather than adding head 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 would be a big project that we want to getting to 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 manage and monitor by our humans in our research department and the creation of custom indices at a much faster speed than we've ever done before. We're always using AI for analytics models as well. And we just revamped the entire sustainability rating system, ESG rating systems, using AI, and that's going to be -- is in the process of being relaunched, and that's going to give us enormous productivity and scalability.

And Tony [indiscernible]

I would just add that from a year ago to now, the use of AI across our over 6,000 professionals in the company has increased dramatically. About 1.5 years ago, we made AI a condition of employment at MSCI. We've had it given tools and training and 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.

Tony, on -- this is Andy. One other point to highlight, which adds to the benefit side of the ledger from 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.

And our next question comes from the line of Owen Lau from Clear Street.

So analytics revenue was up over 10% year-over-year. And Andy, you also mentioned that you had some pretty strong nonrecurring revenue related to implementation -- could you please talk about the outlook there in specific or 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 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 a 9% growth with asset owners.

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, 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 -- 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 nonrecurring 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 index within that client segment. we do see also general environmental factors at play that drive both. And 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 different dynamics across different parts of the business. So I'd say it really depends.

And our next question comes from the line of Ashish Sabadra from RBC Capital Markets.

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?

Yes, 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 pick up 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.

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, we saw 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 a 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 ETFs and then more generally supporting indexed investing in many forms of fashion. 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.

And our next question comes from the line of Craig Huber from Huber Research Partners.

Maybe just talk a little bit further about a little bit better numbers and sustainability and climate there. I mean 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 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 because not because they have similar dynamics or supply and demand or competitive landscapes, but at least because sometimes the sales that we did where sales that were in 1 package. We were linking them into 1 package, which we are increasingly separating between the 2 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 reaccelerate, especially in physical risk. So this past quarter, we had an important win, which was Deutsche Bank, the Central Bank of -- I'm sorry, the Central Bank of Germany was Nortech 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 of 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 the 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 rand 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.

And our next question comes from the line of Alexander Hess from JPMorgan.

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 you 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.

So we're very excited about that part of our business, very excited. And the -- 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 market management they can like [indiscernible] 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 2 is it's important to also recognize that something like 70%, 80% of the active ETFs that are being launched are -- have some elements of systematic investing or index investing in them. And they're not pure play stop picking EPS like some of the mutual funds could be. So that is 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 more -- that are actively managed on that.

So we're very, very bullish about that. And then thirdly, of course, that our role in this industry on the passive side is significant, as you know. And that is -- and a lot of our clients are coming to us to help them on the activity because of our brand and the trust on our database and our indices and our methodologies in order to build this activity as business. So we're very, very hopeful that, that will be a growth area for us on the more challenging part of the active managers around the world.

And 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, as you know, is not a new sale for us. So if the client is licensed already for the module when they use the sort of 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 clients' 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 in licensing additional content sets, but we think the opportunity is much bigger going forward, as Henry alluded to, to help on both the ABS side and the subscription side.

And our next question comes from the line of Faiza Alwy from Deutsche Bank.

I wanted to ask about the strong growth that you saw in custom indexes -- and I'm curious if it's driven by like just your ability to process things faster? Or is it more a function of kind of end market demand? Just trying to understand the sustainability of the -- just the higher growth that you saw this quarter?

So basically, let's start with 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, give me the market cap of your emerging markets, you 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 nonmarket cap, which is given a portfolio or an index of all the securities -- equity securities in the world that have no volatility, high-quality high ESG ratings, low climate risk or whatever.

You can see the flavor. So that is a -- there is an investment thesis behind that, not just a market exposure and therefore, there is an incredible growth in that, in equities. 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 are 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, 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 -- it 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 or institutional for structural products for an over-counter swap and over the counter option in a stock product or a swap.

So the demand is very significant. And therefore, we've been -- as you have heard us say in the last few years, we've been ramping up the ability for us to meet that demand. And that comes in 2, 3 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 and when 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 3 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.

And our next question comes from the line of George Tong from Goldman Sachs.

This is Anna on for George. We saw very strong AUM growth of ETFs linked to MSCI indices this quarter, especially in developed market ex U.S. and emerging markets that over the period of time? And can you provide more color around the momentum behind the international inflows outside of the U.S. 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 MSCs unique exposure to international markets.

Sure, sure. Yes. 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 U.S. 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 we did okay. We did find during that period. But what you've seen over the last 18 months, so really the last 1.5 years is you have seen a rotation take place and start to take place to international equity, 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, have 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 as 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 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 1 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 the -- 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 NOR market cap investment thesis, which is the vast majority of the investment process worldwide, is being systematized. It's 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 I want to make sure you pay attention to that acquisition because it's going 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 these cost ends across the board. And that's been -- the strength of our fixed income, the fixed income the franchise linked to MSCI indices, it's been not the market cap in fixed income indices, but the known market cap, which is -- there is an ESG overlay. There is a climate overlay, there is a factor overlay, and you're seeing that growth. And lastly, what I want to reinforce what Andy was saying, which is that the 2 big ETF markets in the world are the U.S. and Europe. And our presence in Europe is $1 trillion, plus trillion out of the $2.4 trillion. 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.

And our next question comes from the line of Scott Wurtzel from Wolfe Research.

Just wanted to ask on the growth that you're seeing with hedge funds. It's been pretty impressive, I think, in this quarter and I think in the past couple of quarters as well. I'm just wondering if you can maybe contextualize like what inning we're in, and 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, 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.

In 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 an enterprise-wide partner to many of these organizations. And so we are offering things like, say, custom indexes used for structured products, over-the-counter derivatives, customer [indiscernible] strategies. We have custom index best 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.

I said 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 3 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.

Our next question comes from the line of Curt Nagle from Bank of America.

Just kind of go 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 sound like some larger concentrated deals which I alluded to the prepared remarks versus, again, the substantial increase in product velocity and execution. Yes, just any comments on that would be helpful. That's the question.

Sure. Yes, we alluded to this earlier, but we did see as Henry mentioned, we saw a notable pickup in a 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 in 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 TCS, 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, Henry alluded to that scenario where we've been heavily investing broadening our capabilities and become a partner of choice. And so 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.

And our next question comes from the line of David Motemaden from Evercore ISI.

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 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 MSCI ONE or third-party apps like Claude or ChatGPT.

Yes, sure. So consistent with our past approach, we want to make our content as easily accessible and available however clients want to get access to it. So as we alluded to, you can get access to it through the Claude MCP through MSCI ONE. We even have certain content sets of billable 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 up charges and upsales 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 1 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 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 that can lead to upcharges around, as I said, usage, but this is step 1 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 as part of their AI investment processes, those are areas where there are meaningful 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 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.

And our next question comes from the line of Jason Haas from Wells Fargo.

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, equity factor analytics and multi-asset class analytics, the period of highest interest and highest demand is when there is 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 instead of sector exposure of various credits are, what the valuations are, 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 what is it that is in the fund, what are the terms and conditions of the loans and the fund? What are the credit assessments in this partnership we have with Moody's on those funds, what is the market risk of those funds based on factors and the like. So I think that we're increasingly focused on creating valuations in 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 whether they should keep it or sell it or add to it.

And our next question comes from the line of Kelsey Zhu from Autonomous.

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 start-ups or large customers who may try to build some of these products it solves.

Very good question. So far, we haven't seen any kind of competition or intense competition from either the traditional competitors of MSCI or the app starts, the start-ups. 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 no gathering more data to accelerating the pace of model creation and methodologies and index to to do all of that. And obviously, the efficiencies that we can create are things that can help us save head 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, BarraOne, 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 long -- 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.

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 peso development and growth of new -- of our newer product lines, such as climate and PCS and sold to the traditional client base and newer client bases like GPs and banks as principles and insurance companies and other parts, market makers and other parts of that trading ecosystem.

So that ultimately, we become an even bigger long-term compounder of growth, which has always been our goal. So we're underway on that strategy. The benefit of what you're seeing and what we're doing right now is that -- this is not like growth in the periphery. This is growth in the existing big part of the product line, with the existing clients and the like, and then it's going to be highly supplemented by the newer product lines and the newer client segments to add to that growth.

So we're very optimistic about that. And it's a all-weather franchise. We're diversified in many aspects of what we do across products, across client segments, across asset classes, et cetera. So -- so we -- it's a great franchise. And the question is, 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 and 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.

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Ashish Sabadra, and I cover business and information services company here at RBC Capital Markets. We are excited to host Luke. Luke Flemmer, who heads private capital -- Private Assets, sorry, at MSCI.

So Luke, I'll kick off with a question that we're getting across all our info services coverage universe. It's about Gen AI and the moats around the business. So maybe if you can help us or talk about what are the moats around the Private Asset business. Where do you get the data? How do you source the data? How much of it is proprietary? And what are the moats around the data?

Yes, sure. Great question. And obviously, Gen AI is is very much accelerating the ability to do data collection at scale. So if the data is available, if it's ambient, then the ability to go and source that data and coalesce it is being greatly accelerated by Gen AI and that's obviously creating threats. To moats we're traditionally essentially operational in nature, right? People have created scaled organizations to do that data collection and that was effectively a moat. And now as the cost to do that is significantly reduced. There's not a lot of defensibility in those kinds of businesses. Fortunately, for us, within the Private Assets business at MSCI, essentially all of the data that we operate on is proprietary in nature.

We collect data from GPs. We collect many manager portfolios, and we run analytics for those managers, and in process of running those analytics, we also are able to generate derived data off those portfolios that we monetize in various fashions. And then we also collect information from LPs or as to owners on very large scale about all of the portfolios that they own. And again, we do that in furtherance of providing portfolio analytics and risk and performance book of record for those asset owners. But once again, we then use those data sets to generate aggregate and modernized information around those markets and that allows us to do things like create indexes, create benchmarks for different relative performance, et cetera.

So the sort of crux of our Private Assets business is proprietary data. And there's a sort of inherent flywheel in that, which is that we're trusted by market participants that they provide that data with us. In many cases, there's a give to get dynamic where in providing the data, they get higher quality derived analytics back. And the last point that I would make is the derived information itself has a lot of intellectual property embedded in it, right? The methodologies by which we do construction of benchmarks, construction of risk measures, et cetera, reflect a significant amount of MSCI intellectual property. So it's proprietary data combined with proprietary analytics to produce differentiated output.

That's great color. Obviously, a very strong moat around the business. When we think about, as you mentioned, like Gen AI is operationalizing, making it easier to assimilate the data. So can you talk about how MSCI or within private asset particularly, how you're using Gen AI to not only improve like the operational front, but also customer-facing applications. So maybe if you want to start with the internal and then the external-facing gg implementation.

Yes, absolutely. I'll actually add a third because that's exactly how we think about it internally, which is sort of 3 dimensions of AI opportunity for us. Dimension number one is on the data ingestion side. So we consume large amounts of unstructured data from clients. And historically, that was fairly manual and expensive to ingest and normalize. And so we're leveraging AI extensively to bring down not just the cost, but also the time taken and also increase the amount of data and insight that we can extract from that data. So really mining that data much more efficiently at higher speed and at a lower cost on the intake side.

The middle dimension of it that I would add is actually our internal sort of operating efficiency as an organization. And so that would manifest in things like product design, where we can use rapid prototyping and Gen AI-enabled tooling to more rapidly engage with clients, bring ideas to fruition, et cetera. And then we're using extensively on the engineering side to actually build and implement software. And that's been a significant accelerant for us on the delivery side.

And then the third dimension, as you mentioned, is the client-facing dimension. We're embedding Generative AI front ends in our tools themselves. So in our user interfaces, we have natural language interfaces, clients can interrogate data, query data through our interfaces. And we're also delivering data through these connectors, these MCP connectors into Anthropic, Open AI and other large language model foundation providers so that our clients can consume data in whatever environment that they're looking to do so.

That's very helpful color. So you talked about MCP servers. You also obviously talked about layering in the chats on top. How about Agentic AI? Are you also leveraging an Agentic AI? Or are there applications that you're envisioning using Agentic AI within private assets? .

Yes. We're watching the Agentic space very closely. We intend to provide agents as back ends to actually service client requests. So that -- not to get too technical, but as you -- the MCP server is really a data endpoint, right? So that allows someone else's agent to query and gather data and then operate upon it. We are also building agents internally on our side that will face off against client agents and execute more complex and more long-running analytical tasks on their behalf. So as you know, it's a very rapidly moving space, and I think the consumption model of our agent is something which is evolving rapidly, but we're definitely very focused on it.

That's great color. You obviously talked about the proprietariness of the data. But when it comes to private data or private credit, private asset data, there's a lot of confusion because there are a lot of players in the space, Preqin, PitchBook, S&P, Moody's also talk about private credit data. Can you just talk about, in particular, what data do you have and how it's differentiated compared to the other players in the marketplace?

Yes. Sure. I mean those are all great firms that you mentioned, and they all bring different aspects of the data mosaic together for different clients. So I think they will provide different kinds of value. The -- one of the defining things in our Private Assets business, we acquired a company called Burgiss about 2.5 years ago at this point. And Burgiss, as a business, it's been around 30-plus year. It's a very long-standing organization. And those data sets have been collected literally since the late '80s from LPs representing their investments with various managers.

And so that data set is LP sourced. It's not through FOIA, it's not manager contributed. It's really the cash flows, the capital calls, the distributions that LPs enjoyed in those funds. So when we take that data and when we compute an IRR or a performance or a fund benchmark, it's really the gold standard of data, and we have a very long track record. Obviously, as I said, we have private equity going back to the '80s. We have private credit going back 20 years since really the inception of that as an asset class. We have real estate, et cetera.

And so we have these very robust time series of data that allow us to build a lot of financial products on top of those that you really need that depth and robustness of data. And we continue to provide that service for many, many asset owners around the world. And so we continue to collect data of that nature and that continues to sort of power our operations.

That's very helpful. So obviously, the trended data is very powerful. The historical data sets are very powerful. As we think about the revenue growth and maybe if you can split up between the private capital solution versus the real asset. Can you talk about some of the headwinds that existed in the business over the last few years? And what are you seeing in terms of the trajectory going forward?

Yes, sure. And I think quite -- well, let me step back and say the overall comment is we view private assets as a holistic business for us, and there's a lot of synergy between the deep expertise we have on the real asset side and the more horizontal view that we're able to provide through the Burgiss acquisition, which is cross asset class. It's private equity, it's private credit, it's real assets. It's all of those asset classes. And we don't view those as silo businesses, we view them ultimately as an integrated offering to clients, and we will continue to integrate them more closely going forward.

But to treat them as two separate business lines for the sake of the question. The real assets business, we made an acquisition of a company called RCA at the beginning of 2022, I think it was, which was a -- which coincided with quite a negative market cycle in commercial real estate, right? We had a significant rise in interest rates and the fallout from COVID and all of the things you would be aware of. So from a secular perspective, that market has been somewhat challenged for the last several years. And as you know, in -- real estate is a market that takes a long time to stabilize because these are long leases, they're physical assets, it's not a market that works itself out very quickly. And so these things have taken time to be metabolized. In some cases, we've seen conversion of CBD into residential. These are all reshapings of the asset class.

And so that's been a little bit of the backdrop for the last 3 or 4 years. There's been a little bit of a lower transaction volume, just a little bit of a depressed market. As I've said, that market is working its way out. We are seeing more positive movement. We're also repositioning the business to a degree to focus on some of the new fund vehicles and the sort of new approaches that we're seeing in the market. So the sort of core, core plus open-ended structures were the prevalent structure for many years. we've seen a lot more growth in opportunistic and value-add investment, typically in a closed-end fund structure rather than an open-ended fund structure.

In fact, I believe I read the statistic that 65% of all real estate commercial assets are now held in closed-end fund structures. So it's quite a dramatic change in the shape of that business. We've been investing significantly in our offerings around closed-end funds and the analytics and portfolio analytics on these types of structures. And it's actually very complementary with the data sets that we have on the private capital side as well, which historically have also been closed-end fund cross assets. So we're driving a lot of synergy there, and we're focusing on these new product lines. And we're injecting into new areas like data centers, for example.

We launched some data center products last year. Those have been very well received, we're focusing more on infrastructure, which is -- has had strong kind of secular growth through that period. And we've made some investments in senior leadership in the team overall in real assets. So I'd say the backdrop was a degree of secular challenge, unfortunately, which coincided with our acquisition of that particular business. But we feel quite confident that we're going to innovate and align with the needs of that market, and we're going to drive increased growth moving forward. That's certainly our goal.

On the private capital side, I would say that, that's a business where we've really been in the process of digesting a fairly large acquisition. We completed the acquisition of Burgiss a little over 2 years ago at this point. We've been merging the teams, merging the coverage teams, merging the product teams, et cetera. And we're actually seeing very strong growth in that business. Now we feel like we've really incorporated that into the core of MSCI, and we're starting to accelerate sales, client engagement on a global basis, and we're starting to see that in the performance now.

That's great. Maybe just zooming out, you talked about, obviously, the synergies between real assets and private capital solutions. Can you also talk about the synergies between your Private Asset business and the rest of the phenomenal portfolio within MSCI, right, from indices, sustainability and analytics.

Absolutely. I mean, look, that was the strategic insight that drove the acquisition of IPD almost 15 years ago at this point was the insight that MSCI was a scaled and leading player in the public markets, and we help clients with portfolio construction, indexation, risk, all of these things in the public markets. And the private markets were a burgeoning asset class. And certainly, that's played out in spades in the market over the last decade or so. So we see private assets as very complementary and ultimately something that's going to be increasingly closely integrated with the public markets. I would say our view is that some flavor of a total portfolio approach will become more and more prevalent.

We are seeing it on the institutional side. We see more and more clients that are no longer comfortable just managing their private allocation on a stand-alone or strategic basis, that really want to make capital planning decisions across the total portfolio. And that applies to liquidity and cash flow, but it increasingly applies to risk and exposure, right? We have a lot of conversations with clients around thematic exposure, right, help me understand a geopolitical dimension or an AI dimension, all these kinds of things. And they really want to interrogate the total portfolio.

And then on the wealth side, which is a big growth area for private assets, again, we believe that when you're constructing an individual client portfolio, if private -- if alts are going to be a significant allocation, you can't do it on a black box basis. You have to be able to apply the same degree of rigor to portfolio construction that you have -- that you would apply in the public market. So those are, in our view, tailwinds that are moving the world towards more rigor and more of a total portfolio construction approach. And so when we think about private assets in the context of MSCI, I sort of think about it in a T-shaped construct.

So the horizontal bar of the T is the total portfolio story, right? How can we compose public equity, public fixed income and private assets on a like-for-like basis, right? How can we use factor analysis, how can we use cash flow modeling, et cetera, to think about that portfolio construction. But in order to do that, and this is the vertical bar of the T, we need to uplift the quality of the data and the analytics in the private sleeve, right? Because in some cases, the quality of the disclosures, the data available is inadequate. The models are not robust, they're not on a like-for-like basis, et cetera.

So we're doing a lot of work, and we think there's a lot of great business to be done with clients in that vertical stripe uplifting the quality of the private assets data, but we absolutely do it with an eye to the total portfolio. And we really have a product in market that are very popular and widely adopted, which our total portfolio product. So we have many asset owners that use us to manage their total portfolio on a single platform. And so many of these techniques that I'm talking about are not theoretical that were already being used on the ground.

That's very helpful. And maybe that's a good segue into my next question. I think on the last earnings call, there was a call out for a few products. particularly private capital portfolio management, total plan manager and then private capital transparency data. Those were the big growth drivers. Can you just talk about what those products are at a high level? And what's driving the growth there?

Yes, absolutely. So private capital transparency is sometimes the building block that's really the data products and services that collect this ground truth data from the managers. So we collect the reporting on tens of thousands of funds. I think we have $16 trillion of notional capital that's in those fund. So it's a very scaled data operation. And through that process on behalf of clients, we collect all the manager reporting using AI, increasingly, we sort of digitize and normalize and then we play that information back to them on a clean and like-for-like basis. And so in some sense, that offering underpins a lot of what we do for asset owners. And that's a product that has been very popular with clients and we continue to expand there.

And it's an area of a lot of innovation for us. A lot of the AI capabilities are being driven into that platform. The portfolio management is the classic product line in the space. And this is really the product that allows asset owners to understand their exposure. It allows them to understand their capital calls, their distributions their exposure by fund, the underlying content of what's inside those funds, look at relative manager performance, look at quartiling of fund performance, benchmarking, et cetera. It really is the sort of cockpit that allows asset owners to manage their private exposure.

And then total fund manager is a very rapidly growing and successful product for us. And that is exactly what it sounds like. It is a total portfolio solution. It allows clients to bring in their public positions directly from their custodians. They can even bring in liquid alts, hedge fund exposure and then they can bring in all of their private markets exposure and they can view those on a common set of frameworks and analytics.

That's great. That's very helpful color. Talking about risk and exposure. Obviously, there are a lot of headlines around private equity and private credit. Does the -- in that kind of environment, is that a positive or a concerning for your business? Does that demand come down? Or as you mentioned, like does the demand for transparency. So any color on that, those fronts? .

Yes. Look, I mean, it's -- we're not concerned about it in terms of our business trajectory. Obviously, it's unhelpful in the financial markets when you have any areas of distress. In many ways, the -- some of the current -- well, I would break it apart. I think there are a couple of different things going on, and maybe it's useful to look at each of them. So in private equity, there's a longer running trend, and this has been going on for probably really 3 or 4 years at this point, which is an issue of delayed distribution, right?

One of the things people have struggled with in private equity is that it has not been cash generative, right? And this has been a function of geopolitics, depressed M&A market, there's a variety of different things we could talk about. But that is actually driving quite a lot of innovation in that market. We're seeing a lot more focus on continuation vehicles and other fund structures. And it's also a huge tailwind for the secondary trading market, right? We saw secondaries last year reached $240 billion. That was about a 40% year-on-year growth rate, about $120 billion of that LP-led and about $120 billion GP-led.

So that's an area which is growing very rapidly, and it's stepping in to fill some of this like liquidity gap, which hasn't really been forthcoming for private equity. We see that as a huge opportunity for us to provide indexation tools, analytics, et cetera, around that market. In private credit, we're dealing with 2 different issues that I think are getting a little conflated maybe in the public mind. Issue number one is actual confidence in the credit quality itself, right? There have been a few notable the cockroaches comment from Jamie Dimon and others. There have been some issues around disclosure and in some cases, collateral management, et cetera, and those have been quite high profile and that's led to a degree of concern around the overarching credit quality in those portfolios.

The second and kind of distinct issue is a liquidity issue, which is a function of some of these semi-liquid fund structures that have gated redemptions by design. But because people have gotten nervous about the credit, they've tried to sort of over redeem. And therefore, some of these firms have run into redemption gates and that's causing some anxiety in the market. I think both of those are very aligned with things that we've been building and which predate in fact, some of these concerns. Thing number one is tools around disclosure quality, like allowing LPs to actually see whether they're getting high-quality disclosures from these managers.

And frankly, to rate their managers on a comparative basis in terms of the quality of disclosure. We think that will be extremely valuable for the industry that's going to drive the overall disclosure and transparency quality up. And then we've been doing a lot of work in credit quality itself. We did a partnership with Moody's last year. We're making Moody's Analytics available to our clients in situ so that they can assess exposures that they have in their portfolio. We're doing more work at the asset class level, and I think this is very important. So understanding, not all private credit is created alike, right? So there may be particular sectors, maybe we're lending to SaaS, maybe we're not. Maybe there's regional dimensions, et cetera.

We're providing a lot of the tools to allow investors to tease this apart and understand their exposure much better, which we think will be very constructive and allow investors to regain some of the confidence through these sort of tools. And then the other dimension is on liquidity. Does this wrap-up provide liquidity if and when I need it, right? And again, we're building tools to help with stress testing and liquidity and scenario analysis on these fund structures to help asset owners assess their exposure, but also, in some cases, to help the managers, the GPs themselves talk more coherently or more consistently around the design of some of these products. So again, it's always unfortunate when there's dislocations like this in the market. But we think that this will only accelerate the secular trend, which is a demand for higher quality analytics and transparency in private assets.

That's great color. And then one of the things you obviously also mentioned that this could also drive demand for ratings and this is where your partnership with Moody's is obviously very helpful. Maybe if you can just step back and provide us some background on the Moody's partnership, how that's progressing. And if you can also talk about your go-to-market strategy there?

Yes, absolutely. So the -- obviously, as you know, Moody's has a Formal Ratings business and then they have an Analytics business, which are the Chinese world. those collaborations on the Analytics side. So Moody's has a suite of products that they make available to clients that allow them to essentially generate a probability of default on an individual loan and by extension, an implied rating to that loan. And they have a very rich model that they've calibrated over all the data that they see and they continue to update.

We have very granular information on the loans themselves that we collect through our transparency servers. And so we're able for clients to essentially run their portfolios through these Moody's Analytics and give them additional insight into the risk that sits in those portfolios. And again, I think this is part of of an industry trend, but one that I think we're very much at the forefront of, which is asset owners are no longer comfortable treating the fund as a black box, right? If you went back, call it, 5, 10 years, people were a lot more focused on absolute return, and it was a little bit set and forget on the fund, right?

I make a commitment, I make my capital calls, I get distributions back. And at the end of the day, I got multiple on invested capital or an IRR. And as long as that was a good number, I felt pretty comfortable about that. I think just through a lot of the sort of emerging risks in the market, a lot of the aspects of deglobalization and tariffs and geopolitics and AI and all of these sort of incumbent risks, asset owners really want to understand what they own, because if they have exposure to multiple different funds they have an implicit portfolio that they're exposed to, right?

They may only have partial ownership in the underlying holdings, but they do have ownership in economic exposure to those holdings. And so what clients are looking to do and what we're -- I think what we're quite advanced in is how do I look at my effective portfolio, ignoring the fund wrappers for a minute. And so that's where tools like these Moody's Analytics and other things and also our sort of asset and deal level analysis become very valuable because they allow me to think about my portfolio and my exposures, irrespective of the fund structure for the purpose of that assessment.

That's very helpful color. Maybe just a quick question on monetization. Actually, if there are any questions in the room, please raise your hand, and we can have a mic go around. Otherwise, I'll just go ahead with my questions. I was going to ask about monetization, the historical monetization, where was at, which customer segments, but then as you're talking about like how this business is evolving and demand is coming up from more private equity, asset managers, wealth managers, how do you expect the monetization to change over the next several years?

Yes. A couple of comments. So we have a very strong institutional asset owner, institutional LP base. And that was acquired through the Burgiss business and then has been growing significantly, and it was very complementary with the core MSCI franchise, where we serve, obviously, many, many asset owners around the world on the public side, and we help them with public risk and exposure, et cetera. So across the asset owner spectrum, we really range from single family, multifamily office. We have a strong Endowments business. We have a very strong Pension business, and we have some of the largest sovereign wealth funds with clients.

So we really span that asset owner spectrum. Our total planned portfolio continues to get strong traction in endowments and at the smaller end of the pension market. It's a very nice product. But we've also integrated that with our borrower Risk Manager product on the more enterprise side. And so we're able to offer clients, asset owner clients a pretty seamless experience across the range of complexity that they need. And so we see asset owners as a very strong aspect of our franchise and one that we absolutely intend to continue to grow. And from an absolute perspective, it's the largest. And so we think the absolute contribution will certainly continue to come from there.

We have a quite robust GP or Alternative Manager business through the real asset side of the business. We have many large real estate managers. In many cases, these are multi-strategy managers, and we help them with all kinds of portfolio analytics, and that's a really very robust business. But we've been, over the last year or a couple of years, really focused on taking the private capital data set and looking at how we can also bring that to GPs across their life cycle. And so we have tools to help with capital formation fundraising, helping GPs talk about their portfolios and performance versus peers versus market.

That helps on the Investor Relations side as well. And then we actually have data that helps with sourcing, underwriting and portfolio management in the GPs themselves. So that is an area of growth that we're focused on. And then last, but not least is on the wealth segment. So as I alluded to before, we feel very strongly that the wealth channel needs robust data, transparency, benchmarks, analytics to think about the total portfolio and how these private assets get placed into investor portfolios. And so that's an area of growth for us and where we're focused. So I would say those are the 3 main ones that I would call out.

That's great color. And then maybe just on the margins. The margins for Private Assets have been lower compared to the company average. Obviously, it's a more nascent business. How do you think about the margins evolving over a period of time?

Yes. Look, I mean, as you know, the MSCI as a firm has very robust margins. In private assets, it's a growth area for us. So we're reinvesting a significant amount in that area, and we intend to continue to do so. But with AI and automation and the things that I've talked about on the data processing side, we believe that we have good control over the margins and that it's a strongly profitable business, but again, one that we're currently growing.

That's great. We'll keep it there. Thank you. Thanks, Luke.

Thank you very much. Appreciate it. Thanks everyone.

We will go ahead and get going. Thanks, everybody, for joining us this morning. I'm Patrick O'Shaughnessy, Capital Markets technology analyst here at Raymond James.

And up next, we have MSCI. And on their behalf, we have CFO, Andy Wiechmann. Andy, thanks for joining us.

Of course. Thank you for having me. Always wonderful to be here, great event, great turnout. So thank you for hosting.

Great weather. So format is just going to be Q&A fireside chat. So with that, let's get going. I'll kick things off by diving into the thematic debate around AI disruption risk, shockingly, I'm sure. I think most people would agree that your index franchise has a tremendous moat, but let's touch on your other segments, starting with analytics.

How would you frame the moat around your Risk Analytics and Performance Analytics businesses? And as part of that question, how much of those software solutions embed your proprietary data?

Yes. So -- the -- I'd broaden it actually to proprietary content. So for sure, there's proprietary data, but there are proprietary content elements to many different layers of the analytics services that we deliver that are, for sure, a key part of the differentiation, a key part of that value proposition, a key part of the reason why we are the premium provider of solutions out there among many other reasons.

And so maybe I can touch on the proprietary data or content point and then touch on some of the other big differentiators for the services that we have to offer. But on the factor analytics side of the business, the proprietary content is the key there. That is ultimately what clients are licensing, signing up for. There are proprietary risk models in the case of things like our equity analytics, they are deeply embedded in the investment and risk processes of many large financial institutions from asset owners to asset managers, but importantly, the trading community and hedge funds.

And so our factors are intimately linked to market movements, intimately linked to capital flows. And so they are something that clients need to have and that is truly proprietary. On the multi-asset class side, we also have private asset risk models or factor models, which are truly unique. Our ability to do that is because we sit on a tremendous amount of -- and a long history of private asset fund performance across private equity, private real estate, private credit, infrastructure. And so we have risk models that cut across all those dimensions that are truly unique in nature and a big differentiator for us on the multi-asset class side.

Beyond our factor content that I alluded to on the multi-asset class risk and performance service that we deliver, there are proprietary data and content aspects of many different layers, starting at the client portfolio level. And so part of the service we deliver is we aggregate every position that a financial organization sits on.

And so we go through fund admins, custodians, brokers, accounting systems to collect every single position. We house that into a security master, which has unique value, -- it's proprietary security master. And then we tag to each of those security information and asset information, and we're getting that information from a wide range of third-party sources and proprietary sources in certain cases.

And we are using many different providers to allow us to validate, standardize assure quality and provide transparency and traceability to underlying asset information. We then have the truly proprietary security level analytics, so security level analytics that sit on top of that, which are things like pricing and yield curves, valuations, cash flow models, prepayment models, Greeks, these are all proprietary security level analytics that underlie our broader analytics services.

And then arguably most importantly, are those analytic engines and analytic content that fuel our analytics business. And so I already touched on the factor models and factor analytics, but things like our value at risk, our scenario analysis and covariance matrices, simulations. These are all things that are truly proprietary to us, and they are best-in-class out there. And part of the reason clients rely on them is not only the history, the quality, the stamp of approval you get by working with us, and we've been historically the leader across factor end market risk, but it's also the traceability.

And so it's something that is a key input into regulatory processes for many of our clients. They're using it to fulfill their Basel III requirements, UCITS regulation, various other securities regulations out there. And you not only have to be totally confident in the underlying metrics. Otherwise, you are exposed as a client, but you need to be able to defend it oftentimes. And so our ability to trace from the analytic engine and model all the way through to that underlying security in a reliable fashion is a big differentiator.

So yes, proprietary content is a big part of what differentiates us on the analytics side. I would also add on top of that, the interoperability of our tools. And so the fact that our analytic tools are built on the same frameworks that our indexes are built on. And so if you're trying to understand a sector exposure, a factor exposure, a climate exposure, a geographic exposure, you're using the same frameworks and language across our risk tools, our factor tools, our indexes, even our ESG and climate tools as well as your private asset portfolios.

We also benefit from scale benefits, the fact that clients with $50 trillion -- over $50 trillion of assets are using our enterprise risk and performance tools, which creates a huge opportunity to get unique insights into the market. And so for us, AI is much more of an opportunity set for us. We're extremely excited about the ability to broaden the range of services that we deliver to clients, make their lives more efficient and bring together the wealth of content and capabilities we have across MSCI.

That's super helpful. So maybe just to build off of that last point, flipping the AI conversation, what are some of the areas where you see AI is expanding your opportunity set and accelerating your revenue growth?

Yes. So there's several layers to that. So the foundational layer, I think probably every organization sees this, but there are tremendous productivity benefits to us. And that's not just in our standard functions, every function that every organization is probably benefiting from. But if you think about what we do, it is aggregating, standardizing all the things I talked about in analytics data, running that data through models and then delivering it to clients through various channels.

We get enormous productivity benefits, especially in those areas of unstructured, less standardized proprietary data that we sit on. We're seeing dramatic improvements. That frees up additional investment dollars for us. And so we're able to deliver the same attractive margins, profitability growth, but be able to invest a whole lot more in innovation.

And so those innovations, we are seeing very exciting breakthroughs in areas like our -- I mean, you've seen it recently, our Index AI insights. We've had our analytics AI insights, things like our asset location or geospatial data sets are purely -- or could not be delivered without native AI functionality and insights. Several of our private asset -- new private asset capabilities are enabled by and driven by AI functionality.

And so we are rapidly releasing capabilities that are truly enabled by AI. But the really exciting stuff for me is being able to bring together, and I alluded to this in your first question, bring together the capabilities across the firm to deliver new experiences, new value-add services to clients. And so we'll be coming out with in the near future, a basket builder capability, which you can think of as a natural language interface that allows clients to very quickly and easily develop a basket to achieve their specific objectives. That will then translate through over time into custom indexes.

And then we are also being -- underlying that, we are bringing together analytic capabilities together with index capabilities together with sustainability and climate and over time, even private asset insights. And so this vision that we have had as an organization to be able to provide risk and performance within each asset class and across the total portfolio is really coming to life and then the network and ecosystem benefits that can derive from that, that allow you to connect the clients' portfolio to what's going on in the market and allow them to very efficiently achieve their objectives are things that are starting to become tangible and so super exciting for us.

Focusing now on the index business for a second. You recently extended your ETF licensing agreement with BlackRock. BlackRock represented, I think, around 65% of your total ETF revenue in 2025. How would you characterize MSCI's relationship with BlackRock?

I would say it's very strong. It's definitely been super productive. Obviously, the signing of a 10-year agreement with BlackRock, I think, is an indication that we collectively see tremendous value in the franchise that we've built together, but also the opportunity set ahead. And that growth has been really extraordinary in recent years.

And we've seen success in not only launching new products, new content areas where we are a source of innovation for them, and they are also a source of intelligence for us around what the market is looking for and where there are opportunities. But we are also having tremendous success creating these very liquid large ecosystems, particularly places like Europe, where we've been seeing tremendous growth in the assets in what is today a smaller ETF market than the U.S., but a market where we have a strong leadership position and a lot of that's together with iShares.

And so that success has been very fruitful for both of us. We're very excited about the future here. I mean, just looking at what we've seen over the last 1.5 years, but importantly, the last 2 months. So over the last 2 months within equity ETFs linked to our indexes, we've seen $97 billion of inflows in January and February. That compares to a record level of $67 billion in the fourth quarter.

So our prior record was the fourth quarter where we saw $67 billion of inflows into equity ETFs linked to our indexes. We've already seen through January and February of this year, $97 billion. And a lot of that is BlackRock. For sure, it's broader partners that we work with, but there is tremendous, tremendous opportunity to continue to build these franchises in markets, and we see a long trajectory of upside.

That's a very helpful data point. And I think kind of building off of that, I think last year, inflows were a 12% tailwind to linked ETF assets. And it sounds like this year, 2026 is off to a great start as well. How do you think about MSCI's role in driving those inflows versus BlackRock versus the macro?

Yes. So -- we play an integral role in driving those inflows. It's why ETF partners view us as a revenue center for them. Ultimately, the value we bring is we're helping them to attract assets, and we're helping them to attract assets that are willing to pay an outsized fee. And so the way we do that is a few fold.

One is being that common language that is used within the investment industry, namely among the world's biggest institutions, they are using our indexes as their policy benchmarks. So they're using those indexes to do their asset allocation, measure the performance of those allocations. And so naturally, the investment community and assets are going to be tracked along those same dimensions, which naturally fuels demand for tradable products and ETFs linked to those same frameworks.

Similarly, you have the managers that are then benchmarked against those indexes. And so for active management use cases, having the products linked to those underlying benchmarks is a critical differentiator. It's also, as I alluded to, driving innovation in new growth areas. So it's been, over time, fueling the growth of sustainability and climate strategies, where you've seen tremendous growth over the last 5 years.

Factor, as I was talking about earlier. So our Factor Franchise is tremendous, and that's one that ETF providers are very eager to work with us to license factor products, increasingly custom indexes and the reason why ETF providers want to work with us on the custom index side, is not only because we have the highest quality flexibility, institutional-grade frameworks and reliability that fulfill very strongly all regulatory requirements, but it's because they are built on those same dimensions and frameworks that I was alluding to earlier.

And then we've been also very rapidly developing 2 additional ecosystems that feed the ETF market. One is the wealth industry. So as we continue to license wealth managers to use our indexes and model portfolio construction, that feeds downstream ETF usage, but then also the trading ecosystem. So as we are increasingly licensing index content and indexes to market makers, hedge funds, broker-dealers, they are increasingly developing over-the-counter products, which naturally feed the listed products, both ETFs and futures.

And so we are continuing to fuel for our ETF partners this rich ecosystem around the indexes. And so for sure, we rely heavily on our ETF partners for distribution, their knowledge, their insights, but we are continually bringing value to them and view that as a key part of the growth opportunity ahead of us.

Does MSCI have the ability to diversify its ETF partners? And if you do, is that really a desired outcome? Or are you pretty comfortable with your existing relationships?

So we're always looking to maximize the ETF franchise that is out there. And that means not only fueling the very strong mutualistic relationships with players like BlackRock, but a long tail of most of the major ETF providers out there we are actively working with.

And they -- for the reasons I just highlighted, are eager to do more with us. And we're continuing to find new partners from time to time. One of the things that's been so exciting about evolutions in the investment industry as well as tradable products as well as the ETF industry is this move towards systematic investing towards custom products, custom indexes.

And so that creates opportunities for many different ETF providers to differentiate, launch new products, create new franchises -- and so we are actively in dialogue with a wide range of ETF providers. And our goal ultimately is to maximize that ecosystem around our indexes, and that means at times working with a wide range of providers.

We are very intentional and thoughtful about who we work with, where to make sure that we are creating those liquid ecosystems, differentiated products in the market that benefit not only us, but our ETF partners. And so it is something we continually focus on, but believe there's a big opportunity to work across a wide range of participants.

One area where your indexing franchise has seen a bit slower growth has been futures and options and licensing to futures and options exchanges. And that would stand in contrast to like S&P, for example, which is seeing great volumes in the SPX. Are there levers that MSCI can pull to reignite futures and options volume growth?

Yes. So you're right. The growth has been relatively flat for the last couple of years. If you look at where we are relative to 10 years ago, we're quite a bit, quite a bit bigger. And you've definitely seen not only more run rate, but more notional -- outstanding notional interest of listed derivatives contracts, but higher volumes.

It has been, as I alluded to, relatively flat for the last couple of years. And if you look at where we are relative to some of the other players out there, you mentioned one of them, but even some of the smaller players have very liquid, robust, healthy contracts -- or sorry, franchises around their leading indexes. I think there's additional upside or there is definitely significant upside to what we can do within futures and options.

A couple of things to highlight. While volumes have been relatively constant, you have continued to see the OI continue to grow. So that notional I alluded to, continues to hit record levels. And so there is more and more contract usage out there. You see the liquidity removers, so asset owners, asset managers increasingly focused on using these derivatives as parts of their investment processes.

We are actively, as I alluded to earlier, trying to fuel the trading ecosystem. And so as we continue to see the development of the over-the-counter markets in derivatives, that should feed the listed markets. So that is something we're actively working on. We are continuing to work with our exchange partners to get them to proactively work with their trading partners to figure out how they can optimize and make money around our index franchises.

And related to that, you saw us launch options contracts with New York Stock Exchange/ICE, where we've been tremendously successful on the futures front. There are cross-margining benefits between futures and options as well as the established trading community around the ICE futures that should create opportunities on the options side. And so there are a number of areas where we do see upside. It takes time. It takes work. It takes concerted partnership with exchanges in the trading community, but it's one that should have enormous potential over time.

And then shifting a little bit to the Index Subscription side of things. You've been seeing mid-teens run rate growth in custom indexes. What are some of the underlying factors driving that growth?

Yes. So it's been a particularly exciting area for us. We do believe it's a key growth area for our index franchise, but also the broader MSCI franchise over time. I alluded to the basket builder functionality that we're coming out with, which is closely linked to custom indexes. But the thing that -- there have been a number of dimensions that have been fueling the growth recently.

In recent quarters, particularly the fourth quarter, we saw tremendous traction licensing custom index content sets, in particular to hedge funds and the trading communities. Related to that, we've had tremendous success licensing custom indexes for things like over-the-counter derivatives, index-linked total return swaps structured products. But even within the more traditional active management process, we are seeing clients that are interested in creating custom index custom benchmarks, especially as they move increasingly into systematic strategies.

A custom index cannot only be a benchmark for them with that unique custom strategy, but it can also be a key ingredient into those strategies. And so I'd say the overarching theme that is driving the demand for custom indexes is this move towards personalized rules-based systematic investment portfolios, where an index is a very efficient and effective tool that can be used to underlie that. You obviously see it very directly in areas like direct indexing and model portfolios on the wealth side, you see it in insurance companies, who are creating things like fixed index annuities.

And so there's a wealth of opportunities for us across the Custom Index opportunity. It's the reason why it's been the #1 investment area for us, and we have a long trajectory of innovations and new capabilities that we're going to be releasing that should further unlock that opportunity set for us.

Traditional asset managers are still the largest client end segment or end market within your index segment and growth with those clients seems to have stabilized, if not modestly accelerated in recent quarters. How would you characterize or frame the health of that end market right now?

Yes. So -- I'd say we've -- as you alluded to, we've seen modest acceleration in growth with those traditional active managers. I would say there is, for sure, an element of innovation enhancements that we've been making. You've heard us talk a lot about the pace of new product introductions, the innovation, the enhancements and services we're delivering to clients.

That definitely helps with some of the momentum that we've been seeing with active managers. There's likely -- it's tough to be scientific about this, but there are likely elements of the overall market momentum, the market levels that feed into client confidence, more favorable outlooks by these organizations. Ultimately, confidence is what feeds into buying decisions. And so there's definitely been some environmental benefits that are feeding through.

And there were also some cyclical dynamics. You've seen rotations into international investing. We talked about this on the earnings call. Henry highlighted this really over the last 1.5 years. And as I was commenting earlier, over the last -- even last couple of months and the fourth quarter, we've seen extraordinary flows into international exposure strategies, funds. That is an area where we are a leader and have a natural leadership footprint.

And so around the margins, that is something where at the very least, our content is adding more value to organizations that are already licensing it, but it does create opportunities for us to potentially license more to those organizations as well. And so there are environmental factors that are helpful, but there's definitely elements of -- and this is probably the primary factor, the innovation and new product introductions that we've been making and we see ourselves as playing a critical role in helping many of these active organizations transform their businesses to those models of the future, which relate to those more personalized systematic strategies.

And so many of the innovations we're coming out with around things like active ETFs, more broadly Custom Indexes, additional content modules that give our clients insights into markets and where markets are moving are things that should be helpful on that journey. And so it's a very important client segment, as you know, across a number of dimensions, but we do see opportunity to do more with them over time.

And then I think another interesting opportunity for MSCI right now is private assets indexing. I guess, the private asset space more broadly, but in particular, I think there are a lot of serious competitors kind of going after that space. What is MSCI's right to win to build out private Asset Indexes?

Yes. So it is hugely a greenfield opportunity for us, and it's a massive one. We have a very strong, well-established position with providing private asset tools and insights today. But things like indexes, more advanced analytics, insights into evaluated pricing, liquidity, market dynamics, those are at the cusp of being unlocked.

And so just to provide some foundational overview as to what we do in the private markets today, we are -- on the private capital solutions side, we are generally acting on behalf of the world's largest LPs. So we're a service that LPs sign up for. And when they sign up for our service, they basically tell the GPs so the manager send every communication that you would send to me to MSCI. And so we get every fund document, every communication, every performance report that they would send to the LPs to us.

Using that information, we can calculate for the LP. Here's the performance across the 100 funds that you've invested in. Here's what is in those funds and then start to do the analysis, and this is where the upside is on what is in those funds, what's in their portfolio. So what is your exposure to certain sectors? What's your exposure to VC? What's your exposure to technology to certain geographies in a consistent fashion.

Then you can start to do analytics on top of that. So what is driving the performance of my portfolio? What are the risks that I'm taking? What is the value that a manager is providing to me? And that all serves as a foundation to your point, to start to provide real performance benchmarks. So here's how the market is performing, here's how I'm performing relative to the market and then create things like tradable indexes around that.

And so our -- I wouldn't call it necessarily a right to win because we need to do a lot. We need to move quickly. As you said, there are a lot of participants moving into the market, but we are very uniquely positioned because we have the best data, historical data and current data that we are getting at a fund level, cash flow level, but also asset level information. We're getting it as fast as anyone, if not faster than almost everyone out there, and it's the highest quality data.

We are also, as you all know, deeply embedded within the largest LPs. They are using us already for their -- as I was talking about on analytics, where they're using us for their total portfolio risk. And so they're already thinking in terms of MSCI frameworks, but they're also using us for their public equity benchmarks, where we are their policy benchmarks. And so we are a natural partner for them as they start to think about more robust benchmarking of the private asset space.

You then have to -- related to that, think about the interoperability of our tools. So the fact that these insights, these frameworks, these indexes are built on the same risk models, the same sustainability and climate insights as the broader range of tools that we are providing. And so we are very confident we've got the ingredients, we've got the footprint, and we are in the process of evangelizing the industry, and we're getting nice traction.

We have to move quickly. But we think there's a tremendous, tremendous opportunity on the private asset side for us to be a leader in providing not only those insights, those analytics, but also things like benchmarks and market tools for the investment community.

That all makes sense. And then maybe as we wrap-up here, just what are some of the key messages that you want to make sure people walk away with?

Yes. I mean we are -- a couple of things that I would highlight. We are at an extremely exciting point in MSCI's evolution, where we have, we believe, most of the content, the capabilities that we need to revolutionize how investors invest, how they achieve their objectives efficiently, especially as the world moves towards systematic investing. And AI is something that is allowing us to unlock that opportunity.

It's unlocking additional data and insights into what we do. But as I said earlier, it's bringing together the capabilities that we have across the firm into these very unique workflows and services that can revolutionize the investment process. So it's an extremely, extremely exciting time for us. We see tremendous upside and opportunity across a number of dimensions.

Patrick, if you don't mind, I just want to sneak in a quick modeling point here as well as time winds down. So I think you're aware, we do have seasonality in our expenses. The first quarter tends to be a period of elevated adjusted EBITDA expenses related to bonus payments, benefit-related expenses, payroll-related expenses, which tend to be elevated in the first quarter. We also had this first quarter elevated stock-based compensation expenses.

And so if you're looking at the comparison to the fourth quarter adjusted EBITDA expenses, the first quarter adjusted EBITDA expenses are likely to be in the range of $30 million to $35 million higher than those adjusted EBITDA expenses in the fourth quarter. No change to full year expense guidance, continue to be confident in the overall expense trajectory and tremendous operating leverage in the business, but just wanted to point out that one modeling point.

All right. Well, we'll all update our Excel models accordingly. Thank you very much.

Thanks for having us. Appreciate that.

Thanks, everybody.

Hello again. Next up is MSCI again, I'm Alex Kramm, Senior Research Analyst at UBS covering exchanges and business Services. As I said, MSCI is here with us. Andrew Wiechmann, I want to say second or third time at this conference. Thanks for being back. We actually just did this a few weeks ago in Scottsdale at our tech company as MSCI certainly gets a lot of attention from technology investors as well. So...

Thank you for having us. Yes, you seem to do a good job bringing nice weather. Very important this time of the year.

Yes. I don't know if it would be the time to have a New York conference right now. So anyway, I'd like to start these conversations pretty big picture. I mean MSCI obviously has had some very impressive long-term growth targets out there, double-digit subscription growth, low to mid-teens EBITDA growth. We'll talk about businesses in detail for sure here in a little bit, but maybe from a broad perspective, you can just remind the audience here, why the businesses are positioned for that growth, in particular, again, there's been some choppiness in some of the businesses. So help us get comfortable with the outlook.

Yes, yes. And as you alluded to, I think it is important to start with the big picture, take a step back and think about who MSCI is? What is fueling the business and how that translates through to growth opportunities for us and as a result, where we're seeing those opportunities. But I'd like to think of MSCI as the intellectual infrastructure of the investment universe or the IP underlying investment strategies, the capital markets, that takes the form of things like benchmarks, which define the opportunity set. Here's how you define the total universe of investable securities. Here's how you segment that opportunity set across sectors, sizes styles, countries, factors, specific objectives.

We are the standard in common language that is used by investors to navigate the markets and then they allocate assets across those standards. They track the performance of those allocations. They measure their risk and then ultimately, they design strategies and portfolios to achieve their specific objectives. And so when you think about the opportunity set for MSCI, it is deeply interwoven with the growth in the investment universe. And so you see growth in global savings. You see growth in investable assets. Within that, you see assets increasingly being allocated across more security types, asset classes, geographies, navigating more risk considerations, geopolitical, AI-driven, specific market factor objectives. All those create more needs for that infrastructure that I was alluding to earlier. And so as you see global investable assets continuing to grow, you see the number of strategies increasing the personalization of strategies, the systematic number of strategies like outcome-oriented or solutions type of strategy is growing, you need to have MSCI's tools.

And so that necessitates the need for index frameworks and indexation, particularly around areas like custom indexing. You need to be able to have a consistent view across all asset classes. And so multi-asset class analytics factor models, particularly private asset insights, which has been historically very opaque with limited standards. Those are all areas that are increasingly needed by investors to achieve these -- the outcomes that they are looking to achieve. And so MSCI is uniquely suited to meet that demand. And so when you see what's driving our growth, index. So you've seen an acceleration in index subscription. You've seen tremendous growth on the asset-based fee side. You've seen a pickup in custom index growth rate. You've seen a pickup in private asset or namely PCS growth rate.

Those are all ultimately a byproduct of those macro trends that I was alluding to. And so yes, they're very exciting targets. We have conviction and confidence we can deliver on them. We have been delivering on them. If you look at our CAGRs, growth CAGR since the IPO, we've had a 13% revenue CAGR since the IPO. We've had a 15% adjusted EBITDA CAGR, 16% adjusted EPS CAGR. And so we've got the track record of compounding over time. You'll see the growth fluctuate up and down for a whole host of macro market, idiosyncratic factors, but we are a long-term compounder, and we've also got the momentum right now. And so if you look at the growth in the fourth quarter for us, we had 11% revenue growth, 13% run rate growth as an organization, 13% adjusted EBITDA growth, 14% operating income growth. And so we are in a position of building momentum and strong strength moving forward here.

Thanks for teeing me up for my next question because I did want to talk about the near term. The fourth full quarter was definitely showing a lot of signs of strength. Can you unpack a little bit more what were the biggest drivers of that strength? But then more importantly, how do we think about sustainability as we clearly are now thinking about 2026?

Yes. So I alluded to this a little bit when I was talking about some of the areas where you are seeing acceleration in outsized growth. But we have seen good momentum in the last couple of quarters. We saw a very strong Q4. That was driven in part based on the innovations that we have been making that increased cycle of new product releases, new capability releases. And so you've seen that be an added fuel to the growth algorithm of the company. But you've also seen nice growth across client segments. And so you've seen us continue to deliver elevated growth in client segments like hedge funds, trading firms, what we call the trading ecosystem or fast money community as well as broker-dealers.

We've also seen higher growth with asset owners wealth managers, insurance firms. These are all areas that are smaller contributors to the overall revenue for the company, but we're increasingly through our go-to-market actions through the investments we've been making in those product innovations that are geared towards some of these client-specific use cases starting to unlock those opportunities in size. And then on top of that, you actually saw a pretty strong fourth quarter with asset managers as well, which is encouraging.

So to be sober, I think there's an environmental aspect to that. We've probably on the margin seen slightly more confidence among our client base, slightly healthier buying behavior. But again, that is fueled by a lot of the enhancements that we're making. So we see these organizations looking to license more content looking to license more capabilities, looking to use us to help them become more efficient. And so we're definitely encouraged by the momentum. And as I alluded to, in addition to the continued elevated growth across client segments with some pickup in asset managers, the areas where you've seen the acceleration of growth on the product side are within index and within private assets and PCS specifically.

Great. I do need to ask about the other side of the coin, which is retention, also nice improvement. I think sustainability was the only segment that was a little bit softer. But as you think about the retention rates, do you feel comfortable where we are right now as we go through 2026? Or are there even opportunities to maybe step up a little bit more?

Yes. So we're always focused on improving retention with clients. I think you've heard us mention before, our retention rate tends to be notably higher with clients that are using 3, 4, 5 different products from 3, 4, 5 different product segments of ours. And so the more we continue to upsell, provide more content, more services to these organizations, the stickier they will be. On top of that, we are making continued advancements in existing products that they get. So a lot of the innovations are not just fueling upsells, but they are fueling the existing products, which support price increase, but they also support retention. So they allow our clients to operate more efficiently, get more value from the service that we are providing.

And then we have a laser focus on our go-to-market, but also account management. And this is a big initiative that Henry is pushing from the top, but really serving our clients more strategically. And I think it's something we've done with the largest clients, particularly large asset managers for some time, and we've seen the benefits of that, but we're increasingly doing it across different client segments. So our enhanced go-to-market efforts across a lot of these other client segments I talked about is going to enhance our retention rates in those areas as we can do more for them, deliver more value for them. But it's also something that ultimately is going to create more opportunity for us. And so listen, we've been encouraged by the retention. As you said, we saw a pickup year-over-year in the fourth quarter. We're encouraged by the momentum we see there. And I think if we continue to deliver on the innovations, product enhancements in those go-to-market and account management areas, we should continue to see an attractive outlook for retention.

All right. Last one across the business. I need to talk or ask rather about pricing. I think you or maybe actually Henry did sound a little bit more constructive on pricing in the, as you called it, better environment recently on the earnings call. So anything specifically you're seeing there? Anything you can quantify? I know people are always very focused on that, but it's an area that you kind of have a good starting point with every year.

We do. And listen, we feel like we're in a good place from a price increase standpoint. As I've mentioned before, the key inputs for us into price increases are client health, we are generally looking at overall costs as well, client usage of our tools, but also the value and importantly, the value that we are delivering to clients. So linking it to what I said on the retention question, what I alluded to earlier, we are delivering more and more value to our clients. We continue to enhance the services they get. They're able to operate more efficiently. They get more data points. They're able to unlock additional value, be more effective in their day-to-day jobs. All that supports price increase. And so the contribution to new sales from price increase has been relatively steady in recent periods. There are puts and takes across the business. But we feel we are in a good position to continue to sustain unlocking value through price increases over time, given those enhancements that we're making to the service we deliver to clients and our content sets overall.

Okay. Jumping into the business then a little bit more, maybe starting on the index side, which is clearly the biggest part of your business today. There was a long period where the business has actually grown double digits and then it got a little bit more choppy, still very good, but people seem to be very focused on that double digit. So since there is a big focus, and I think you have -- in your previous targets, you don't have segment targets anymore. But when you have segment targets, I think that was definitely a business that we were looking for double digits. So how do we get back there?

Yes. Listen, it's got double-digit growth potential for sure. If you look at where the growth is now, I think 9.4% subscription run rate growth in the fourth quarter, up from 9% in the prior quarter, up from 8.4% a year ago. And so we've got good momentum there. If you dial the clock back further, we saw a meaningful contribution from our sustainability module, our ESG module. I think I mentioned this at your last conference, where we were getting a big benefit from this tremendous growth with our ESG module. We have seen that growth slow down, and that's been probably one of the primary factors that's driven the overall index subscription growth rate down. That is a smaller contribution now and where we are seeing tremendous demand, I think there is a long runway to continue to fuel that.

And so we are seeing -- I alluded to this earlier, talking from the firm-wide view, but we're seeing tremendous and steady growth with areas like the trading ecosystem or the fast money community, where the utility of our index content in creating things like baskets, structured products, over-the-counter derivatives continues to grow, things like index arb strategies where the opportunities for trading firms, hedge funds to continue to make money around that growing ecosystem of products continues to grow. We're seeing wealth organizations increasingly use our index content to develop model portfolios and be more sophisticated about how they track their clients' portfolios performance. We're seeing the FIA market, the fixed index annuity market become a meaningful opportunity set for us.

All of that's on top of asset owners that are using our index content more broadly as they internalize their investing processes. And then asset managers who are generally around the edge is becoming more systematic in how they develop strategies. And so they are seeing increasing utility and value from licensing more and more content from us. And so we saw a strong fourth quarter on the -- I alluded to this with active managers looking to license more content from us. We see a long trajectory of demand and opportunity on that side. But we also see tremendous opportunity to fuel growth across all of these areas. And then linking it back to one of those big trends I alluded to at the beginning, systematic investing, outcome-oriented investing, custom indexing, we saw accelerate in the most recent quarter as well, and we continue to be very bullish about the opportunity set around custom indexing.

And so there's a lot of legs to this momentum. We continue to see tremendous opportunities. We think this definitely can be a double-digit growth area for an extended period. And then layer on top of that, the incredible momentum that we've seen within the passive market, namely ETFs, where we've seen record flows at unprecedented levels. It's incredibly exciting how big the index opportunity set is for us.

Okay. Staying on index, but then maybe going a little bit more into the cyclical side. You mentioned a little bit at the beginning already -- and we actually talked about this right before we got started. We've done, I think, last year, a lot of work on what international flows picking up could mean, well, first for the asset management community, but then what that means for a company that serves the asset management community, namely you guys. So Henry on the call actually did echo our sentiment a little bit. I was very happy to hear that. But it seems like you are starting to see a little bit of a positive benefit there. Maybe you can be a little bit more specific how it's manifesting itself. But then also, as we obviously think about this maybe just getting started, where else could you see potential upside, again, on the cyclical side, on the subscription side mainly?

Yes. So I'll touch on the subscription side, but it is related to and you can't lose sight of what's happening on the asset-based fee side. And so we had record inflows in the ETFs linked to our indexes in the fourth quarter. We had $200 billion plus of inflows into ETFs linked to our indexes throughout 2025. And then year-to-date, so if you just look through January and early February, $50 billion plus of inflows already this year into ETFs linked to our indexes. So the pace has even picked up so far to this year. That's obviously going heavily into international exposures. We see it into EFA world, emerging market and variance on those, including single country types of exposures.

And so I think that is reflective of a broader sentiment, not only capital flows going internationally, but a broader sentiment of investors needing to be aware of smarter about thoughtful and intentional about how they allocate across geographies. And so you've got the environmental aspect of it, which is, as you were alluding to, to the extent you have asset managers and even more broadly, financial markets participants increasingly focused on international markets. So it might be they're launching new strategies, building new teams, wanting to understand the dynamics and nuances of those markets better. Those are catalysts for demand. As Henry said, it's without a doubt a helpful thing to us. At the very least, our clients are getting more value out of the massive content that they are already licensing from us, and we can push price increases as a result of that.

But it also times leads to the demand to license more content across those organizations. And it's not just on the market cap indexes. This also feeds into factors, so our factor indexes, but also our risk models more generally. You have a world where geopolitics can move markets significantly, the need to understand specific market dynamics, exposures, risk factors is growing, and that is where MSCI is uniquely positioned. So it's not only the focus on an increased allocations internationally, but it's trying to understand those dynamics of what's driving those capital flows in those markets is something that should benefit MSCI.

Excellent. All right. I want to quickly shift gears to the analytics business, which has definitely been an area of strength over the last couple of years. 4Q was a little bit softer on the sales side. I don't know if I'm being nitpicky, but it was. So look, do you think the business is in a good spot here? It's been in the 7% growth rate. But I think you always have ambitions to maybe get that higher. So what are you focused on? Are there opportunities to get it higher? And again, anything notable maybe on the 4Q why it was maybe a little bit softer?

Yes. Nothing notable on 4Q. As you know, it can be lumpy quarter-to-quarter based on timing of big deals for us. But listen, it's been an area of strong momentum for us the last couple of years. It's always an area where we see huge opportunities. The exciting thing about analytics is we can serve so many different client segments, users, use cases with the unique IP and capabilities that we produce. And so we see tremendous opportunities out there. What has been fueling some of that acceleration in growth from a product type lens, I think you're all aware our factor models have been ripping. We've seen solid double-digit growth with equity analytics for several quarters now. A lot of that is benefiting from the growth in multi-strat hedge funds where that factor content is integral to how they manage their portfolios and manage risk, and we've benefited with the growth there. But we are also seeing traction with more traditional investors.

This is early days, so I don't want to overstate it, but it's super exciting where you start to see front office use cases of those risk models at many traditional asset managers. We've historically served the risk function at those organizations. But as you see the portfolio managers, the investment office starting to want to understand what I was talking about in your prior question, what's driving the market, what's driving my portfolio? What are some of those underlying risk factors that I'm taking in my strategy, that creates opportunities for us to move into the front office on the risk model side. So that's incredibly exciting.

On the multi-asset class side, you did see a pickup in growth in multi-asset class analytics in the fourth quarter. And that was in -- with asset owners directly. There's a whole host of factors at play there, but one thing that I would call out is our private asset capability. That is where we are very differentiated. So if you're a CIO or a CRO at a big pension fund, sovereign wealth fund, you're increasingly allocating to the private markets. You want to have a deeper understanding on your private credit risk and exposure. You want to understand the value that you're getting from the fees that you're paying to these managers. we are uniquely positioned to help in that total portfolio view, but with a particular focus on the private asset side.

So things like our private credit risk model, our real estate risk model, our private equity risk model, all things that I think are big differentiators for us and some of the insights that we can provide there and integrating with our private capital solutions capabilities is helping to fuel opportunities on the asset owner side. And then we've also gotten traction on the wealth side. Still relatively small for us in analytics. But as you see wealth organizations become more systematic, not to overuse that word, but how they think about risk in their clients' portfolios, they build model portfolios, that is what our tools are designed for. I want to take -- based on this client's planning objectives, risk tolerance and our house views, here's generally the portfolio we want to construct. You can use our risk models, our optimizers, our multi-asset class analytics to do that. And so we've gotten traction mainly around that model portfolio process for big wealth managers. So yes, there are legs of growth there. We do serve a lot of clients, a lot of segments. And so you'll continue to see some lumpiness period to period, but we continue to be bullish about the opportunity set based on the direction of travel of the industry.

Excellent. Okay. Then stepping through the businesses here, sustainability and climate business continues to decelerate, not to move on to a little bit of a more softer note. But look, we all remember the fantastic growth in 2021, 2022. It's certainly far away from that. Some people are worried that this business could actually be growth or negative growth. So maybe just talk about that a little bit. And then in particular, as we think about 2026, there's still a lot of dynamics in a lot of different places. Anything of note in that business that we should be aware of?

Yes. I would say nothing new to highlight. We've talked about a lot of these dynamics in the past. You definitely see pockets, particularly in the Americas, where demand for sustainability solutions and insights is more muted. Clients are more cautious about additional purchases, expanding what they're doing, even communicating how they are doing it, which has created a softer dynamic. But we still do see pockets of opportunity as well. So we are seeing areas like our physical risk insights are geospatial AI-enabled insights is a high-growth area. Even corporate sustainability insights has been a high-growth area for us and a new focus, particularly outside the U.S.

And so there are a whole host of areas where we do see strong growth. And then even against that backdrop and those pockets of muted demand, we are picking up market share. And so as organizations look to consolidate providers, they're looking to do more with single organizations as the provider of probably the most broadly accepted standards as well as a provider of the broadest solution set across asset classes, across climate and sustainability, we're uniquely positioned to win business there. And so this will be a big market opportunity over time. This is going to be a key input into the investment process. We're uniquely positioned to support it. The thinking is evolving. There are additional views around resiliency, energy transition. These are all areas where we are helping and there is demand for our tools, but we're in a transition phase. And I think that's going to mean in the short term, we're going to continue to see the same dynamics that we've seen in recent quarters in the near term here. But we believe over the long term, we are well positioned to be the leader in what will be a big space, and so we continue to be excited about it.

Okay. Very good. All right. Rounding it out then with your other private asset segment, there's 2 businesses in there, the real estate side and then also the private market side. I think a lot of themes here. Structurally, I think, probably well positioned for growth as those end markets get bigger. Cyclically, I think on the real estate side, it's a little bit more challenged. Maybe you can touch on that. But then even on the private market side, on the PCS side, I think you made a comment not that long ago that maybe it's been performing a little bit below expectations. So where are we right now? How do you think about 2026? And then, of course, what gets you excited in terms of the medium term? This is still both very early businesses.

Definitely. I mean it is an area we're incredibly excited about, massive, massive long-term opportunity, to your point, very early in that journey. Maybe just to touch on real assets first, and then I'll come to PCS, although the trends fueling both of them are consistent. As you said, we've had some tough cyclical headwinds on the real asset side for the last several years, where you've seen notable decreases in commercial real estate transaction activity. We do have big parts of our business that are tied to that transaction activity, serving developers, brokers, lenders where you have seen decreased activity. You have seen some green shoots. I mentioned this on the earnings call, but there are certain areas where you've seen a pickup in capital coming back into the space, namely around office space, retail, -- in recent periods, we've also seen around rental properties.

Obviously, there's areas like data centers, infrastructure. So green shoots there are positive early indicators for us. And we've seen, as a result, while small, we've seen some pickup in business activity, things like our Index Intel offering, which is a solution set that allows you to understand what markets are moving, what way and what is driving that performance. We've seen tremendous success there. And so hopefully, some green shoots that should continue. On the PCS side, to your point, to be frank, when we announced the acquisition of Burgiss, I said we think this is a 20%-plus growth business. The growth has fallen down into the teens. It did tick up in the most recent quarter. So it's up to 15% growth. The thing that's encouraging about that is the growth is coming from those areas that we've been focused on and we've been enhancing. And so we've been on this journey for the last couple of years to enhance the product offering, enhance the go-to-market and really deliver some of these tools that we know the private markets need.

So tools like benchmarks, classification standards, liquidity insights, credit risk. These are all things that we now have. We have a more robust go-to-market effort, not only in the U.S. but also internationally. And so we've seen tremendous success in both EMEA and APAC, although they're still small for us, very early days. But going back to my comments at the beginning, this is an area where we know investors, particularly given some of the dynamics you're seeing in like growth equity with software-focused funds, particularly some of the dynamics that you're seeing within private credit where investors are really thirsty to understand what their exposures are. And that's just a baseline, understand what's driving the risk and performance of their portfolios and then be smarter about how they allocate their assets. And in a world where there are more markets that allow them to sell their positions, buy their positions, hedge their positions, get access to more liquid open-ended funds, there's going to be more and more need for the solutions that we provide. And so it's early days, as you said, but we think we're getting to a position where we've got the tools, we've got a more refined go-to-market effort and should be able to continue to build momentum there. So we continue to be excited about the opportunity set.

Okay. Excellent. Thank you. Going back maybe to company-wide topics, AI is going to be a big topic at this conference for sure. It's on everybody's mind. You've been sounding pretty optimistic here recently. So maybe you can talk about both opportunities on the revenue side and also on the margin side. In particular, when you think about the revenue side, which maybe is not as much in focus these days, but maybe be a little bit more specific what you're actually working on go-to-market strategy, anything that you can highlight that maybe already produces some results in the near term. And then, of course, I got to go to the risk side because as I mentioned, that's where investors seem to be focused on. You just look at these markets again over the last couple of weeks. You seem to be getting caught up in that as well. So maybe talk about both of those signs.

Yes. So AI is I mean you've heard it, as you alluded to on our recent calls and from Henry, in particular, it's exciting. It is super exciting for us across a number of dimensions. I think I've mentioned to you in the past, it is very CFO friendly. I think that's probably not surprising to most folks, but the impact is very tangible. And so cost to produce, I'm seeing notable improvements on, particularly in areas that it's difficult for us to source clean standardized data like in the private markets, where we've seen improvements in the cost per data point increase by 30% plus. And that not only leads to efficiencies for us, but it allows us to rapidly expand the coverage that we have.

So I think you've heard us mention. We did not have a proper private credit transparency service offering a year and change ago, and AI enabled us to very rapidly build out the capability to offer transparency across private credit portfolios. You've obviously seen us do a lot of things around risk and liquidity there. So it's a huge enabler. It's leading to productivity benefits and efficiencies across most of what we do, obviously, things like pace of development and engineering, we're seeing notable improvements in productivity. But the exciting -- that's great for me. I get geeky and excited just from a P&L management standpoint. But the exciting thing is what it is doing for clients.

And so I alluded to this earlier, but we are rapidly delivering more and more value to our clients. And so things like our AI insights offering which is basically making it much easier for clients to interact, interrogate, query their portfolios, serve up insights to them around the inherent risk, things that they need to be focused on. It's a big leap forward where clients no longer need as big teams to handle the integration with our platforms. They no longer need big risk teams to parse the massive amounts of data and scenarios. And so we are making our clients much more efficient. And so that's been a growth area for us. I alluded to expanding on the private credit front, but also in other areas where it's tough to get data areas like our asset location geospatial data set, which is a key input into assessing the physical risk of a portfolio, together with some of our standard models is allowing us to deliver a tool -- really an AI-driven tool set that would not exist without AI. Even on the custom index side, it is allowing us to develop custom indexes, new custom indexes, but also custom indexes faster than we were in the past with a whole host of added capabilities around it. And so tools that we are delivering today are directly -- almost everything we do is AI-enabled and AI supported, but tools that would not exist without AI.

I think we mentioned on the most recent call in 2025, we had about $10 million of sales from these true AI-enabled tools, and we're just getting started on that front. But the thing that is most exciting is it is unlocking the vision that we, as an organization, have had since I joined the company, which is really bringing a total portfolio solution to our clients. And so we are on the cusp of releasing some capabilities that we've talked about for a long time, and we are uniquely able to produce because we have access to the client portfolios. Clients with $50 trillion of assets are using our enterprise risk and performance tools, the $18 trillion trading ecosystem of benchmarked assets around our indexes, our industry standard frameworks, as I was talking about earlier, and risk measures, bring that all together to allow a client to say to MSCI, "Hey, I want to develop a portfolio or a basket with this strategy. I want to be long semiconductors, limit my China exposure, overweight the momentum factor, achieve this climate objective."

And we can bring together the total universe of what their portfolio looks like, so the context of what their portfolio looks like, the context of where the capital markets ecosystem is around those indexes in the standard frameworks that they are using to think about their portfolios and exposures together with world-class index capabilities to build this custom basket or custom index to very efficiently achieve their objectives on their portfolios. And that has applications across not only the allocators and asset owners, but wealth managers, traditional asset managers who are launching more of these systematic type strategies and obviously, within the fast money ecosystem of trading firms, hedge funds, broker-dealers. And so we are connecting that massive ecosystem that exist around our unique content sets, or standards with unique tools across that total portfolio, as I alluded to earlier, including private assets, where no one else has the same capability, and it's super exciting. Being able to unlock that network and ecosystem is the holy grail for us. And it feels like AI is unlocking a big opportunity for us. And so I know you asked about risk, but for us, the focus is move as quickly as possible. So we're all in. We're moving quickly, but it's to unlock the massive opportunity set in front of us.

Okay. Very good. Moving quickly, since you just mentioned, a couple of questions left. Maybe on the expense side, since we are on CFO-type questions, you just gave expense guidance. Maybe just anything to add there, maybe the building blocks, any market-related items you want to highlight? What brings you to the lower or the higher end? Yes.

Yes. Yes, thank you for asking. We didn't give that color on the earnings call. So I would say the AUM assumption that underlies our guidance, including our expense guidance that we provided is that AUM levels are relatively flat for the first half of the year and then gradually increase in the back half of the year, which is consistent with how we've done it in the past. And so depending on how markets move, but also as a result of a whole host of other factors, we will continue to calibrate the pace of spend across the business. And so in addition to looking at the market levels, we're looking at business performance, investment performance, emerging opportunity sets.

And so all those factors feed into our ongoing proactive financial management across the business. And so we will continue to, as we've done in the past, calibrate that pace of spend based on not only how markets are moving, but the overall business performance that we're seeing. And we are committed to delivering on driving long-term outsized sustainable growth, but also delivering period-to-period attractive profitability. And we think we've got a lot of levers and tools at our disposal to continue to deliver this very attractive profitability growth in addition to that long-term top line growth.

Okay. Lastly, very quickly on capital allocation. On the M&A side, you've been fairly selective, but let us know if there are any capabilities you're still looking at closely, anything you need to add? And then, look, you're pretty opportunistic on buybacks. You've been stepping it up recently. Markets have been choppy. The sector and your stock has been under attack. Normally, you would lean in now. So maybe give us an update there and anything else we should think about for 2026 as it relates to capital allocation and buybacks?

Yes. I mean, listen, we're big long-term believers in the stock, the opportunity set I talked about earlier. And so we take an opportunistic approach to share repurchases. And yes, we are continually monitoring the market, and it's a function really of available cash, market volatility and stock volatility and some level of conviction or value overlay on what we're doing. And so you can intuit from that our approach to repurchases. On the acquisition front, listen, we generally believe that we have very attractive organic growth prospects. We're not looking to dramatically diversify the business, add a new product line.

We are continually looking at opportunities, but we are very selective to make sure that they are very financially compelling and strategically compelling. And usually, it's to accelerate those capabilities to use your term, those capabilities that we think are going to fuel the long-term growth of the business. So they're just bolt-on enhancements if we do pursue them. But we're going to be very selective. And the areas that we would look would be private assets, unique content sets, capabilities around custom indexing, those growth areas that you've heard us talk about, you've seen us do these tactical bolt-ons in the past. We'll continue to look in those areas.

Okay. Fantastic. So we didn't leave any time for Q&A, but I think we got plenty here. So why don't you help me thank Andy for making it all the way down to Florida and give us an update.

Awesome. Thank you. Thank you, Alex.

Good day, ladies and gentlemen, and welcome to the MSCI Fourth Quarter 2025 Earnings Conference Call. As a reminder, this call is being recorded. [Operator Instructions] I would now like to turn the call over to Jeremy Ulan, Head of Investor Relations and Treasurer. Sir, you may begin.

Thank you, and good day, and welcome to the MSCI Fourth Quarter 2025 Earnings Conference Call. Earlier this morning, we issued a press release announcing our results for the fourth quarter 2025. This press release, along with an earnings presentation and brief quarterly update 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 today's 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 a discussion of additional risks and uncertainties, please see the risk factors and forward-looking statements disclaimer in our most recent Form 10-K and 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; Andy Wiechmann, our Chief Financial Officer; and Baer Pettit, our President. Lastly, we wanted to remind our analysts to ask one question at a time during the Q&A portion of our call. We do encourage you to ask more questions by adding yourselves back to the queue. 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 today. MSCI is generating impressive momentum across product lines and client segments. Our leadership in the global investment ecosystem and relentless focus on innovation has enabled us to drive a strong financial performance. In the fourth quarter, we achieved organic revenue growth of over 10%, adjusted EBITDA growth of over 13% and adjusted EPS growth of almost 12% for the quarter and almost 14% for the full year. Our attractive all-weather franchise, client centricity and alignment with favorable long-term secular trends have positioned us to deliver on the long-term growth targets we have set for MSCI.

Since MSCI's IPO a little over 18 years ago, we have achieved a compound annual growth rate of nearly 13% for total revenue, nearly 15% for adjusted EBITDA and over 16% for adjusted EPS. In addition, we have now delivered 11 consecutive years of double-digit adjusted EPS growth. We intend to continue with all these records at MSCI for the years and decades to come. In the fourth quarter and through yesterday, we also bought back nearly $958 million of MSCI shares at an average price of about $560 per share. Over the last 2 years, we have repurchased almost $3.3 billion of our shares at an average price of $554. As you can see, we have a very strong conviction on the prospects and potential of MSCI, and we believe our franchise remains undervalued.

In Q4, MSCI's operating metrics included net new subscription sales of $65 million and nonrecurring sales of $31 million, bringing total net sales to over $96 million. Q4 was, in fact, our second best quarter ever for recurring net new subscription sales, and we grew a growth rate of 18%. Across MSCI, our retention rate was over 94% for the full year. All of this resulted in total run rate of over $3.3 billion, growing 13% and comprised of total ABF run rate of $852 million, growing 26% and recurring subscription run rate of over $2.4 billion, growing over 9%. Q4 showed how MSCI is using our deep rooted competitive advantages to drive growth. With newer client segments, in particular, we are doubling down on key opportunities while reinforcing our position as the essential intelligence layer of global investing.

So for example, our index flywheel is helping clients form thematic baskets, gain global exposures, unlock new distribution channels, launch tradable products and hedge exposures. In Q4, we delivered our best quarter ever for new recurring subscription sales in Index. Meanwhile, total ETF and non-ETF AUM linked to MSCI indices reached approximately $7 trillion, driven by record inflows into our clients' ETF products linked to MSCI indices, particularly listed ETF products in Europe. In general, asset-based fees remain a consistently strong contributor to our top line with a durable track record of positive annual cash inflows into ETFs linked to MSCI indices every year stretching back more than a decade.

We also had a strong quarter in Analytics, where we posted our second best Q4 on record for new subscription sales. In Private Capital Solutions, we drove recurring sales growth of 86%, supported by our rollout of innovative new products and landing new client relationships. In Sustainability and Climate, our new subscription sales were lower than last year's levels, with particular softness in the Americas. In Sustainability, MSCI is expanding our solutions across all client segments and asset classes to address emerging risks and opportunities that go beyond environmental, social and governance matters. Examples include AI and supply chain disruptions on companies and fixed income instruments in people's portfolios.

In climate, MSCI is emphasizing physical risk and energy transition tools that promote consistent standards and a common language across companies, industries and regions. Physical risk is just one area where we have been leveraging AI to enhance our capabilities with tools such as geospatial asset intelligence. We're also harnessing AI to enhance our solutions in custom indices, risk insights, ESG controversies and private assets. For example, MSCI has decades worth of historical data on private markets, and we're now using AI to process this data in significantly larger volumes and then feed it into our total portfolio insights. Our company-wide total embrace of AI represents a technology power transformation that will increase the value of our tools for clients across the board.

I will now review our Q4 performance among individual client segments. In general, MSCI is unlocking significant opportunities across high-growth client segments. With hedge funds, MSCI delivered 13% subscription run rate growth and 26% recurring net new sales growth. One prominent deal in the quarter was the index rebalancing team at a top global hedge fund for MSCI's new extended custom index module, which spans almost 5,000 custom indices. This highlights the growing appeal of our index product ecosystem and the need for more tools from MSCI. Moving on to wealth managers. MSCI achieved nearly 11% subscription run rate growth, including 15% recurring sales growth. As we drive further adoption of our index and analytics tools among home offices and wealth platforms of large investment managers.

For example, in Asia, we closed 2 major CIO office deals for our multi-asset class factor models, which helped make 2025 our best year ever in new recurring subscription sales in the wealth segment in APAC. Among asset owners, MSCI posted close to 11% subscription run rate growth along our strongest recurring net new sales growth in 5 years, driven by private capital solutions and analytics. For example, we are seeing rising demand across regions from pension and sovereign wealth funds for our total portfolio solutions spanning public markets, multi-asset classes and especially private markets as clients increase their private asset allocations.

Shifting to banks and broker-dealers, MSCI delivered subscription run rate growth of over 9% with large deals from index and analytics. The expansion of basket trading among banks has created new opportunities for us given our capabilities in quantitative investment strategies and custom indexing. In Q4, this trend helped MSCI secure a landmark deal for our new basket builder solution with a prominent bank in the Americas. Using our tool, traders can rapidly create a standard and custom index baskets across client and internal workflows with MSCI index content and IP forming a fundamental basis of these baskets.

Turning finally to active asset managers. MSCI achieved recurring net new sales growth of 13%, primarily driven by index, along with subscription run rate growth of over 7%. Our Q4 results bode well for the gradual recovery of our performance with this important client segment. Active ETF products remain an exciting opportunity for active asset managers and for MSCI. In 2025 alone, MSCI supported our clients' launch of over 50 new fee-generating active ETF products in the market. As Q4 demonstrated, we are well positioned to benefit from AI, accelerate innovation and drive adoption of new and existing products for established and emerging client segments while still delivering compounded EPS growth for shareholders. And with that, let me turn things over to Andy. Andy?

Thanks, Henry, and hello, everyone. It's great to see the strong momentum across the business. This momentum is supported by our pace of innovation that is fueling growth across client segments and product areas. Index subscription run rate growth accelerated further to 9.4%, including 16% growth in custom indexes with some key wins among banks and hedge funds, as Henry highlighted. We also had success with asset managers, where index recurring subscription sales growth was nearly 10% and index subscription run rate growth was slightly above 8%, reflecting the expanding usage of our content.

Index retention remained strong at nearly 96% for the full year and 95% for the quarter. The acceleration in index subscription run rate growth was complemented by asset-based fee run rate growth of 26%. Equity ETFs linked to our indexes captured a record $67 billion of inflows during the quarter, totaling $204 billion for the full year. This growth is driven by extremely strong inflows into ETFs linked to MSCI developed markets ex U.S. indexes, including EFA and World and MSCI Emerging Markets Indexes, where we see large and rapidly expanding ecosystems being established around our indexes. We see extraordinary runway to fuel those franchises well into the future, and we are extending the ETF agreement with BlackRock through 2035 to solidify that tremendous future growth. To enable this growth, we will lower the fee floors impacting certain superscale ETFs on which we have been capturing a larger share of the overall economics.

The aggregate impact will translate to be roughly 0.1 basis points based on year-end 2025 AUM levels with roughly a 0.05 basis point decrease on January 1 of this year and another 0.05 basis point decrease on January 1 of next year. Outside of the timing of these adjustments, we expect the fee dynamics to remain consistent with the trajectory we have seen before with respect to our overall ETF basis points. Our close partnership with clients like BlackRock and the shared success we've achieved together position us well to drive enormous upside.

In Analytics, we had subscription run rate growth of over 8%, driven by our second highest Q4 ever for recurring sales and higher retention. Recurring sales in Analytics benefited from strong sales of our enterprise risk and performance tools, notably with banks and asset owners in addition to continued momentum with our risk models. In Sustainability and Climate, one of our largest Q4 new subscription deals was with a large European wealth tech firm, positioning MSCI to be the embedded provider of Sustainability Solutions for small- and medium-sized wealth managers in Europe aided by our clients' distribution network.

This win drove a meaningful contribution to the product line's new recurring subscription sales in Q4. In Private Capital Solutions, we saw growth accelerate on the back of closing almost $8 million of new recurring subscription sales in the quarter, an increase of 86% from the prior year. We've seen strong traction with our total plan offering and our transparency data, both of which have benefited from numerous enhancements and new capabilities. In Real Assets, run rate growth was almost 6% with improving retention as well as sales of new solutions. Turning to our 2026 guidance, which we published earlier this morning, our expense outlook reflects the powerful operating leverage benefits of our business with continued investment initiatives fueling future top line growth.

I would highlight that CapEx reflects the anticipated build-out of a new London office space as well as increases in software capitalization related to key business investments across products. Our full year tax rate guidance reflects an expected Q1 tax rate of 18% to 20%, which is higher than past years as we will likely have a slight stock-based compensation headwind this quarter. Free cash flow guidance reflects the expectation of approximately $100 million of higher expected cash taxes in 2026 compared to 2025 due to various onetime discrete tax benefits in 2025 and the timing of cash tax payments between '25 and '26. Our capital position remains strong with an ending cash balance of over $515 million at the end of December.

Subsequently, we have paid down $125 million on our revolver, which now stands at $175 million. We will continue to pay down and draw the revolver in modest amounts from time to time to support our capital uses and optimize interest expense. In summary, MSCI's strong Q4 results are reflective of our mission-critical, durable solutions and our accelerating pace of innovation. We are seeing solid momentum in delivering new products, capabilities and enhanced go-to-market efforts, and these are translating through to tangible results. We are focused on meeting client needs and enhancing value across client segments by delivering increasingly integrated solutions. As we've said in the past, the goal of MSCI is to have a fully integrated company in which each product line benefits from and contributes to every other product line.

This will amplify the powerful compounding financial algorithm that has fueled our business, and we remain committed to delivering the firm-wide long-term targets of low double-digit revenue growth, excluding ABF, adjusted EBITDA expense growth of high single digit to low double digit and adjusted EBITDA growth of low to mid-teens, enabled by the powerful operating leverage of our business. And we expect ABF to be an outsized double-digit grower through cycles and a key driver of the financial algorithm. However, we will no longer maintain product line-specific long-term targets to better reflect our focus on managing our investments across integrated product lines and delivering outsized growth across the company.

Lastly, this change will not impact our current reporting, and we will continue to provide the same level of transparency and disclosure with continued reporting along product lines. As you can tell, we are very excited with the strong pipeline and opportunities in front of us, and we look forward to keeping you posted on our progress. Before we open the line for questions, I'll turn it back to Henry, who wants to take a moment to recognize Baer as he approaches retirement.

Thanks, Andy. I want to take this moment to recognize my business partner and friend of 26 years, Baer Pettit, who has played a critical role in turning MSCI into the standard setter we are today. Baer announced his retirement in November, and he will formally step down as President on March 1.

I know I speak for the entire senior leadership team at MSCI when I say that we will miss him tremendously. Looking ahead, I'm now excited to work with Alvise Munari and Jorge Mina, who many of our shareholders and the analysts that follow us already know very well as we seek to build on MSCI's momentum and deepen our relationships with both newer and more established client segments. And with that, over to you, my very good friend and business partner of many decades, Baer Pettit. Baer?

Thank you, Henry, and greetings to you all on this my final earnings call. As you may doubtless imagine, this is something of a difficult moment for me and one about which I have mixed emotions. Serving as MSCI's President and a member of our Board of Directors has been a tremendous honor and privilege that I could not have imagined when I joined the firm's Head of EMEA coverage over 25 years ago. Not many people get the chance to impact the global investment ecosystem, and I'm grateful to have had the unique opportunity to help lead MSCI's growth and influence on the investment industry. As a long-term owner operator, I was clearly delighted by the Q4 results, which show the resilience of that all-weather franchise, which we have spoken about on numerous occasions on this call.

If there's one thing that has characterized MSCI in the quarter of a century that I've been here, it is the firm's constant ability to reinvent itself and to seek new opportunities in a variety of market and industry context. Many of those opportunities have proven to be extremely resilient and will remain a source of shareholder value for many decades ahead. The highly creative and client-focused teams at MSCI are wired to always keep looking for new opportunities and to drive client value and hence, the growth of the firm. The evolution of MSCI into a truly multi-asset class provider of insight and actionable content for investors and other market participants has not happened overnight.

The content and capabilities have grown both through organic investments and the variety of acquisitions with which you are familiar. The great power of the MSCI franchise is rooted in our talented people, who I know will continue to set new standards and drive innovation. It is also grounded in the value that our clients and shareholders derive from the growing number and variety of solutions MSCI deploys. This is what in the past I have referred to as 1 plus 1 equals 3.

Notably, it is clear that the efforts that have been put into private markets are really starting to pay off and that this strong combination of public and private markets capabilities will be a key driver of our franchise. And these capabilities create opportunities in a variety of client segments across the globe. I have no immediate plans ahead of me. It truly has been an amazing journey for which I thank all my colleagues at the firm. I'm certain that as a shareholder, my retirement savings are in good hands and that this great franchise will continue to create value for clients, shareholders and employees for a long time to come. Thank you very much. And with that, operator, please open the line for questions.

[Operator Instructions] Our first question for today comes from the line of Toni Kaplan from Morgan Stanley.

Baer, I really wish you all the best. Henry, I wanted to talk about AI. You talked about some of the launches that you made. Which do you think are going to be sort of the most meaningful for adoption in the near or medium term, however you want to frame it? Which clients are showing the most interest? And I guess, what could this mean for your growth rate both in maybe '26, but also even beyond that?

Thank you, Toni. The journey with AI started 3, 4 years ago for us and initially has been extremely focused on creating AI agents to help us with the day-to-day operations of the company. We use AI extensively in applying to understanding controversies, for example, on ESG ratings. We've been using AI very, very deeply in the gathering of tremendous amount of data in the private markets and private assets and the like. So those are 2 big examples, but we -- there are about 120, 140 projects that cut across the company in using AI to augment the capacity of our smart and talented employees to leverage their smartness and capabilities. Then halfway through it, we started focusing intensely on using AI for products.

The first application of it was in our Analytics business in terms of putting AI insights into the portfolios that are running in our servers for our clients, AI insights to understand the performance, the risk, the correlations. So in a way, it's like adding hundreds of people on people's eyes, in this case, digital people, of course, agents to understand what's going on in the performance of our portfolios and the activities of our clients' portfolios. And therefore, that has taken off. We've had a lot of embrace of what we call AI insights in the Analytics product line. So that's been a big benefit.

Then we look at AI in terms of automating the custom index creation capability. As you know well, we've been working for a couple of years on designing a software application integrated with our production environment to create a large number of very fast custom indices and custom baskets for trading, for investment, for investment products and the like. One of the things that we realized was a slowdown in that process is the human interaction of understanding the methodology, back testing the methodology and all of that. So we've been training AI agents to do that process much faster than the humans with obviously a lot of human supervision, right? So that is something that is already in place and it's already being rolled out as another example of that.

So I think that most of our product lines will benefit enormously with AI agents in terms of either servicing the client or giving insight to the portfolio to our clients or being able to much faster create IP and the like. But I just wanted to highlight 2 examples on the efficiency side in terms of controversies and data capture and private assets and 2 examples on the product side. But I could give you 20 other examples in each category, but I just wanted to exemplify the enormous potential. The last thing that I would say is still early days in our application of AI across the board in MSCI. And we're extremely excited. The company is turning into a total AI machine, and we think it's a godsend to us, as I've said in the prior call.

And our next question comes from the line of Alex Kramm from UBS.

I wanted to come back to a topic that I think I asked about a couple of times last year, which was this whole idea of international flows picking up and flows moving away from the U.S. I think we've started to really observe this in the marketplace now. I heard there was a recent asset management conference in Europe where the sentiment was better than it's been in years. So it seems like there's excitement growing in your customer base. So wondering if this is actually starting to drive new sales, better conversations? And maybe most importantly, is it giving you better opportunities for maybe pricing a little bit more aggressively?

Thank you, Alex. All of the above for sure. Now we're a subscription business, as you know. So things don't take off immediately the same way that they don't go down immediately. So all of this stuff takes time. And of course, you -- a lot of what we do is serve the long-term asset owners in the form of pension funds, sovereign wealth funds, endowments, foundations, family offices and the like. And a lot of those parties don't turn their portfolios on a dime, right? They look at the secular trends, they take their time and all of that. So obviously, as you know well, Alex, the immediate effect has been in the devaluation of the dollar. Obviously, the dollar has been out of favor and people have been selling the dollar and selling dollar assets, as we know.

And therefore, that has translated into significant flows into MSCI equity indexes that are ex U.S., developed markets ex U.S. And likewise, we've seen the revival of emerging markets as well. I mean, we saw Korea hitting an all-time high for a couple of days this week. and the like. So we are definitely seeing the benefit of that. And we're seeing the benefit in the flows, the $200-plus billion of flows into ETF linked to MSCI indices, the ETF of our clients linked to MSCI indices. That is a strong indication that people are putting their assets in non-dollar assets, right, in those dollar securities. So that's another trend. On the subscription side, we, for sure, have seen a significant uptick in activity in Europe, in EMEA. Evaluating our -- in one of our QBRs last week, we were very pleasantly -- or pleased and surprised to some extent that our run rate in EMEA in Index including subscription and ABF is higher now than the Americas, which is an incredible feat, right, to achieve given the nature of the capital markets in the United States.

And that is on 2 fronts. One, the subscription of our products in EMEA plus obviously, the huge inflow of assets into EMEA listed ETF. I mentioned that in my prepared remarks that we have seen a significant increase in inflows into ETF listed in Europe. So we're seeing that. And we had a very strong quarter in Asia Pacific, obviously, in the fourth quarter. Obviously, sometimes it is -- one quarter is very strong. The other quarter may be a little weaker or softer. But I think that we have a very great franchise in APAC, and we're beginning to see significant activity inside APAC, and away from the APAC investors going into dollar assets. But it's still very early days in all of this. The great rotation of assets away from dollar assets in the U.S. is just an early analysis. It is too early to tell whether that will continue on a secular basis or it's just cyclical for now, given the geopolitical aspects and the economic aspects, but we're well positioned either way.

And our next question comes from the line of Manav Patnaik from Barclays.

This is Brendan on for Manav. Just wanted to ask on the private assets, look like it has its best net new quarter. And it's been -- you've obviously been excited about the opportunity there, but it's been taken some time for it to unfold. But I guess what drove that? And then is this the early innings of a trend do you think? Or is there some kind of onetime item? Or what do you guys see there?

Sure, sure. Yes. Thanks, Brendan. It's Andy. So yes, it's been great to see the PCS run rate tick up. We also saw the real asset run rate growth tick up a bit. And we are seeing encouraging trends on a number of the key areas that we've been investing in and building out and enhancing over the last couple of years. Maybe just to give a couple of areas of focus and areas where we've seen traction on the PCS side first. The strong sales were around areas like our total plan offering, which we've been really developing and proactively going to market around as well as our transparency offerings. Both of those, we've seen very good momentum on and a pickup in growth rates.

We saw good growth not only in Americas, which, as you know, is a big part of the PCS franchise, but we saw actually tremendous success and traction in EMEA as well. That's been an area we've been intently focused on and building out our go-to-market effort, and we are starting to see some shoots there, which is encouraging. The outlook is positive. We believe this is a massive, massive opportunity for us. We've got a very robust product development pipeline. And so we've mentioned some of these in the past, but we continually come to market with capabilities and content sets that really don't exist in the market today, and we know there is strong demand for. So things like our recently launched Document Management and SourceView offering. We're seeing significant client interest around that and positions us to do more for clients, so continue to expand the value that we are bringing to them.

And by the way, that's something that is enabled by AI as well. And AI has been a key enabler, not only on the data sourcing front, as Henry said, but also expanding the range of capabilities and insights we can give to clients. I would also highlight things like our asset and deal level metrics, things like our suite of indexes, including our private capital -- or sorry, private credit indexes are all things that we're now in a position, I think, to drive that adoption and standardization. And so it is good to see the strong fourth quarter. We see attractive opportunities ahead of us. We see good momentum here and think we can continue to drive that. And we are also getting strong traction with a wide range of partners and distribution channels such that our content and solutions are going to be increasingly accessible and easily usable across a wider range of the ecosystem, and that includes in areas like the wealth channel, which we believe is a big opportunity.

On the real asset front, definitely some positive signs there. I think we've seen some green shoots in the industry. I think investment rose in the U.S. across nearly all commercial real estate sectors. There are some areas like office and retail, where there is double-digit growth. And we've seen private capital moving from not only institutions, but we've seen private investment dollars coming back in as well. So it's all good signs, and we're seeing that translate through to some early movement. We still got a ways to go, but early movement with our Index Intel offering and traction with our -- some of our new products like our data center product. So early days on that front, but definitely encouraging, but very exciting around the PCS opportunity.

And our next question comes from the line of Ashish Sabadra from RBC Capital Markets.

Andy, I wanted to ask you a question about the free cash flow puts and takes. You obviously called out the $100 million of cash taxes impacting free cash flow. I know you don't guide -- so I was just wondering if you could talk about some other puts and takes like CapEx and interest expense and stuff like that. And I know you don't guide to adjusted net income and EPS, but we all look at free cash flow as a proxy. So is the right way to think about it like on top of free cash flow as that cash tax and the reduction in share count, and we should still get the low to mid-teens EPS growth in '26 in line with the long-term targets?

Yes. So I would -- I'd highlight a few things in addition to the cash taxes, which was a meaningful item here. But we've got a couple of sizable timing-related items that are depressing the free cash flow in 2026. But I would highlight that we are projecting strong double-digit collection growth with stable working capital dynamics. So the core fundamental underlying dynamics of the business remain quite healthy. In addition to the cash taxes, which, as I alluded to, is expected to be roughly $100 million higher than 2026. Part of that relates to some tax payment deferrals from '25 to '26, about $30 million of those and roughly $50 million of onetime discrete benefits in '25.

But on top of that, we also, as a reminder, issued -- had 2 debt issuances in the third and fourth quarters of 2025. Just given the interest payment schedules on those, we had no cash interest payments in '25. So there's going to be a meaningful step-up in the cash interest expense in '26 to the tune of $90 million. And so that creates some noise in that period-to-period comparison. And then the last thing I would highlight, and you see this in the CapEx guidance is we are building out a new London office space. As you know, London is one of our key offices, one of our bigger offices. We are moving locations there, and we'll have meaningful CapEx around that build-out, which will amount to about $25 million of occupancy CapEx.

Beyond that, we are -- and I alluded to this, we are continuing to invest in software solutions. Henry touched on this, notable investments into custom index and basket builder capabilities, which we're very excited about, many of the PCS capabilities that I just alluded to. And so that also is adding to the CapEx. But those 3 items are leading to some comparison noise when you look at '25 versus '26. But if you look at top line and cash collections continues to be very healthy. And we continue to believe there's a strong trajectory of free cash flow growth going forward here, particularly free cash flow per share.

And our next question comes from the line of Alexander Hess from JPMorgan.

First of all, Baer, congratulations on your retirement. And yes, congratulations again. I want to maybe ask about the reiteration of the medium-term targets and then some comments, Andy, that you said that about the strength of the pipeline. Can you give us a little bit more color on how you break down that pipeline strength into sort of a cyclical uplift, the megatrends that have been discussed on the call versus new product innovation? I know that you called out sort of a number that, that was last quarter on new sales. But just sort of any color on what's driving that pipeline would be really helpful and how that might convert into the low double-digit target.

Sure. Yes. So as I mentioned, we're definitely encouraged by the pipeline. Henry alluded to this earlier, but there is an environmental dynamic here on the margin. I think we've seen constructive buying behavior across many client segments. On the margin, we've seen a good degree of confidence on a number of fronts. I think the sustained favorable market momentum is something that does feed into that confidence. And as we mentioned, we saw pretty good results and some improvement in sales and growth with asset managers, which is an area where, listen, we continue to see the secular pressures, and we'll continue to see some of those secular dynamics at play. But we've seen on the margin a slightly healthier environment across asset managers.

But I would highlight, most importantly, as you alluded to, a lot of the momentum we see and the pipeline opportunities are related to the actions that we are taking. And so it does relate to the innovations that we are releasing across the company, our enhancements to client service and go-to-market and our orientation around client segments. I think on all those fronts, we're opening opportunities up in many of these new big client segments as well as within our existing well-established client segment areas. So we're seeing decent momentum on both fronts here. Just to specifically hit your question about new product contribution to sales. Listen, we saw in 2025, roughly a 20% increase in the contribution to recurring sales from recently introduced products. We continue to see a strong and building pipeline of opportunities related to those new products and those cut across almost every part of the company, but it's something that is definitely creating pipeline opportunities for us. So we're definitely excited.

And our next question comes from the line of Kelsey Zhu from Autonomous.

On ESG, I guess, a while ago, we talked about the regulatory headwinds or regulatory uncertainty in Europe and how that's impacted growth. What are you seeing in that market more recently? And when should we expect ESG to recover in Europe?

So the recovery in Europe is already taking place. No doubt about that. Not at the pace that we wish it will be happening, but it's already taking place. Obviously, it's in the context of a new reality that not everything in terms of performance and portfolio construction needs to be ESG when the pendulum swung too far on that side. The big, big focus is on financial materiality in people's portfolios. And we're also benefiting from a consolidation of suppliers of ESG data and ratings and analytics into the European market. We alluded to this in the prepared remarks that one of the important sales that took place in Sustainability was this wealth technology platform in which we have -- we become the supplier of choice compared to others, and they've eliminated that other supply. So there is a benefit that we're getting from that.

I think -- so I'm hopeful and the pipeline indicates that we will continue to grow at a decent clip in Sustainability in Europe. I don't think we have reached bottom yet in the Americas market, in the U.S. market, not in Canada, but in the U.S., given some of the political sort of undertones in the various states and all of that. So that will continue to be soft. I think we're holding our own, and we're consolidating. We're being very aggressive in displacing others in the marketplace, et cetera, but that is going to remain a pretty significant battleground on that. And in APAC, the business never took off totally, and it kind of slowed down a little bit given all the issues around the world. But we've been putting in place new management, new salespeople, new dialogue and penetration. And I think that it will be a meaningful, maybe not a strong contributor to our Sustainability sales.

Now more importantly than all of this, I will say, strategically, is one of the things that is completely dawn on us was that the onset of the ESG revolution, so to speak, was just the early days of understanding emerging nontraditional risks and opportunities and the analysis of securities and then the build-out of portfolios. So as time goes by, we will be using a lot of our expertise and our data and our client relationships to expand the ESG/Sustainability franchise into analyzing the effect of other risks in portfolios. And those are obviously, tariffs. We have enough data and capabilities to analyze where companies are producing goods and services, right, and where they're selling them. Supply chain, the effect of AI on companies, we have enough data and are getting much more to analyze the effect of AI. Is it a good thing for a company? Is it a bad thing for a company and the like.

So obviously, climate will be the mother of all emerging risks in clients' portfolios. We will be doing that, especially on a physical risk basis. We're really pivoting significantly from not just transition risk, but to physical risk, which is where the big demand is today and especially with shorter-term pools of capital like banks and insurance companies in addition to the longer-term pools of capital. So we're very excited about this area of our business. It is going through a transformation for sure. It has slowed down, but we're hopeful that with all the comments that I made plus the pivoting towards other forms of emerging risk, given the franchise that we have and the expertise that this will be a long-term grower for us.

And our next question comes from the line of Craig Huber from Huber Research Partners.

Baer, all the best to you going forward. I thought you did a great job. Andy, on the cost side of things, have a couple of quick questions here for you. As you know, the last 4 years or so 2021 to '24, your Analytics costs were flat, give or take. And then the last 2 quarters, back half of last year, they're up 11% to 12%. Can you just give us a little more understanding about what you guys are investing in there in the Analytics area? And is this -- what should we expect there in 2026? And then my nitpick question on the Sustainability and Climate side of things, your costs there in the fourth quarter, I guess, were down about 6% year-over-year. Was that just some true-up maybe you did on maybe bonus accruals? Or what happened there? I want to understand that also going forward for Sustainability.

Sure. Yes. So Craig, on the Analytics side, we can get some natural lumpiness, both on the revenue side and on the expense side and the expenditure side more generally in Analytics. Things that will impact EBITDA expenses, but overall operating expenses as well are things like the level of capitalization that we see in any given period. Expenses like severance, and that's something where we did see some variance, particularly in the fourth quarter, can cause some swings in period-to-period comparisons. FX is one that you've probably seen in the past. We do have some meaningful exposure to non-USD employee expenditures on the Analytics side.

So FX, especially when you see a depreciating dollar can lead to some expense pressure there. And so a lot of it is just kind of the traditional drivers of lumpiness that we will see. There have been some elevated expenses related to infrastructure investments that we've been making. Again, I wouldn't focus too much on that, but that has been a piece that stepped up. We are, as Henry alluded to, making a number of enhancements around our AI insights, many of the capabilities that he alluded to in terms of being able to dynamically build baskets, look at signals -- investment signals on a real-time basis. We've got some very cool projects going on and continue to build out capabilities in other frontiers across our equity analytics and multi-asset class analytics.

So I wouldn't focus too much there. And as you know, we don't necessarily solve for -- aren't driving for specific margin or even expense growth rate in any specific segment, but continue to allocate just based on where we see the attractive investment opportunities. Yes. On the Sustainability and Climate front, listen, I would say along those same lines, we always manage our expenditures dynamically, and we are proactively allocating based on the opportunities we see and market dynamics.

We are continually reallocating to those areas that we think generate the fastest payback and have the highest return. We continue to invest in definitely key areas in Sustainability and Climate. Henry touched on a number of those areas that we are focused on. But on the margin, there are areas where we're investing less. And so on the full year, you did see roughly flat. I think it was 2% expense growth, as you alluded to in the fourth quarter, down 6%. So there is some noise around other expenses that can be lumpy, but you can see we are generally growing expenses less in Sustainability and Climate.

And our next question comes from the line of Owen Lau from Clear Street.

For private asset, you highlighted a number of opportunities there. One of the key themes in this space is tokenization. How does this tokenization trend impact your world or you don't see much of an impact at this point?

Sure. Yes. So I think it is potentially a big catalyst for us on a number of fronts. I'd say it hasn't been significant to this point. I think it can have a significant impact on markets and financial products, a number of areas that we are focused on and see big potential. But your question specifically around private assets, listen, we know there is -- and this is why we are investing in the space and seeing tremendous opportunities. Investors are getting deeper into what is in their portfolios, understanding their risk, what's driving returns, what's the value that managers are providing, how to think about, I'd say, more of a traditional asset allocation across private assets.

And so you see a tendency, especially with more open-ended type vehicle structures and continuation funds that people are more dynamic in how they invest their money across private assets. And it is a cumbersome process today. I think as many of you appreciate, we have seen tremendous growth in the secondary markets there, both secondary funds, but also secondary transactions of LP interest. As the world moves towards tokenization and really streamlines ownership transitions, sales and purchases of private assets, it's going to necessitate the need for things that we are investing in, like evaluated prices, like credit risk, like portfolio tools. And so we think tokenization could be a big accelerant for not only the private markets generally, but the tools that we offer.

And our next question comes from the line of Scott Wurtzel from Wolfe Research.

Just wanted to go back to some of the remarks you made on the active asset manager end market. I mean it sounds like there's been a little bit of a shift in tone towards kind of more positive outlook on that end market. So just wondering if you can kind of share a little bit more color on some of the trends you're seeing there and what's driving maybe a little bit more positive sentiment on the outlook there.

Yes. So clearly, active asset management in a world of high concentration in indices, especially the superscalers and technology have had a tough time performing relative to indices around the world. So we have seen continued outflows, cost pressures and the like. So what we have done throughout '25 is evaluate which is the best way that we can help this industry. They need us badly in order to return to high growth and profitability. And so I alluded to the move of active portfolios to an ETF wrapper and MSCI can play a very large role in doing that.

Secondly is to help a lot of these clients create investment products so that we are turning -- gradually turning MSCI from a cost center in the -- inside many of these managers to trying to be a profit center, a revenue-producing center, a new product development center. Now not every manager will want us to be as proactive, but we are offering that opportunity to people in that. We are also helping clients consolidate suppliers into us. We're an extremely reliable, dependable supplier. Many of these active managers have a lot of -- a dozen index suppliers, a dozen analytics suppliers and all of that, and they can easily consolidate to us.

So that's another initiative that we have and therefore displacing competitors in that area. So it's a gradual process. But the important part, and I think what you're seeing in the results is that we are -- we took a meaningful part of the first half of '25 to say we need to change the way we approach this segment. We cannot continue to be just one more cost pressure on them, and that's bearing a lot of fruits. And the journey is still early, and we believe that we can return to higher growth with them.

And our next question comes from the line of Faiza Alwy from Deutsche Bank.

I wanted to ask about the AI efficiencies that you referenced earlier in the call and have referenced previously. So sorry for the 2-parter. But one, I'm curious if you're able to potentially quantify some of the benefits from the efficiencies that you're expecting this year and how much incrementally you're able to reinvest in the business? And then I guess, longer term, I know you haven't changed sort of your longer-term outlook around profitability, but I'm curious if at some point, this can result in better profitability over time? Or do you think there's just going to be continued reinvestment, whether it's in the form of new products or potentially some pricing give back to your clients?

Yes. So it's definitely a question that necessitates maybe a long answer, but we're going to try to be as brief as possible. We can follow up with you offline. The first thing strategically to recognize is AI is a godsend to us in 2 directions. The first direction, very importantly, is that through the application of AI, we can lower the run rate of expenses in our existing business. And in doing so, we can then take those savings and put them back into the run rate of investments in what we call the change the business, the new innovation, the new areas. We have enormous opportunities at MSCI, and we are severely handicapped in prosecuting all those opportunities by the size of our investment dollars.

And we have been extremely disciplined not to take the money out of the profitability of the company. It has to come from the reallocation of cost in the company. So that is something that is beginning to play into the expenses of the company in 2026. It started a little bit in '25, but it's going to play in '26, it's going to accelerate in '27 and then accelerate further in '28 to the point in which we can grow the rate of growth of our organic investments in the company at a much higher pace, probably double the pace that we've been growing so far. So that is a significant opportunity for us. The second one is AI is going to help us accelerate significantly the pace of product introduction because, for example, we've been able to -- through AI and the application of AI to gather much more data and more granular data in private assets.

And that has allowed us to create terms and conditions of credit in private credit, have been able to help us analyze the holdings of funds so we can create eventually holdings-based private asset indices and things like that. So that's going to accelerate us quite a lot. And since we've never been a big workflow software applications company, AI also will help us accelerate the ability of people to use our content. We have something called at MSCI, how do our clients consume our content? We do analysis of every product line like that. And through AI, our clients will be able to consume our content much easily, much broadly than through sort of inflexible sort of workflow applications and the like. So those are a few examples of that. Why don't we take it offline so we can -- our team can tell you more about the quantification of all of this.

And our next question comes from the line of George Tong from Goldman Sachs.

This is Anna Wu on for George Tong. I wanted to start by extending our congratulations and best wishes to Baer. My question is on cancellations. Can you give us some color on conditions you believe that needs to occur before we might see a sustained reduction in cancellations? And how do you see those underlying dynamics across segments?

Yes. Maybe an overarching comment here, and I alluded to this earlier, we are seeing some improvement in overall client dynamics on the margin. Generally, it's relatively consistent. But on the margin in areas like asset managers, even in places like EMEA, we are seeing some improving dynamics. So that's helpful. I would say the areas where we see lower retention rates are in -- and you've seen a slightly lower retention rate in Sustainability and Climate. I think Henry alluded to some of the pressures that we're seeing in the Americas on the Sustainability and Climate front.

And then in real assets, we've seen a slightly lower retention rate, although it has been lumpy and has improved in spots. And as I alluded to, we are seeing some encouraging trends on the real asset front. Outside of that, we, I think, are seeing pretty good engagement from clients. We're seeing overall health improving. And I think a key component of driving the higher retention rates beyond just the environment are the things that we are doing. So enhancements to client service, which are resulting in enhanced client satisfaction, improvements in the products that we're releasing and the innovations we talked about, many of which are to facilitate and support price increases.

And so I'd say we'll continue to see some of the pressures in those same areas. I've mentioned this in the past on the Sustainability and Climate front, on the real asset front, some lingering pressures in parts of the asset management market. But overall, I'd say we've got good momentum, and we're doing the right things to drive strong engagement and retention.

And our next question comes from the line of David Motemaden from Evercore ISI.

Andy, in the past, you had mentioned some potentially elevated cancels for asset managers in Europe. I'm wondering if that played any impact on the retention levels this quarter and how you're thinking about that in 2026?

Yes. It's -- listen, building off the last question and my response there. Yes, it has been one of the dynamics that we've seen for the last couple of years actually. We've seen a slightly lower retention rate in EMEA. Just good to mention that. I think we saw a retention rate slightly below 93% in EMEA in Q4 versus a retention rate slightly above 94% in the Americas in Q4. It does bounce around quarter-to-quarter, but generally, we've seen a higher retention rate in the Americas for the last couple of years, and I think that is a reflection of those dynamics that I've alluded to in the past around some of the pressures on asset managers there, some of the M&A transactions that have occurred.

I'd say we're not expecting any pickup in the future. As I alluded to, if anything, we're seeing some improvement in client dynamics on the margin. But I would say we're generally seeing a fairly consistent dynamic on the EMEA front. And that lower retention rate actually, we see it across product lines other than S&C. So Sustainability and Climate does have a higher retention rate in EMEA versus the Americas. But outside of that, we see a slightly lower retention rate in EMEA versus the Americas. So I'd say no notable change in dynamics, if anything, slight improvement on that front.

And our next question comes from the line of Jason Haas from Wells Fargo.

I'm curious if you could help reiterate what's driving the strength in index recurring subscription revenue outside of asset managers. Is there any way to help like stack rank what those drivers are and just your level of confidence in those continuing?

Sure. Yes, it is multifaceted. But at the highest level, we are seeing a move in the investment industry, and this is one of the most powerful trends impacting the investment industry is a move towards personalization, customization, customized outcomes, custom portfolios. And index is a very efficient and effective mechanism to reflect a specific investment view, investment objective or a strategy that an investment industry participant has. And so that is underlying the opportunities we see across the new products we're releasing, existing products that we have as well as the client segments that we're going after.

Maybe to tackle your question along client segment lines, our highest growth client segment has been and in the fourth quarter was hedge funds. You've heard us talk a lot about the trading ecosystem and opportunity with hedge funds, broker-dealers, trading firms. That growth is being fueled by their thirst for content. That's content to help them better understand markets better, better understand our indexes. They are increasingly looking for more content sets that we're actively releasing that ultimately help them navigate the markets and capitalize on opportunities more effectively. And so we saw 19% growth with hedge funds in the fourth quarter. We saw 10% growth with broker-dealers. And related to that, we see broker-dealers developing things like over-the-counter derivatives, index-linked swaps, structured products as tools to help their clients, whether those are institutions or even high net worth individuals achieve specific investment objectives and risk and return and exposure objectives across their portfolio.

And then even on asset managers and asset owners, when you look at the growth we've seen there, it is -- and the growth is, I think, 8% on both asset managers and asset owners and index. It is licensing more content from us across more parts of their organization and more use cases, and they are just finding more utility in the breadth of content and tools that we are providing on the index front that enable them to achieve their specific objectives via index portfolios. And so I'd say broadly, it's being fueled by this need and demand for custom outcomes, we're feeding that with our existing Index IP, but also more and more custom indexes.

Henry alluded to some of the new capabilities that we are releasing now and on the verge of releasing over the coming quarters, things like our Basket Builder, advancements on the custom index front that allow clients to actually directly interact with and back test portfolios and build their outcomes. We think that's going to unlock massive opportunities. So listen, in the near term, we're fueling the growth, you're seeing nice growth, and we have been for several years with the trading ecosystem buying more content, but we're seeing elevated growth and enhancing opportunities across all parts of the investment ecosystem to use our index content. So I'd say it's a very compelling opportunity and part of the reason we remain so bullish and excited about the future.

And our final question for today comes from the line of Alex Kramm from UBS.

Sounded like you wanted some follow-ups, so hear this. Now this is a quick one, and it's actually a follow-up to my earlier question. I think Henry suggested that you are having a little bit more pricing power as the environment has gotten better. So maybe for you, Andy, any more meat you can put around this? I think in the past, you've talked about contribution from pricing, et cetera. So maybe a little bit more in terms of 2026, what are you expecting across the different segments?

Yes. I would say, generally, the contribution from price increase has been relatively stable. There are puts and takes across the business based on innovations, enhancements we make to existing services, client health and usage of our tools. And as I've alluded to before, there are certain areas or Henry talked about it in areas like S&C where the health does vary in different geographies. But overall, we've seen a relatively stable contribution from price increases.

As you're asking about, and I think I alluded to this back in December, and we've mentioned before, the enhancements we are making on many fronts, we are monetizing through price increases. And so that's something that's not only supporting up sales, but price increases. So I would say there's some nice sustainability and durability to our ability to continue to increase price because we are significantly enhancing the value that our clients get from our tools. And this is an area where AI is particularly exciting, where it's allowing our clients to do more with the services we provide and be more efficient in how they operate. And those should allow us to continue to unlock commercial value through price increases over time.

And I'd now like to hand the program back to Henry Fernandez, Chairman and CEO, for any further remarks.

So thank you, everyone, for joining us today. As we have described this morning, MSCI's all-weather franchise helped us complete another strong year of underlying business performance and attractive margins. We are also building momentum in the company in terms of creatively and aggressively selling across all client segments what we currently have. And the new product machine and the new innovation mode of MSCI is getting into high gear, and that will help us continue the momentum that we have generated in the last 2 quarters. It feels like we kind of bottom out in the second quarter of last year.

Obviously, too early to tell at this point, but we feel pretty confident and pretty encouraged by the pace of innovation, the pace of selling, the dialogue with clients, the market drop and for sure, the level of innovation and product launches that we are achieving. I'd like to take this opportunity one more time to thank my long-time friend and business partner, Baer. MSCI would not be what it is today without Baer, your contributions, your leadership, your dedication, your owner-operator mentality. We wish you great happiness and fulfillment and good health in your retirement. And we, for sure, will be taking care of your retirement dollars here and make them multiply. So with that, again, I'd like to thank everyone.

And thank you, Henry, for your partnership, an incredible leadership, which I'm very confident will continue.

Thank you. Thank you all.

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

Hello, everyone. Thank you very much. I'm Alex Kramm, Senior Research Analyst at UBS, covering exchanges and business services. With me here to kick off my portion of the program is Andy Wiechmann, CFO at MSCI. Thanks for being here. got set for the first time.

Great to be here. Amazing event. Thank you for having us.

Yes. A lot of interest in tech and AI these days. But look, in the interest of time, why don't we just jump in with the conversation here. And from my perspective, always helpful for the audience to start very big picture. So look, MSCI has had some pretty impressive long-term targets out there, double-digit subscription revenue growth and low double digits -- sorry, low to mid-teens EBITDA growth, correct me if I'm there. We'll get into the business details here in a minute. But maybe in very broad strokes, why don't you outline? Why the business is positioned to [ pull ] the growth in particular, given the results in the last couple of years have not been quite there?

Yes, sure. So I think you hit the there the , which is a big picture. And I think to understand the opportunity set that fuels that growth trajectory, it's important to start with the big picture. As you know, we are a provider to the investment management industry, more broadly, the capital markets. .

And if you look at the biggest trends taking place within investing, you're seeing a move towards rules based or systematic, if you will, customized portfolios and customized solutions.

That is one of the biggest trends you are seeing across the investment industry, all parts of the investment industry. That's manifesting itself in things like multi-asset class solutions portfolios, model portfolios, direct index portfolios, structured products, basket trades, all those are some manifestation of that more systematic personalized type of investment strategy.

And across all those areas, the necessary ingredients are frameworks to define the investment opportunity set. So how do I think about sector, sizes, geographies, styles, factors in a systematic way, that is what MSCI does. That's the core of what we do. And then on top of that, you need consistent ways to think about the drivers of risk and return that is what our factor models do. You need multi-asset class risk management and performance management solutions.

That is what our multi-asset class risk and performance analytics tool do. And you need these frameworks [indiscernible] all asset classes. And we are unique in having everything from benchmarks, but through to risk models, risk frameworks and risk management tools across all asset classes. And so we are uniquely positioned to help drive this transformation towards customization. And so the exciting thing for us is not only does that mean we can do more for asset managers that are pivoting their business model, and that's our largest client segment, but we are seeing tremendous opportunities in client segments where we've historically been small and that is there is like wealth management, areas like broker-dealers, hedge funds, the trading community more broadly, insurance companies, corporates directly.

These are outsized growth areas for us. And we have been ramping up our innovation geared towards those use cases and those client segments. And though we are quite bullish about that opportunity set. And the way we are going to get there is that [indiscernible] doing more with our existing well-established asset manager client bases, asset owners that are also pivoting in this direction. But ramping up and we've been doing [indiscernible] solutions geared at helping wealth managers, insurance companies, hedge funds broker-dealers, the corporates directly, the trading community banks and we're seeing that traction.

So we are quite encouraged and see that trajectory to drive those long-term results. And then you alluded to the profit long-term EBITDA targets that we have. It's important to keep in mind that everything we do is we're developing IP-based solutions that we generally develop once and sell many times to many users. So there is inherent operating leverage, and that gives us the ability to both reinvest in the business significantly.

And that is particularly the case with AI today while driving attractive profitability growth. And so we are confident in that dual mandate that we have to drive sustained strong top line growth, but also reinvesting in the business. sufficiently to fuel that growth while delivering attractive profitability growth.

Okay. Perfect. Thank you. Great overview. But now, obviously, we need to think a little bit more short term. So sales improved a bit or very nicely actually. And you certainly sound more optimistic on the call. Now with less than a month left in the fourth quarter or the year actually, and give [indiscernible] hear a [indiscernible] event. How are things tracking at the moment? And how should we be thinking about 2026?

Yes. Yes. So you're right. We had solid Q3 results. We had record Q3 levels for recurring sales and recurring net new or close to in index and analytics, our 2 largest client segment -- or our 2 largest product segments. And that was fueled by not only [ trashing ] on many of these newer client segments with the newer solutions I alluded to. And so that's something that gives us a lot of confidence, but we also got strong traction with asset managers.

And so there have been a number of factors at play that have contributed to the slowdown in overall growth over the last few years, everything from some of the noise we've seen in sustainability and climate. We've seen some noise in the commercial real estate space, some pressure particularly a year or 2 years ago with active asset managers. And so that has led to some slowdown, but we're in a position now where we have been rolling out solutions. We've been getting traction enhancing our go-to-market with many of these client segments that I alluded to earlier, and at the same time, enhancing our value proposition to active asset managers to help them, as I alluded to in the last question, transform their business model.

And so there's going to continue to be some noise in there. But overall, we remain very encouraged I think you heard Henry's comments on our third quarter earnings call that we are seeing traction on many of these new solutions. And those are going to help fuel momentum and sustained growth well into the future.

Obviously, we're not -- we don't provide guidance or commentary specifically on Q4, 2026 around operating metrics. But I will say, we're bullish and we're encouraged about the momentum we're seeing across the business.

I had to try. But -- and then quickly on the other side, you touched upon it a little bit already, but where do you think we should still be worried about maybe sales being a little bit slower or retention declining? So do we actually think retention has normalized after the last couple of years of a little bit of more shop?

So listen, we've been engaging more holistically and strategically with our largest clients. That's something we've talked about in the past, but a big part of our go-to-market, but also our product road map has been delivering holistic solutions to these organizations. And by doing that, we have a much broader relationship where we can add value across many different frontiers. And so that is inherently helpful to retention rates and helps us to help clients grow in certain areas where they might be looking to rationalize in other areas.

And so we do think we're in a pretty good place across most of our client base, particularly our largest clients. As I alluded to, we'll continue to see some lumpiness in results in places like sustainability and climate. I think there's still going to be some noise related to like commercial real estate, and we'll see. And I've alluded to this before, potentially some of the elevated [ cancels ] with asset managers in Europe, particularly in the near term here. But as I alluded to in the last question, we're encouraged by the momentum, and we remain bullish about the trajectory of recurring net new and recurring sales where we do see strong engagement and strong demand for our solutions.

Okay. Good. Last one from a big picture across the business kind of perspective. But pricing, obviously always a topic that people are interested in. Seems like following a period of higher inflation a few years ago, things are a little normalized. Do you think this is a good way to think about 2026 as well?

So as you alluded to, I would say our -- the contribution to recurring sales from price increases has been pretty consistent overall at the firm level over the last couple of years. That was slightly lower than it was in 2023 when we were in a slightly higher inflationary environment. .

But overall, across the business, there are differing dynamics at play and the contribution has fluctuated a bit in each product area and across client segments. But on whole, the contribution has been relatively consistent. And our approach to price increases has been relatively consistent. So we do focus on beyond just the overall pricing environment. We are heavily focused on client usage.

So how much are our clients using our tools, where they're using them for client health that is an input and then probably most importantly, the value that we are delivering to clients. And so it is important to underscore that many of the enhancements, the innovations that we're making to our products and solutions.

The way we monetize those is through price increases in certain parts of the business. And that increase in innovation enhancements that I alluded to earlier, that's something that will continue to help support price increases. And so price is going to be an important part of the growth going forward. It's one where we remain quite confident. We've got the opportunity sets and the ability to deliver value to clients such that we can generate more value for them and even the price increase that we're pushing through to them. But I'd say across the business, there will be varying dynamics. But overall, I'd say the approach is going to be pretty consistent, looking forward here at this point.

Okay. Fantastic. All right. Then getting a little bit more into the segments, starting with the largest segment, which is index. So look, the business has been growing double digits for a long time as I was following the company, but things have softened, I guess, last year or last couple of years. And now people worry that will not grow that fast anymore in the double digits. So can you maybe just unpack how we get back to that double-digit range?

Yes. So it is important to keep in mind -- yes, to your point, the index subscription growth has slowed over the last several years gradually. If you look at probably the biggest driver of that slowdown, it has been the sustainability modular or ESG index module. That's something that was growing back in probably 5 years ago or so, that module was growing in the 40%, 50% type subscription run rate growth area.

And so that was a huge driver of helping us drive elevated subscription growth within index. That has gradually slowed down, and we don't break it out discretely, but you can see in the ESG and factor category within that index run rate bar that we report that, that has slowed [ fly ] down into the single-digit growth range. And so that fluctuation alone has been a meaningful driver of the slowdown.

The other thing I would highlight is, we've seen a growing contribution from those other client segments that I alluded to in your first question. And so we have seen more and more of not only the overall subscription run rate, but the growth coming from those areas like wealth management, broker-dealers, hedge funds, the trading ecosystem. So these are our client segments. As I alluded to before, we've been historically small.

We've generally in the past taken tools that we developed for that active management process and license them to those client segments. There's still a long way to go on that front. But what we have been doing is developing toolkits, data sets, solutions that are a little bit more geared towards those specific use cases. And so we are very excited on the heels of many of the new solutions that we've been rolling out around things like the custom index ETF module, our sustainability and factor methodology module, AUM constituency data or venture-backed index offering.

And so we're rapidly releasing data sets that are geared towards some of these other use cases. And we know there is demand there. And so we continue to have confidence about the long-term trajectory within index subscription. We see tremendous opportunities across many dimensions, both on the product side but also the client segment side. And so we're definitely looking forward to the future.

Okay. Good. Can you -- so can you go into the opportunity in custom indices statistically? I don't think you just mentioned it, but I know it's the number one investment area that you guys have. So maybe just talk about what seems like you're winning there, why are you winning? And how do we think about this opportunity in general, which I think you think it's still pretty early?

It is. It is without a doubt. And going back to your first question, when I talked about that big picture view of what's driving the industry and our business, systematic, personalized portfolios and strategies, you can very efficiently implement a personalized systematic strategy being an index. An index is effectively a basket of securities with weights or some systematic algorithm on top of it that determines the portfolio. .

And so we are seeing tremendous opportunities around that bigger trend, and I alluded to this earlier, manifest themselves in all parts of the industry. So you're seeing [ broker ] dealers creating things like over-the-counter derivatives like a total return swap. You're seeing banks develop structured products with customized outcomes or personalized views on the market. You're seeing direct index portfolios. You're seeing wealth organizations develop models that implicitly and sometimes explicitly bring in customized views reflecting their house views and research views or even the personal views of the end client.

And you're seeing the institution increasingly put money against custom mandates. And so for all those use cases, our content can be an integral ingredient. And so that's why we get so excited about what we call custom indexes and custom indexes is a bit of an over simplification. Yes, a lot of it is fueled by our development of custom indexes, but some of it is custom data sets, some of it is services that we can deliver.

But we have -- you alluded to actively investing in this category to fuel that demand and we think we are uniquely positioned to drive that opportunity set. We're uniquely positioned because at the core of what MSCI indexes are, they are a framework to do a systematic asset allocation. So how am I going to allocate my assets across geographies, sectors, countries, sizes, styles, factors, climate considerations. We give those ingredients that are already used for an asset allocation exercise that can naturally be used to pick overweight, underweight bets, custom outcomes.

We were also the standard in things like factors with the standard in things like climate objectives in sector classification. And so the combination of being that common language being embedded in the policy benchmarks and that asset allocation of the world's large investors, makes us a natural complement, natural provider of tools for custom indexes.

You throw on top of that what AI is enabling us to do. And so creating things like custom buckets, together with the investments we've made in our custom index construction capability, not only doing simulations, but ultimately productionizing indexes, we are very, very excited about the opportunity on custom indexes. And that's not only on the subscription side, but it's also importantly fueling a lot of the growth on the asset [ based feed ] side.

Okay. Very good. Another topic. As you kind of alluded to already, so I'm not sure what else to add here, but it's really about what you said about new customer sets and it's still kind of an index for the most part. But obviously, new customer segments like wealth hedge funds, banks have helped on the index side, I believe. And -- but the question really is, is it enough to offset maybe some of the challenges that we all see on the asset management side?

Yes. So there are big opportunities. We're early on those opportunity sets. They will, over time, as I alluded to, contribute more and more. So they will be outsized growth areas. And just from a weighted average basis, will contribute more and more to the overall growth, but we do need to continue to fuel the growth with asset managers. And yes, there are pressures on active managers. There's structural change taking place but we are in a position to help these organizations transform their businesses.

So you're seeing them move into more of these systematic strategies, more solutions. We're seeing them raise active ETFs, many of which are systematic in nature. And so for sure, we need to continue to add value to those organizations in a world of AI. There's also a growing demand and thirst for all that content that we deliver on the index side, and that's definitely the case with active managers.

And so we are looking to grow not only in these newer client segments that are going to be higher growth but continuing to fuel growth with asset managers, and that is an important part of the -- not only our growth algorithm, but the broader investment ecosystem, and we can play a meaningful role there.

Fair enough. All right. Shifting gears to analytics for a minute here. That's been -- I want to say, maybe I shouldn't say that. It's been very strong. I was going to say surprisingly strong. But over the last couple of years. So the question really is, is it sustainable? Where is it coming from? I think some people worry that hedge funds, in particular, and the growth we've seen there has really fueled the growth. So is that right? Are you seeing any slowdown in any trends there? So what should we be aware of here?

Yes. So we've been encouraged by the growth on analytics. We've had now several years of higher growth than we had seen in the past, and it's been quite resilient. It's been quite stable. Listen, a big part of it is from hedge funds, but we don't view that as a bad thing.

Hedge funds have been our highest growth client segment. That has been heavily driven by success with our factor models. And so when you look at the -- our investor presentation and look at the analytics subscription base, we have been seeing solid double-digit growth with our equity analytics and a lot of that is fueled by traction with headwinds.

It is also traction with broader investors, broker-dealers, asset managers, and so we're seeing strong demand for our factor content, beyond just hedge funds. But we've been very successful in licensing more and more content and continuing to innovate in solutions that are helping and are at the backbone of how many of these large multi-strat hedge funds actually manage risk and manage their portfolios.

More broadly, we see more and more opportunity to do that. So we don't view that as a bad thing. But it's not only that. We have been seeing strong traction with things like our AI insights. We've been seeing strong traction with many of the enhancements we've made to our fixed income analytics capabilities. We've been benefiting from our enhanced APIs and modern data distribution and access to our analytic engine that's making it easier for clients to consume more and more content.

And so we continue to be quite excited about the opportunity in front of us on the analytics and think there is definitely sustained momentum even beyond hedge funds, although we do continue to see attractive opportunities to do more hedge funds.

Okay. All right. Then unfortunately, moving back to the things that have not been [so stellar]indiscernible] is obviously sustainability climate. You mentioned it earlier. That business has continued to slow from the peaks in 2021, '22. Any turn on the horizon? And then on the flip side, could that actually go negative? And how should we think a little bit more shorter term into 2026?

Sure. So there are varying dynamics at play across sustainability and climate. If you remember, we renamed the segment from ESG and climate to sustainability and climate and that was driven in large part to reflect that we are doing a lot more than just ESG and ESG rating.

ESG rating that's always going to be a very important part of our social set. But we are increasingly delivering solutions to clients to help them understand other sustainability factors and the financial risks associated with other considerations. And so as I alluded to, there are parts of what we are doing, where we're seeing tremendous engagement. So areas like our [ geospatial ] asset location data set, some of our broader physical risk insights and physical risk solutions that we're delivering.

You see tremendous traction across many other climate considerations and it's not only in the Sustainability and Climate segment, but also in the Index segment. We're still seeing pretty robust growth of new climate indexes, climate index-based products out there, strong interest there. And so the the approach to sustainability is evolving over time. And so that manifests itself differently in different client segments, different locations.

As we've talked about before, in the U.S., you are seeing a little bit of hesitancy around launching new sustainability strategies, broadcasting how you as an organization are integrating sustainability for a whole host of reasons. And so we have seen more pressure within the Americas, in Europe. We've seen evolving views on how to incorporate sustainability from -- in large part, a regulatory standpoint, where you're seeing different regulations focused on everything from missions to physical risk to broader sustainability objectives.

And those can be competing between country, region, different regulators, different organizations. And so I think that has created some hesitancy. And so I think we're going to continue to see the dynamics that we've seen in recent quarters play out in the near term here. There's going to be choppiness in the growth rate. The important thing to keep in mind is, this is an integral part of the investment process.

We are hearing loud and clear from our clients that this is something that is important to them. It is a financial risk they know they need to focus on. They have demand to see broader views of sustainability beyond just traditional ESG. They are looking at things like resiliency and transition, energy transition, they're thinking holistically about physical risk.

These are all areas where we can help them, and we are helping them. And I think given the breadth of our solution, our leadership position, we are actually solidifying our position as a leader in the space. And we're doing more and more for clients in what we believe is a big long-term opportunity set. And so we do believe we are well positioned for the long term. We're solidifying our position even stronger today. But in the short term here, we do expect the dynamics we've been seeing in recent quarters to continue.

Okay. And then maybe to round it out, that's quickly touch on the, I guess, the other segment, which is mostly real estate by private markets. Clearly, there's a lot of enthusiasm on private markets, in particular, and we've seen some big deals in the space recently. We could probably talk for 30 minutes about all the dynamics here in this evolving market. But maybe just can you sum up what you're doing here if you need to have more assets or capabilities in the space and if and when we should actually see a bigger contribution to the growth of the overall company.

The private market, in particular, like we can skip real estate probably, but go ahead.

And by the way, we do see very active and attractive opportunities on the real asset front. And it goes hand in hand with what we're doing across broader private markets here. But yes, to your point, we could spend a long time on this front. This is an area where we are heavily focused. We remain very excited.

We think we have the capabilities right now to deliver those must-have solutions that the industry needs. And we are uniquely focused on and uniquely positioned to deliver them. And so we are -- and you've seen us announce a lot of these very actively rolling out everything from our family and suite of benchmarks across the private asset space to more recently [indiscernible] our private asset classification standard.

You've seen us roll out private credit risk scoring types of tools that are out there, deeper transparency insights workflow solutions that help our clients extract more information from the rich data that they are getting and that we have on their behalf and then helping deliver solutions that are going to underpin are critical for thing like liquid products out there, better risk management, [indiscernible] climate type solutions.

And so we have been, for the last several quarters, actively rolling out this wide range of tool sets that we've been working on since we acquired [indiscernible]. And we are actively ramping up our go-to-market or we have been ramping up our go-to-market to strongly position ourselves to deliver those frameworks, we know what the industry needs. So they need a systematic way to think about the addressable opportunity set. How do I think about the total universe of private markets? How do I think about the risks that I take by allocating to real estate versus private equity within private equity growth versus LBO versus VC.

How do I think about private credit and the risks I take there? How do I think about the liquidity risk I'm taking? And importantly, the value that the manager is providing to me where I'm paying significant fees. And so we're very bullish about this opportunity set. We've been actively rolling up the tools and ramping up our go-to-market in areas like wealth managers and [ GPs ] in addition to our established client segment of LPs, such that we're at a point where we are very excited about the outlook there and very excited about our positioning and establishing these standards.

Okay. All right. We have just over one minute left. So I want to give you maybe a final type question on both expenses and capital allocation. So maybe, again, as we think about next year, just remind us how we should be thinking about expense philosophy in general. And then, of course, on capital allocation, you've been very selective. But anything that -- any capabilities you feel like you need to add -- you picked up -- you stepped up repurchases recently. So again, just maybe with 1 minute left, expenses and capital allocation that we should be taking away from a financial picture perspective.

Yes. So just I'll hit the second question first quickly. No change to our approach to capital allocation. I think we continue to selectively look at bolt-on accelerator acquisitions. I think we generally feel like we have the capabilities that we need to pursue these very attractive growth opportunities I alluded to earlier. .

And so we don't need to do any acquisitions. We're not looking to do anything big or transformative, but there can be areas where we can bolster the content set that we have, the solution we deliver to our clients around areas like private markets, maybe pieces of the client ecosystem. But generally, our focus is going to be on continuing to repurchase shares because we are big believers in the long-term opportunity set here. On the expense side, again, no change to our approach here.

We very actively financially manage the business, and we are going to deliver on that dual mandate of driving long -- investing to drive long-term growth, while delivering attractive profitability growth. And I think Henry used the term Godson when he was talking about AI. AI touch is so much of what we do, and it is very CFO friendly. I can tell you that AI is already starting to deliver very attractive efficiencies, productivity benefits for us. But our intent is to invest -- reinvest that into the business to fuel these attractive growth opportunities.

And so we're very confident about our ability to drive attractive growth and profitability and invest in these critical investment areas for us.

Excellent. Good way to end it. Andy, thanks very much for coming, and hope to have you back next year.

Thank you for having us. Thank you.

Appreciate it. .

I'm Ashish Sabadra, and I cover info services companies here at RBC. We are excited to host Jorge, Head of Analytics at MSCI thanks again for giving us this opportunity.

Thank you, Ashish. Great to be here.

I'll kick off the conversation with a question on GenAI because that has been the most topical question across our universe and at the tech conference, how do you think about the GenAI? One of the questions that we get is, obviously, the disintermediation risk. But then if you can also talk about the proprietary data, how deeply embedded you are within the workflows? And as well as talk about the monetization opportunity. So we'll first go with the top line and then we may talk about the efficiency part.

Yes. So we're very excited about GenAI in general, for both of those reasons. We think it will make us way more efficient than we are today and then have to talk about the things that we're doing in that regard. But we also think there's opportunities to expand ways in which our clients are using it, develop new products. And so lots and lots of opportunities that we see going forward.

So let me talk about internally first, how we're doing it because I think that's something that we've been doing for a very long time. Generally using standard leading products and embedding them in every part of what we do, certainly in product development, our engineers are using it to code, things like Replit and Cursor and Copilot -- GitHub copilot, all of these things, using it for building new code, testing, quality control of the data, sourcing data faster, which is a big part of our business. We run a big data factory at MSCI. And we've seen a lot of gains from doing that, and there's still more to be done in that space. We've been factoring all code using AI, seen 50%, 60% gains in the time that it would take to do that work. So it's quite remarkable what you can achieve.

But then we're also doing it across the firm. So in the client coverage organization, for example, we analyze client nodes using AI. We put all this intelligence at the fingertips of our account managers. Hopefully, that improves the client experience and the service that they provide our clients. So we're seeing a lot of those benefits internally. And then in terms of clients using our products, right, we have developed already a handful of products that use AI in very deep ways. We just released the second version of what we call AI insights. The first one was released a while ago, but it's now multi-asset class. And what these does is -- it allows our clients to ask questions about their portfolios, right, using natural language.

So a client can, for example, say, "Hey, can you give me a line chart of the tracking error of portfolio XYZ over the last 2 years?" And he will do that or give me the top 10 stocks contributing to the risk of my portfolio today, things of that nature, and it happens in real time rather than having to go into an application and clicking through various screens or trying to find the information. And so this is also creating massive efficiencies on our client side. This is something that our clients could with our current tools. It just takes time, right?

And in a world where they are also trying to become more efficient themselves, this is extremely powerful. So things like that have been very well received. And then sort of more on the cutting edge we're thinking a lot about how our clients will want to consume our content going forward, right? So we already put a lot of our content on places like Snowflake. And some of that is even AI-enabled, for example, our factor models are using now or our clients can use Snowflake AI capabilities on top of our factor models.

But going forward, even more directly, the possibility of using our APIs and their content through market standard LLMs like cloud, for example, right? So we're experimenting -- internally, we've already done that we're thinking about how to externalize some of the stuff like building MCP. So this is a connector between our data and our APIs and these LLMs, so that clients can interact with us straight in places like cloud and ChatGPT and the like. And so we think there's a lot of possibilities to really increase the usage of our content by making it more accessible through all of these tools. So very exciting future.

That's great. That's very helpful color. And if I can drill down further on the monetization part, so maybe the 2 aspect questions. So you talked about AI inside and the product functionality that you're adding. How do you think about that monetization? Do you think about that as a stable stake or ability for you to continue to charge for it? Or does it help you on the pricing front, retention? Does it help when you're baking off against the competitor. So first on that AI insight? And how do you think about monetizing the investments that you have done on -- or the AI capabilities that you are offering to the clients?

Yes. So AI Insights, we're bundling the agentic capabilities into the product. And the reason we're doing that is because we think that specifically the set of capabilities is something that enable our clients to use what we're already providing much better, right? So -- what are the benefits? Retention, it helps with new sales for new clients, and it definitely helps with pricing as well because we're adding a lot more value, helps our clients cut costs on their side. So it becomes a pretty easy decision to make from that perspective. So there will be other things that we will build over time that might have be stand-alone products that we sell separately. But AI insights specifically, we're bundling it into the current risk offering, right?

That's helpful. And then maybe on the other aspect, as you talked about the fact that your data is AI ready and as it gets available within MCP servers and cloud and other ways of monetizing data, how do you think about the opportunity on that front? And again, this is over the longer-term monetization opportunity on that side?

Yes. So if you -- just in -- and by the way, I think this is true across MSCI but talking about analytics, which is the area that I'm responsible for. If you look at the biggest consumers of our data, there are the firms that typically have an infrastructure to use that data efficiently outside of an application, right? And so -- and then they have these processes on top of that data. So who are they? A lot of the quant hedge funds, a lot of the banks, particularly broker-dealers, market makers, et cetera. And so these are the firms that are also at the forefront of the use of a lot of these tools. So we think it's just going to naturally increase the demand for a lot of our data as the data become more useful when paired with these agentic capabilities.

That's great. That's very helpful. Just drilling down to the quarter we've had like last 2 quarters, very, very strong net new subscription sales, particularly on the analytics side. Can you talk about what's driving that strength? And maybe if you want to go by client segment or by products and then we can drill down further on those growth drivers?

Yes, it's a great question. So why don't we start by segment, right? So just to give you a sense on the analytics product line, about 40% of our run rate is asset managers. Then we have 20% hedge funds, 20% banks and broker-dealers and 15% asset owners and 5% is like a little bit of everything. On the asset manager front, as you know, it's a segment that has had quite a bit of challenges over the last couple of years. A lot of those challenges haven't gone away, but I think the markets helped at least in the immediate term a little bit.

But with those firms, what we're trying to do and we're getting good results with them is a couple of things. First, make sure that we have the conversation about consolidating more of what they do with us because we can help them save cost and it's good for us because we do more business with them, right? So some of them are, for example, only risk clients. We want them to be risk and performance clients, right? Some of them only uses in the middle office. We want them to use us in the middle office and the front office. And the more they do with us, the more they can save and the more business we do with those organizations. So that's clearly one of the strategies.

The other one is just making sure that we remove any friction in the use of our products with them because people generally think, oh, well, is the spend with the vendor, right? But for every dollar that clients spend with us, they typically spend more than $1 internally in making effective use of our solutions, integrating into their infrastructure, running things, et cetera. So -- and this is linked to the AI question, right? The more we can help them make use of our tools without having to spend money themselves, the more opportunity that we will see in this segment. And that's kind of what we've been doing with asset managers. And I think that playbook will continue for a while. So that's on the asset management side.

On the hedge fund side, hedge funds, particularly upon hedge funds, multi-managers, multi-strats in general, not just multi-managers, have been doing very well for the last few years, and they are big consumers of our model data, factor model data. So that has been a big driver for us. Part of the ecosystem as well are the broker-dealers and the market makers in the trading ecosystem, building baskets, hedging, et cetera. So those 2 things kind of go hand in hand, and that's been good for us in the last few quarters in terms of driving growth.

And then the last thing is working with asset owners in helping them manage their total portfolio. The story there is as they increase their allocations to private assets, the total portfolio oversight becomes a very different exercise, much more challenging, and so we're very focused on making sure we provide them with the tools and data they need to do that. They're all in different stages of the journey. Some are already very advanced. Certainly, the Canadians and some of the Middle Eastern funds, the some of wealth funds, but many others are moving very rapidly in that direction, and we're focused on helping them.

That's great. We will go into private asset because I think, again, that's a very important area. But before we do that, I don't know if you referenced what's happening on the wealth side. So particularly on the wealth, any color that you can provide on traction that you're seeing for analytics?

Yes, that's a great question. We -- I didn't go there, but that's kind of -- part of that 5% I was -- that I was talking about is still a very small part of our business, but it's something that we're excited about. We continue to invest in this new tool coal MSCI Wealth Manager. But before I go into the specifics, just to back up a little bit and tell you some of the use cases that we serve, right? Because we're very targeting what we do for these organizations. So one is the model of portfolio construction, typically, we serve the CIO or the home office in doing that. So we help them with our factor model data, with our tools, optimization tools, et cetera. Our index data is part of that. Our private asset data will increasingly be part of that as these models start including more and more private assets in them, and that's definitely the direction in which things are going. So that's one use case.

The other one is the adviser workflow, right? So specifically in helping the advisers build portfolios for their clients, customized to their needs and their requirements. But at the same time, still complying with the households. So they don't drift too far from what their organizations want them to do. So that workflow reporting back to the client, et cetera, is another thing that we're doing in wealth. And then the third thing, which is not strictly selling to wealth organizations, but it's part of what we think as the wealth opportunity is helping managers of assets, both traditional asset managers, but also increasingly general partners to position their products into the wealth channel, right? So that's a sales enablement play by helping them explain why adding certain products into the advisers' portfolios will leaving them better play somehow.

So we do a lot of scenario analysis, a lot of risk and return characteristics and comparisons and so on and so forth. So that's generally what we're doing. I'd say we're still early in that journey where, as I mentioned, I started saying investing in MSCI Wealth Manager, which is fulfilling the adviser part of that workflow and integrating our private asset data, integrating our sustainability and climate data, and we're starting to see some wins in that space, which are part of the results that you reflect, but we still think we're early in that journey.

That's great. And there were 2 tuck-in acquisitions on the wealth side, right? And I was just wondering if you can talk about how that's being integrated into your wealth offering. And I guess that's part of the wealth manager product that you've talked about?

Yes. So the -- I mean that's -- wealth manager is actually rebranded the acquisition was fabric, right, and wealth manager is the branded version of that, but it's the same product. So that has been the main acquisition on the analytics side, as you mentioned, the tuck-in acquisition. This is a buy-to-build type of acquisition. So we still need to invest quite a bit of it to -- get it to a point where everything -- all the IP at MSCI is integrating the service for that adviser workflow, right?

That's great. Shifting gears to private assets, you've talked about private assets a couple of times. Obviously, a big growth opportunity. You recently launched private credit factor model with 1,500 private credit funds. Obviously, with the purchase -- been a few years now, but with the purchase credit data, you have a very strong proprietary data sets. Can you talk about how the opportunity is from an analytics perspective or factor model perspective?

Yes. So a couple of things. The first one is, yes, we just released the private credit model. That was the last sub-asset class within private assets that we have left because we have private equity, real estate, infrastructure, so we're missing private credit. We just released it. This is part of the solutions that I was mentioning earlier to help mainly asset owners manage their portfolio holistically. This model is integrated into our multi-asset class model. So now someone that's investing in public assets, private assets, including private credit, can use it to basically do asset allocation at the entire portfolio and then obviously, risk modeling for the various sleeves or sell the asset classes within that.

So we're getting very good feedback from clients. We just released it. So we have a number of clients trialing right now the model again, mostly asset owners, whether it's pension funds, sovereign wealth funds, superannuation funds, those are the typical users of this tool. But then beyond that, we have a robust agenda for things that we want to develop going forward. There's a lot of problems that are -- have been sold for a long time on public assets that are still not quite resolved in private assets. For example, there are private asset benchmarks, but it's not easy to take that benchmark and then do a risk or a performance attribution against it, right? So that's something that we think we are well positioned to solve for clients. So these are -- this type of problem that we're going to resolve.

Liquidity issues are super important, both for the institutional asset owner and also even more so for wealth. But what, for example, the large asset owners tell us is, look, if I have 50%, 60% of my portfolio in private, which some do now, and there is a market correction. And I get capital calls I have to liquidate at very distressed levels and that's a very bad scenario for us. So solving for that type of question is not something that anyone has done so far. So we think we have a lot of opportunities for helping clients in private assets specifically manage their portfolio -- and this is -- a lot of these problems are in the intersection of public and private, right? So it's not strictly a private asset problem is where they intersect with the public assets.

Absolutely. That's very helpful color. As you mentioned, private asset -- these analytics has been integrated with our multi-asset class as well. I believe multi-asset class is the biggest piece from a product perspective. Can you talk about the growth drivers there? Where you're seeing the growth? How do you think about the innovation there?

Yes. So the -- yes, multi-asset class is many, many use cases, right? So you need to break them down. I think we already talked a lot about what we're doing with asset owners. So that's a big part of it. It's also a big part of what we do with asset managers. So basically, all of these AI insights that I talked about are built on top of the of the MAC model and the MAC analytics that we provide. So we've already talked a little bit about that. But we also use these analytics in other client segments. So we're actually starting to see quite a bit of demand from banks. Now I'm talking about banks as principles, not the broker-dealer side of the bank to use analytics for the investment book on the treasury to solve some ALM problems, some regulatory requirements. And so again, it's opening up opportunities in other segments.

And it's basically the same toolkit, a little bit modified for the needs of the segment, right? And then we also have a very healthy client base on the hedge fund side that uses our multi-asset class analytics for risk management purposes. This is different from the models, but yes, but we think there's opportunities to grow that piece as well.

That's great. Fixed income. Fixed Income analytics has been another big growth driver for you relatively smaller, I guess, but bigger growth opportunity. Can you talk about the fixed income analytics?

Yes. So on fixed income, where we're seeing a lot of the -- we've seen demand in a couple of places. One is integrating our fixed income analytics into the order management system so that there is consistency between the middle office and the front office on the number. So -- and that's mostly asset managers. The other place where we're seeing demand is in securitized products. We've spent a lot of time investing in securitized products across different types of collateral and structures. And so -- and regions, right, from certainly the U.S., which is the lion's share of that market, but places like Japan and others. And we're seeing demand from asset managers just to use the models directly, but also increasingly for banks, right, that want to improve some of their analytics in securitized products.

That's great. And maybe just honing on this question on regions. Can you talk about like from a regional perspective, have you seen stronger opportunities or greater inflection in growth in certain region versus another, like...

Yes. So it's a little bit -- I think the client segments behave similarly across regions. So a lot of it is how big is the client segment in a specific region, right? There's other dynamics, but that's a big one. So for example, when you look at hedge funds and hedge funds doing well and helping our growth, the vast majority of them are in the U.S., right? So there's going to be a geographic vendor. Obviously, there's a number of them in London, but not nearly as many as there are in the U.S. And there's a few in some spots in Hong Kong and Singapore. But it's, by and large, a U.S. phenomenon. So obviously, that biases things to the U.S. Broker-dealers and market makers are mostly in the U.S. and in Europe in a few places, right? So obviously, that's going to be biased there.

Asset owners. Asia is a huge market for asset owners. There is generally a handful of very large ones, in some cases, 1 or 2, but in some cases, many like Japan or Australia, right? And so that region will have a bent towards asset owners and solving the private asset opportunity and so on and so forth. So I think when we talk about regions, a good way to understand that is through the lens of client segments, right?

I was just going to ask about the MSCI ONE product that was an initiative that has been going on for several years now. Can you talk about how that products have evolved, the MSCI ONE products?

Yes. So we are putting more and more of the MSCI content on -- MSCI ONE is basically becoming that single pane of glass through which our clients can access content, not just for analytics but across all product lines. It hosted AI insights is -- hosted inside MSCI ONE as an example. And so you can get all of the bar analytics, the risk metrics analytics with the AI. It's now all embedded there. We have our sustainability and climate data there, real estate data, our index data. We're working on putting more of our private asset data, and so it's going to become a hub for clients to access all of the content across product line, which will help us with telemetry, understand what clients are doing. There's more self-servicing, some of it AI-aided in that platform. It's a lot easy to discover new capabilities for clients and hopefully, that helps with the sales effort is -- clients can self-discover things that they might be interested in.

Now that said, one important thing to understand is that we -- we'll never be a company that distributes only through our own applications in our own channels. We have an open architecture philosophy. We distribute our content where our client wants it, right, generally. We want to meet our clients where they are. And many times, that means that we distribute through competitors, and we're quite okay with that because we need to reduce friction for our clients, right?

That's true. Absolutely. Talking about pricing, I was just wondering if you can talk -- provide some qualitative or quantitative color about how you think about pricing as you're adding more and more value for your customers, how do you think about pricing?

Yes. So sometimes it's straightforward in that it's a new product and we price that product. And obviously, when we sell it to an existing client, we have a price list that we go by, et cetera. In terms of price increases, we're always very careful to make sure that we are thinking about the value that -- the incremental value that we're providing for those clients. And that's why we don't have a one-size-fits-all policy because sometimes we spend a lot of our road map and agenda is to help one type of client. And so obviously, they're getting a disproportionate amount of incremental value versus some others, and we take all of those things into account to make sure that clients feel that they're paying for the increased value, right?

Okay. That's great. Actually, when we spoke about the different products, multi-asset class and fixed income, we didn't really delve into equity factor models, and I was just wondering anything in particular that you would flag on the equity side as you're seeing more adoption on that front?

Yes. We have a very robust road map on the equity side. Some of it is client-driven demand that clients sometimes ask us for new versions of our models. That can have a geographic bend to it. Can we have a model for this specific country? Or can you modify a model to have different factor structure. And what we find out is that even though the demand might come from 1 or 2 clients, generally, these models end up having much broader adoption across the board because the idea of one is the idea of many, right?

But beyond that, which is something that we've been doing for the last couple of years, we're starting -- this is an area where we're starting to use AI focus a lot more on factors that might not be permanent by transient type of factors that are more thematic in nature, specifically because our clients want to understand performance related to certain events. So for example, COVID or the Ukraine war or tariffs or any of these things? And how are those short-term effects are impacting their portfolio. Now these aren't things that are going to persist for 10 years, the way like momentum or value or growth could, right? Of course, those things revert as well, but these are more permanent factors. But linking returns to those themes, those events is something that we're very much focused on.

That's great. And that was going to be my next question as well. As you think about your product road map, you talked about a lot of things on AI front getting your data AI ready. You talked about some of the innovations that coming on the equity factor model? Are there other things that you would flag? Obviously, you also talked about bringing more and more of your product suites on MSCI ONE. But as we think about your product road map, things that to look out for?

Yes, a lot of integration also and cross-pollination across product lines, that's something we haven't talked about. One thing that we just released is our factor risk analytics were embedded in what we call Total Plan Manager, which used to be called Caissa, that was part of Burgiss. That's a product that helps basically endowment foundations, family offices basically given a complete view of their portfolio. So there's a very heavy private asset bend to that product given how those organizations invest. But we're starting to see very positive feedback from clients that are basically able to access the bar risk analytics inside that product without having to use a different front end for that. So that's an example.

We're doing a lot of work across index analytics and basket creation. The ability for clients to define baskets that have very specific characteristics that can turn into an index. A lot of work with -- again, with private assets trying to take more and more of the data and turn it into risk factors. So there's a plethora of opportunities to cross-pollinate across the organization that we're very, very excited about. And in the future, we think our strength, biggest competitive differentiation of the firm is our ability to bring all of the capabilities of the firm in an integrated fashion to solve client portfolios, that's something we're very focused on.

That's great. We'll end it there. Thank you again. Thank you, Jorge for joining us. Thank you, everyone.

Thank you.

Great. I'm Alex Hess, Vice President on Andrew Steinerman's Business and Information Services Equity Research team. Thank you all for joining us this afternoon at the Ultimate Services Investor Conference. It means a ton to have you all. And especially Andy, who is making his fourth consecutive appearance at Ultimate Services. Andy, a warm welcome to USIC 2025...

Thank you. Thank you. Thank you. Very happy to be here. Always a great event, didn't disappoint this year. So thank you for having us.

Okay. Great. Awesome. Andy, I want to start with the recent guidance update for a higher interest expense following your bond issuance. Investors are likely to draw a line between this update and a potential return of share of capital to shareholders. How should MSCI be -- sorry, how should investors be thinking about your recent capital allocation actions. And so maybe why has MSCI been a little bit uniquely aggressive this year?

Yes, I would say we have been aggressive. We've been opportunistic, but it is in line with our historical approach. And so that historical approach starts with available cash. And so given the attractive financing markets that we've seen or at least attractive credit spreads that we've seen, we've taken advantage. Our leverage was running below the targeted range of 3 to 3.5 for some time. And given the financing we did in August and then again a few weeks ago, we've now moved to be within that targeted range. And so we're solidly right in the middle of that targeted range of 3 to 3.5. That has given us a higher amount of cash. And we use that as an input, along with two other factors in our share repurchase approach. One is volatility in our share price. And so we tend to set up repurchase programs that tend to buy more when there's more volatility in the stock.

And then we do put some overlay of value. We are very bullish on the long-term prospects of the company, but we think in the short term and the near term, we can create value by putting some degrees of, I'll call it, conviction around price levels on our repurchases. And so you've had in recent periods, particularly recent months, you've seen our cash jump. You've seen some volatility in the share price, and we've been aggressively taking advantage, and it's been a tremendous source of value creation for us over the last 13 years, and we believe will continue to be a key ingredient of the formula value creation for us.

Great. Great. So now let's -- normally, you end with capital allocation, we get started there today. So let's talk about the momentum that you guys have been seeing, at least as the third quarter in the net new subscription sales with new products seem to facilitate that improvement. What solutions are really on the net new side moving the needle most for MSCI at this juncture? What should investors be watching and be really training their eyes on?

I think you've heard us talk about a lot of them. I think across the organization, we have accelerated the pace of new product development. We've released a whole host of capabilities that are valuable and sellable in their own rights, and we've also released a whole host of capabilities that help support price increases and are adding -- continually adding more value to clients. And so it's not one specific area. It's across the business, and it's really across all product segments.

But on the Index side, we have seen traction in areas like our custom index capability, an area where we've continued to innovate and enhance that capability. We've come out with data sets in recent periods that are readily monetizable with the trading ecosystems, so hedge funds, trading firms, broker-dealers around things like our sustainability methodology, index methodology, factor index methodology, our constituent AUM data set. You have seen us release additional insights into parts of the investment ecosystem that allow our clients to understand better what's going on around index-based products. And you've seen us come out with things like the venture index that we've recently released.

And so those are all products that we think are very impactful to many different client segments. They're continuing to fuel not only the value we can bring to -- and I forgot to mention what we're doing on the active ETF side, which I know it's gotten a lot of attention. But those are all things that are being helpful and adding value to our existing clients, but also continuing to fuel that outsized growth with additional client segments.

Just to provide a few other examples across product segments. On the Analytics side, we've had tremendous traction with our next-gen factor model. You've heard us talk obviously about some of our fixed income capabilities. You've heard us talk about AI insights or AI insights offering and in areas like Private Assets, arguably the area where we probably had the most innovation and new product development, everything from our PACS, sort of private asset classification standard that we've recently rolled out. I think everybody is familiar with them, and we've talked about the Moody's partnership and the private credit scoring service that we can provide are providing a whole host of benchmarks and content sets, a self-extraction tool that is allowing clients to get even more value out of the transparency service that we deliver to them today, where they can not only look at the information that we pull out and present to them in a structured fashion with kind of the standard classifications and analysis around it, but they can actually interrogate and extract information on their own.

And so very, very rapid pace of innovation, which is helping to fuel growth across the business.

Yes. That's helpful. So you flagged that about 20 -- on the earnings call that about $25 million of year-to-date bookings come from newly released products for the first 9 months of the year. That's about 13% of the total. How do you calculate that number? And how does that compare to years past?

Yes. So that reflects new recurring sales from products that have been released since 2023. And so we think that's generally a good time period to start to quantify the impact of new products. That does not pick up, as I alluded to, capability enhancements that are helping to drive price increases, other benefits for clients, but really focused on those new products that we've come to market and are selling discretely. What's fueling that is those products I mentioned in your prior question. And so that's what comprises that $25 million. And it is across many parts of the business that is a pickup from what we've had in the past. And so new products are definitely contributing more and more to sales and growth of the business.

Got it. And so in the past, you were able to lean more on capability enhancements to exist extent products. So taking -- let's for -- just for an easy example, ESG ratings, taking that from 1,000 equities to 10,000 equities. And now it's another -- an analytical overlay on the...

I think that's -- yes, that's one way to think about it. That's probably a little bit oversimplified in certain areas. But I would say we are -- and another over simplification here is in the past, we have monetized products that were developed for asset manager use cases within other client segments where we've seen applications and opportunities across a wider range of use cases and client segments. A lot of the product innovation that I alluded to is actually developing products and solutions or services that are geared to non-asset manager client segments as well. And so it is an important contributor to and driver of this outsized growth that you've seen us have and we'll continue to see us have across the non-asset manager client segments.

Got it. And then it seems like you sort of answered this question already, but I'm going to ask it anyway, 3Q '25, 3Q in general, is generally or seasonally quiet period for you guys on new sales. It's not a signal rich as 4Q. We're going into 4Q. How do -- should investors expect 3Q's performance to translate well into 4Q?

So we have not given any specific guidance on Q4 here. We -- to your point, Q4 tends to be a higher period of sales and cancels for us. It is a period where we tend to have a higher portion of contract renewals and around renewals, we can oftentimes have up sales. On the flip side, we can also have elevated cancels. And so you will oftentimes see elevated cancels and a lower retention rate in the fourth quarter. But we also see sometimes some client budget dynamics that feed into stronger sales in the fourth quarter. And our sales incentive plan and plans oftentimes are geared towards annual targets. And so all those reasons translate through to Q4 being an important and often a constructive quarter for us.

You heard our commentary about -- we are encouraged, Henry is definitely encouraged about the momentum that we've seen in new product development. I think we've indicated that we've seen a fairly consistent end client environment here. On the margin, we've seen some favorability in certain pockets from the momentum in equity markets. But a lot of our bullishness and excitement has been around your prior questions on the new product development and traction we're getting in certain client segments. And so we continue to hope that continues.

I want to drill into the private capital segment because I think Index is understood and Analytics, everybody knows as a view, and I certainly do. I think it's well understood as well, though. On private credit -- private capital, excuse me, how do you -- you're launching private market data with index applications. You're launching solutions for the private markets with Analytics, more Analytics like use cases. How do you decide which segment something gets put into? And it seems like that maybe is a little blurrier than it used to be.

It's a fair question, and I can understand the blurriness. And like Analytics, like sustainability and climate, Private Assets, the content we have there, the unique access to data and IP that we're creating benefits all segments of MSCI. And so you're absolutely right. You are seeing us launch things like that venture index I alluded to earlier. That shows up in our Index segment. You're seeing us launch our private credit risk model. It shows up in our Analytics segment. And so we are seeing innovation happen across all segments related to the private asset capability and franchise that we are building.

Typically, it is -- the way that we determine where -- which product segment it will show up in is around use case and product dynamics. And so if it is something that is a equity index/liquid-index ETF-type product like that venture-backed index, it's going to sit in the Index segment. If it's an index that is used for private asset benchmarking and specific private asset use case that will be within our Private Assets segment. When it's an analytic risk tool, it's typically used by a risk office. So our private credit risk model is primarily used in a CIO or a CRO type of capacity to understand risk of a private asset portfolio relative to the risk of the entire organization, that shows up in our Analytics segment.

And so if it is -- generally, if it's something geared towards private asset investment process, private asset investors, it's going to show up within our Private Assets segment. But there will be -- continue to be a lot of instances where that IP is fueling opportunities across the business.

That's super helpful. And I want to touch on a comment that your colleague, Baer Pettit, who's retirement was just announced, all the best to Baer. He noted on the last earnings call that more and more LPs are using MSCI Private Capital Indexes for performance benchmarking, and this is a shift away from traditional public market proxies, absolute return hurdles, whatever. What's driving this transition? And it sounds like you expect this to benefit your business. Is that fair?

Yes. Yes, for sure. To oversimplify here again, there has not been a good alternative. The most common benchmark for private asset allocations, private asset portfolios among many asset owners, has been a public market equity index. And I think [indiscernible] in a private asset portfolio, particularly because a lot of -- the reason people invest in private assets is the perception that it is uncorrelated and has different dynamics fueling its performance.

And so we are on that journey to create fit-for-purpose, much more robust, standards, including for indexes and benchmarks that will benefit and be a much more effective tool for investors in private asset classes, and that's not only for private equity. We've been on that journey in real estate, but also for private credit and infrastructure.

And so there's all sorts of considerations around making sure you have robust data to be able to develop an index that is a sufficient cross section of the market, which I think there have been a few providers that have had that data, reliable enough marks and value information, cash flow information on the funds themselves that ultimately feed into and comprise the indexes, standard -- classification standards, as I alluded to before, there haven't been clear definitions a lot of times between what is VC versus growth equity versus LBO within private credit, what are the different instruments and instrument classes? How do I think about the dynamics of those? And then related to that, what are the risk factors and attributes that I need to think about in each of those? What is the importance of liquidity, when valuations are reported, thinking about things like frozen indexes, which are much more important for things like governance, and compensation versus unfrozen indexes that will -- actually historical results will change over time.

And so these are all problems that we are actively solving and coming out with solutions that will make for much better tools for the investors who are investing in the private markets.

So by frozen index, do you mean like a cohort analysis? Or like vintage analysis, vintage...