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Indexing the Short Case Against MSCI
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Update: Indexing the Short Case Against MSCI
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Appendix: NYCPPF FOIA Documents
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Appendix: CalPERS FOIA Documents Part 1
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Appendix: CalPERS FOIA Documents Part 2
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Research Overview

S&P 500
Financial Services
Jan 17, 2024

After conducting a forensic financial review of MSCI (founded as Morgan Stanley Capital International), a provider of decision support tools and solutions for the global investment community, Spruce Point believes the business' four main segments are under pressure and facing client retention challenges. Based on our investigation, we estimate a 55% to 65% long-term downside risk, or $190.00 – $244.00 per share.

The report highlights several key concerns with the company, including:

  • Evidence that MSCI’s core index business is under pressure, client Retention Rates are declining, executive leadership is being replaced, and reputational risks are rising
  • MSCI’s Analytics segment also appears under pressure, anchored by increasingly commoditized solutions
  • Despite having been MSCI’s recent growth driver, the Company’s ESG and Climate segment is now beginning to struggle
  • MSCI is shifting attention to Adjusted EPS while cash flow and dividend growth struggles and aggressive accounting decisions flatter revenue and costs

UPDATE: Spruce Point Capital Management is pleased to release documents obtained through Freedom of Information Act ("FOIA") requests with California Public Employees' Retirement System ("CalPERS") and the New York City Public Pension Fund ("NYCPPF"), respectively the largest and fourth largest pension funds in the United States that spend millions on fees for MSCI's services.

The email correspondences between MSCI and CalPERS express concerns about price increases, detail exploration of reduction in usage, terminate certain products such as Barra Portfolio Manager, and provide repeated examples of MSCI offering price concessions. These actions directly call into question MSCI's repeated claims of pricing power and market share stability.

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