MSCI's CEO Presents At Morgan Stanley Services Summit (Transcript)

MSCI, Inc. (MSCI)

Morgan Stanley Services Summit

May 8, 2012 8:10 a.m. ET

Executives

Henry Fernandez - Chairman & CEO

David Obstler – CFO

Edings Thibault - IR

Analysts

Suzi Stein - Morgan Stanley

Presentation

Suzi Stein - Morgan Stanley

So first up this morning we have the management from MSCI. For those on the webcast, I'm Suzi Stein, head of Business Services at Morgan Stanley Research. I am joined by my colleague, Toni Kaplan.

As many of you know, MSCI used to be part of Morgan Stanley but was completely divested in 2009. We have Henry Fernandez, Chairman, CEO and President who has been at the helm of MSCI since 1998. We also have David Obstler, the Chief Financial Officer, who joined MSCI when it acquired RiskMetrics in 2010. We also have Edings Thibault right here in the front row, Head of Investor Relations. Thanks so much for being here today.

Why don't you start by just giving a very brief overview of the company, and then we will dive into the Q&A.

Henry Fernandez

Can you hear me now? Okay. MSCI is an investment decision support company, and we have been with that objective since the inception of the firm. And a lot of people ask us, are you an index company or data company or analytics, or technology, and we say all of the above. But more importantly, what we try to do is really address the fundamental investment problems that the clients around the world have with some kind of model that derives data and then gets coupled with technology to be able to deliver that solution to those clients. So I would rather leave it at that so that we can spend more time on the Q&A. And by the way, I’d like this forum a lot better than go through slide after slide of the same old thing.

Suzi Stein - Morgan Stanley

So there’s obviously then an evolution from data to analytics. What do you think the next step is in terms of growth for MSCI? Where do you see the company headed?

Henry Fernandez

I think it’s all of the same which is more data. We have an immense repositories of data within our company. For example, more than half of the underlying positions of the largest hedge funds in the world are sitting in our databases for us to be able to aggregate and the like and create new products around that. Every piece of data is proprietary to the hedge fund client and in aggregate we could be able to use it in a lot of different means. So that’s an example of more data usage that over time can become available. More analytics, because technology is option that will be able to help us leverage the solutions, investment solutions on the models and the data that we provide and can embed those processes in our clients’ internal universe and therefore we’re going to see a lot more of technology being used as well.

Suzi Stein - Morgan Stanley

One of the few things that we are going to focus on today is differentiation and can you talk about how – what differentiates MSCI from competitors on both the analytics side and on the index side?

Henry Fernandez

The first and foremost, we are in the business of creating standard. So standard for measuring performance, for measuring equity portfolio risk in the form of Barra, Barra tracking error or Barra risk numbers. We are in the business of measuring standards or creating standards on multi-asset class risk portfolio with RiskMetrics. We for sure are the standard for voting practices with ISS. We are now trying to create a standard with ESG, environmental, social, governance criteria for investment portfolios. So that’s what we – that’s our first differentiating factor.

After that, and those standards by the way are branded. So English is a standard but it’s not MSCI branded, at least not yet, right. So GAAP is a standard but again it’s not branded and the like. So therefore we are fortunate that we have branded standards but you will have to back them up with service, with quality of products, with innovation, with enabling technology that is going to be able to help our clients’ investment processes.

Suzi Stein - Morgan Stanley

What about particularly on the analytic side, what are you seeing as far as competition and what are you doing there to really distance yourself from competition?

Henry Fernandez

Competition always exists in one way or another. It’s always been in our universe of companies and products from their inception. I think for us more important than competition is to focus on the needs of those clients around the world that we have and the prospects that we can get, and be able to come up with the solutions to what they are looking for. And our business is a rapidly evolving business. The needs of our clients are evolving quite dramatically. If you think about Europe right now, many of our clients will plug in their sovereign bonds that’s AAAs and forget about it in the context of credit risks and all the kinds of risks. That’s no longer the case. So we’ve got to develop new models that are going to be able to take those pieces into account.

So these are evolving and therefore we stay very focused on serving those needs. You don't have to worry about competition. It's always going to be there but the clients are going to follow you and your products and services.

Read the rest of this transcript for free on seekingalpha.com

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