The History of Morgan Stanley Capital International
A Look at MSCI, One of the World's Most Popular Indexers
MSCI is one of the most common acronyms that investors will encounter as they begin to explore the world of international investing. But, they might be surprised to know that even experienced investors know very little about MSCI or its history.
The MS part of the acronym stands for Morgan Stanley. As a result, it is often assumed that the MSCI indices are calculated by Morgan Stanley, the investment bank. While Morgan Stanley is a majority shareholder of MSCI, they are actually separate companies. Morgan Stanley itself has nothing to do with the construction or maintenance of the MSCI indices.
The second half of the acronym involves yet another company. CI stands for Capital International. This company was a unit of the Los Angeles-based investment management firm Capital Group. In the late 1960s, Capital International created a series of stock market indices that tracked international markets.
In 1986, Morgan Stanley bought the marketing rights to Capital International’s data and Morgan Stanley Capital International, or MSCI was born. In 2004, MSCI bought a firm called Barra, and the firm has since been known as MSCI Barra. MSCI Barra went public on the New York Stock Exchange in November 2007.
MSCI's String of Acquisitions
Since then, MSCI has gone on to make a number of different acquisitions. In 2010, the company acquired RiskMetrics Group, a provider of risk management and governance products. The company sold off two divisions of that company - Institutional Shareholder Services (ISS) and the Center for Financial Research and Analysis (CFRA) - and incorporated the other elements of the business into MSCI ESG Research, which provides clients with research reports and analytical tools covering environmental, social, and governance investment criteria.
The company acquired Measurisk in the same year, which is a provider of risk transparency and risk measurement tools for hedge fund investors. With growing demand for transparency from hedge fund managers, these tools and others were combined into a hedge fund risk transparency offering.
In 2012, the company acquired the real estate performance measurement group IPD, which integrated private real estate asset performance into its models. The acquisition also added a series of real estate indexes to MSCI's ubiquitous equity indexes.
The company acquired InvestorForce in 2013, which is a leading provider of performance reporting tools to institutional investors. Through this acquisition, MSCI began providing consultants with daily monitoring and analysis of institutional assets.
And in 2014, the company acquired Governance Holdings Co, which is a provider of corporate governance research and ratings for institutional investors. The acquisition enhanced and broadened the company's ESG research and tools for institutional clients.
MSCI is best known for its benchmark indexes. In fact, the company is the #1 provider to the equity exchange-traded index fund (ETF) industry based on the number of licensed ETFs that it counts as clients. In 2014, the company was also recognized by the IRRI Survey as the #1 provider of fixed income and corporate governance research through its ESG Research division.
Over the years, MSCI has made a name for itself as a leading innovator in developing risk management and performance measurement tools. For instance, the company developed a methodology to back-test Expected Shortfall in 2014 and launched the MSCI Low Carbon Indexes to track both carbon emissions and fossil fuel reserves. These were among 24 new index families launched in 2014 alone.
Key Takeaway Points
- MSCI stands for Morgan Stanley Capital International, which were its two major shareholders before it went public in 2007.
- MSCI is best known as a leading provider of equity indexes that underly many popular ETFs, as well as for its fixed income and corporate governance research.
- The company has grown over the years through a series of high profile acquisitions that have added to its broad service offerings over time.
- The company continues to innovate by launching new equity indexes that address important underserved areas while continuing to provide industry-leading tools.