MSCI Market Indexes
A Look at MSCI, One of the World's Most Popular Indexes
MSCI is one of the most common acronyms that investors encounter as they begin to explore the world of international investing. You might be surprised to know that even experienced investors don't know what MSCI actually means, or where it came from.
That string of letters is attached to the names of many of the most-used indexes that track stock market performance in certain areas—geographic, industrial, or other. MSCI stands for Morgan Stanley Capital International.
Some Background on MSCI
In 1986, Morgan Stanley bought the marketing rights to Capital International’s data. Morgan Stanley Capital International, or MSCI, was born.
With the marketing rights purchased from Capital International (CI), Morgan Stanley (MS) became associated with the indexes. However, while Morgan Stanley is a majority shareholder of MSCI, the two companies are actually separate. Morgan Stanley does not administer or maintain the MSCI indexes.
CI 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 indexes that tracked international markets.
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 Barra's Acquisitions
Since then, MSCI has made a number of acquisitions. In 2010, the company acquired RiskMetrics Group, a provider of risk management and governance products. The company sold off two divisions of the company, Institutional Shareholder Services (ISS) and the Center for Financial Research & Analysis (CFRA).
It then 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.
That same year, the company acquired Measurisk, a provider of risk transparency and risk measurement tools for hedge fund investors. With the growing demand for transparency from hedge fund managers, these tools and others were combined into hedge fund risk transparency offerings.
In 2012, the company acquired the real estate performance measurement group IPD, and 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, a leading provider of performance reporting tools to institutional investors, in 2013. Through this acquisition, MSCI began providing consultants with daily monitoring and analysis of institutional assets.
And in 2014, the company acquired Governance Holdings Co., 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 top 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 leading provider of fixed income and corporate governance research through its ESG Research division.
Over the years, MSCI has made a name for itself as an innovator in developing risk management and performance measurement tools. For instance, the company developed a methodology to back-test expected shortfalls 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. MSCI continues to develop new methods and indexes for measuring different markets around the world.