UPDATE 1-MSCI enters real-estate investment benchmarking with IPD buy

Wed Oct 31, 2012 7:35am EDT

Oct 31 (Reuters) - Investment analysis and market index company MSCI Inc said it will buy IPD Group Limited for $125 million to enter the real-estate benchmarking business.

London-based IPD provides real estate investment benchmarking, performance analysis, market indices and market research to institutional investors, fund managers and owners of real estate.

"We have seen significant demand from institutional investors globally for better coverage of private markets. The real estate investment market presents considerable opportunities for growth," MSCI Chief Executive Henry Fernandez said in a statement.

IPD had revenue of about $47.7 million for the year ended December 31, 2011.

The deal, which will be funded through existing cash, is not expected to have a material impact on MSCI's earnings in 2012, the company said.

The announcement was not unexpected, as MSCI had confirmed earlier this month it was in talks with IPD for a potential acquisition.

Index providers like MSCI are facing pressure as major fund companies such as Vanguard Group, Charles Schwab Corp and BlackRock Inc are all looking to cut costs on their exchange-traded funds.

Earlier this month, Vanguard, the largest U.S. fund manager and MSCI's second largest index licensing customer, said it was defecting to cheaper rivals, stoking fears that other customers would use Vanguard's exit as a leverage to demand lower fees.

MSCI's shares, which touched a three-year low earlier this month on Vanguard's exit, closed at $27.54 on Friday on the New York Stock Exchange. Major U.S. stock markets were closed on Monday and Tuesday due to Hurricane Sandy.

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