Profile: MSCI, Inc. (MXB)

MSCI Inc. (MSCI), incorporated in 1998, is a provider of investment decision support tools, including indices and portfolio risk and performance analytics for use by institutions in managing equity, fixed income and multi-asset class portfolios. The Company’s principal products are its global equity indices marketed under the MSCI brand and its equity portfolio analytics marketed under the Barra brand. MSCI’s products are used in various areas of the investment process, including portfolio construction, performance benchmarking and attribution, risk management and analysis, index-linked investment product creation, asset allocation, investment manager selection and investment research. The Company’s primary products consist of equity indices, equity portfolio analytics and multi-asset class portfolio analytics. It also has product offerings in the areas of energy and commodity asset valuation analytics and fixed income portfolio analytics.

The Company’s products include the index data, risk data and/or software applications. Its software applications offer its clients portfolio analytics to perform in-depth analysis of their portfolios, using its risk data, the client’s portfolio data and fundamental and market data. Its energy and commodity asset valuation analytics products are marketed under the name FEA. The Company’s clients include asset owners, such as pension funds, endowments, foundations, central banks and insurance companies; institutional and retail asset managers, such as managers of pension assets, mutual funds, exchange traded funds (ETFs), hedge funds and private wealth, and financial intermediaries, such as broker-dealers, exchanges, custodians and investment consultants. As of November 30, 2009, it had over 3,100 clients across 67 countries.

Equity Index Products

The Company’s MSCI-branded equity index products measure the returns available to investors across a variety of markets, sizes, styles and industries. As of November 30, 2009, the Company calculated over 120,000 equity indices daily. During the fiscal year ended November 30, 2009, approximately 2,400 clients worldwide subscribed to its equity index products for use in their investment portfolios and for market performance measurement and analysis. In addition, MSCI also had more than 65 third-party financial information and analytics software providers, who distribute its various equity index products worldwide.

The MSCI Global Equity Indices are the Company’s principal index products. They measure returns available to international investors across a variety of public equity markets. As of November 30, 2009, its Global Equity Indices included 75 developed, emerging and frontier market countries, as well as various regional and composite indices built from the component country indices, including the MSCI EAFE (Europe, Australasia, and Far East), MSCI World, MSCI ACWI IMI (All Country World Investable Market Index) and MSCI Emerging Markets Indices. In addition, the Global Equity Indices include industry indices, value and growth style indices and large-, mid- and small-capitalization size segment indices.

The MSCI Domestic Equity Indices are designed to measure the returns available to domestic investors in the United States and China public equity markets. Each of these domestic country index series includes value and growth style indices, and in the case of the United States large-, mid-, small- and micro-capitalization size segment indices. The Global Industry Classification Standard (GICS) was developed and is maintained jointly by the Company and Standard & Poor’s. This classification was designed for classifying companies into industries. Its equity index products classify constituent securities according to the GICS. MSCI also offers GICS Direct, which is a database of more than 38,000 active companies and 42,000 securities classified by sector, industry group, industry and sub-industry in accordance with the GICS methodology.

Equity Portfolio Analytics Products

The Company’s Barra-branded equity portfolio analytics products assists investment professionals in analyzing and managing risks and returns for equities at both the asset and portfolio level in equity markets worldwide. Barra equity risk models identify and analyze the factors that influence equity asset returns and risk. The Company’s Barra equity products utilize its fundamental multi-factor equity risk model data to enable clients to construct, analyze and manage equity portfolios. Its multi-factor risk models identify common factors that influence stock price movements, such as industry and style characteristics, based on market and fundamental data. The Company’s customers can use its equity portfolio analytics by installing the Company’s software applications and equity risk data in their technology platforms.

Barra Aegis is the Company’s equity risk management and analytics system. It is a software application for equity risk management and portfolio analysis that is powered by its equity risk data. It is deployed by the client as a desktop application. Barra Aegis is an equity investment analytics module, which enables customers manage their equity risk against their expected returns. It also enables clients to construct portfolios based on client-specified expectations. Barra Aegis also provides a factor-based performance attribution module, which allows clients to analyze realized returns relative to risk factors by sectors, styles, currencies and regions. Barra Aegis tools also help clients identify returns attributable to stock selection skills.

The Company’s Equity Models Direct product delivers risk data to clients for integration into their own software applications. The risk data in Equity Models Direct is also available via third-party providers. Global equity model (GEM2) is an investment decision support tool for global equity portfolio management and construction. Barra integrated model (BIM) provides a detailed view of risk across markets and asset classes, including currencies, fixed income assets, mutual fund assets and hedge fund assets. It begins by identifying the factors that affect the returns of equity securities, fixed income securities and currencies in each individual country or market. These factors are then combined into a single global model that can forecast the risk of multi-asset class, global portfolios.

Its single country equity models identify the set of factors most able to explain sources of risks and returns of portfolios in that country, such as the United States equity model, version 3 (USE3), which models risk for United States equity assets and portfolios, and its United Kingdom equity model, version 7 (UKE7) model, which models risk for United Kingdom equity assets and portfolios. The Company’s Europe equity model (EUE3) is designed to be used across a range of applications and is available in six different versions to reflect local and regional commonalities, as well as short-term and long-term investment horizons. The EUE3 models cover approximately 9,400 stocks in 29 markets, including a number of emerging and frontier markets in Eastern Europe.

Multi-Asset Class Portfolio Analytics Products

The Company’s multi-asset class portfolio analytics products offer a risk assessment framework for managing and monitoring investments in a variety of asset classes across an organization. The products are based on its integrated fundamental multi-factor risk models, value-at-risk methodologies and asset valuation models. They enable clients to identify, monitor, report and manage market risks from equities, fixed income, derivatives contracts and alternative investments, and to analyze portfolios and analyze risk and return across multiple asset classes. Using these tools, clients can identify the drivers of market risk across their investments, produce daily risk reports, run pre-trade analysis, evaluate and monitor multiple asset managers and investment teams and access correlations across a group of selected portfolios.

MSCI has two products in this area: The BarraOne System and The Barra TotalRisk System. The Company’s clients access BarraOne via the Internet, using their desktop browsers. This product includes modules for risk allocation and risk budgeting, performance attribution, historical as-of analysis of portfolios. Clients install TotalRisk on their own information technology infrastructure. This product includes simulation modules that enable clients to perform historical and Monte Carlo value-at-risk calculations.

Other Products

The Company’s other products consists of two types of products: energy and commodity asset valuation analytics for investors, traders and those hedging investments in these asset classes and fixed income portfolio analytics products to facilitate the investment processes of fixed income investors. MSCI’s energy and commodity valuation products are software applications that offer a variety of quantitative analytics tools for valuing, modeling and hedging physical assets and derivatives across a number of market segments, including energy and commodity assets. These software applications are not provided with any market data or index or risk data. These include products, such as @Energy, VaRworks and StructureTool. Barra Cosmos enables global fixed income portfolio managers to manage risk and optimize return in multi-currency, global bond portfolio. This product integrates specific bond, derivative and currency strategies to reflect each user’s investment style, while monitoring the overall risk exposure of the portfolio. Barra Cosmos is deployed by the client as a desktop application.

The Company competes with Dow Jones & Company, Inc., FTSE International, Ltd, Russell Investment Group, The McGraw-Hill Companies, Inc. (Standard & Poor’s), STOXX Ltd., Nikkei Inc., Nomura Securities, Ltd., Tokyo Stock Exchange, Inc., Applied Portfolio Technologies, Axioma, Inc., FactSet Research Systems, Inc., Northfield Information Services, Inc., Wilshire Analytics, Algorithmics and RiskMetrics Group, Inc.