MSCI: Emerging markets gain traction in US

MSCI has reported operating revenues of US$517m for the third quarter of 2021, up 21.6% from the previous year while organic operating revenue grew by 20.4%.

Index operating revenues were US$322m, reflecting an increase of US$65.8m. The increase was primarily driven by US$41m in higher asset-based fees mainly due to a soar in revenues from exchange traded funds (ETFs) linked to MSCI equity indexes.

In the structured products market, MSCI has recorded a significant growth with an increasing number of investor across the US market with the MSCI Emerging Markets underlying accruing US$174m in sales across 30 products during the third quarter of 2021, compared to US$27m in sales for just 11 products in the same period a year prior.

Over the past year, issuance and sales of products tied to MSCI Emerging Markets have steadily increased with figures creeping up to total US$86m (17 products) in the final quarter of 2020, SRP data shows. This number then sky-rocketed to US$225m (34 products) in the first quarter of 2021 and later dropped by 33% in Q2 21 to total US$150m (37 products).

The best-selling structure for the Q3 21 period tied to MSCI Emerging Markets was the Performance Leveraged Upside Securities - MSCI Emerging Markets (36261U168). Selling for US$58m, this growth note was issued by GS Finance and features a capped call and enhanced tracker payoff types.

The product will reach maturity in a year and will offer a capital return of 100% plus 300% of the rise in the underlying at maturity over the investment period. This is subject to a maximum overall return of 115.55%.

The most popular MSCI underlying in the US market for Q3 21 is MSCI EAFE with US$188m in sales across 50 products, representing a decrease from its figure of US$234m for 61 structured products during Q3 20.

Europe

Across the European structured products market, MSCI’s decrement and ESG offering continued to increase in popularity during the third quarter with all the non-flow products being listed in the German market.

The MSCI World Climate Change ESG Select 4.5% Decrement EUR Index is the most dominant proprietary underlying in Q3 21 and accounts for 163 products, while the MSCI EMU SRI Select 30 Decrement 3.5% Index was featured across 32 products.

In Belgium, one structured product tied to the MSCI World IMI Select Trend Accelerators Index was issued during the Q3 21 period - the BNP Paribas Fortis Funding (LU) Select Trend Accelerators Note 2031 is wrapped as a medium-term note and features an uncapped call payoff type.

The note is expected to reach maturity in 10 years and offers minimum 100% capital return plus 100% participation in the rise of the index at maturity. The final index level is calculated as the average of 24 monthly readings taken over the last two years of investment.

Apac

During the third quarter, a total of three non-flow structured products were tied to the MSCI World ESG Screened 5% Risk Control Index across the Asia-Pacific market.

All the products were issued by HSBC Bank and are wrapped as structured deposits sold in the Chinese market specifically. The products will reach maturity in two years and have shark fin and putable payoff types.

MSCI also reported a fall in net income which stood at US$170m at the end of Q3 21, representing a 6.8% decrease from the same period a year prior. As of September 30, 2021, net income totalled US$532m, a 19.4% increase from last year.

Total operating expenses were US$237m, up 19.8% year-over-year while adjusted EBITDA expenses stood at US$211m, up by 19.7%.

‘MSCI’s third quarter reflected strong performance across the company,” said Henry A. Fernandez (pictured), chairman and chief executive officer at MSCI, commenting on the frim’s results. ‘We benefitted from our targeted investments, which position us very well for the ongoing transformation of the global investment industry.’

Click to view MSCI’s earnings release.