Good day, ladies and gentlemen, and welcome to the MSCI Second Quarter 2025 earnings conference call. As a reminder, this call is being recorded, and at this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session where participants are requested to ask one question at a time, then add themselves back to the queue for any additional questions. We will have further instructions for you later on. I would now like to turn the call over to Jeremy Ulan, Head of Investor Relations and Treasurer. Sir, you may begin. Thank you, Operator. Good day and welcome to the MSCI Second Quarter 2025 earnings conference call. Earlier this morning, we issued a press release announcing our results for the second quarter of 2025. This press release, along with an earnings presentation and brief quarterly update, are available on our website, msci.com, under the Investor Relations tab. Let me remind you that this call contains forward-looking statements, which are governed by the language on the second slide of today's presentation. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made, are based on current expectations and current economic conditions, and are subject to risks and uncertainties that may cause actual results to differ materially from the results anticipated in these forward-looking statements. For discussion of additional risks and uncertainties, please see the risk factors and forward-looking statements disclaimer in our most recent Form 10-K and in our other SEC filings. During today's call, in addition to results presented on the basis of US GAAP, we also refer to non-GAAP measures. You'll find a reconciliation of our non-GAAP measures to the equivalent GAAP measures in the appendix of the earnings presentation. We will also discuss operating metrics such as run rate and retention rate. Important information regarding our use of operating metrics such as run rate and retention rate is available in the earnings presentation. On the call today are Henry Fernandez, our Chairman and CEO; Baer Pettit, our President and COO; and Andy Wiechmann, our Chief Financial Officer. With that, let me now turn the call over to Henry Fernandez. Henry. Thank you, Jeremy. Good day, everyone, and thank you all for joining us. In the second quarter, MSCI delivered another strong financial performance, including revenue growth of over 9%, adjusted EBITDA growth of over 10%, adjusted earnings per share growth of almost 15%, and free cash flow of over $300 million. Year to date, we have repurchased $286 million worth of MSCI shares at an average price of $557 per share, demonstrating our long-term conviction in the value of our franchise. Our second quarter operating metrics included total run rate growth of 11%, fueled by record AUM levels in ETF products linked to MSCI indices and asset-based fee run rate growth of 17%. Among client segments, we recorded double-digit subscription run rate growth with banks and broker-dealers, wealth managers, hedge funds, and asset owners. Despite the well-known ongoing pressures on active asset managers, MSCI's subscription run rate growth with this client segment held steady at 6%, while retention with active asset managers stayed high at 96%. Across all client segments, MSCI is rapidly developing innovative use cases for our existing solutions, while developing new solutions for our increasingly diverse client base. Turning to our product clients, MSCI's Q2 performance affirmed that index in general, and our asset-based fee franchise in particular, is a key growth engine for us with enormous opportunities. Most notably, our strong ABF run rate growth reflects the vital importance of MSCI indices to global investing, especially in non-US market exposures. In fact, MSCI captured more indexed equity ETF cash flows than any other index provider during the quarter. Total equity index ETF AUM linked to MSCI indices surpassed $2 trillion for the first time, driving total index ETF and non-ETF AUM balances tracking MSCI indices to $6 trillion. In addition, fixed income index ETF AUM linked to indices created entirely by MSCI, or in partnership with partners, reached $84 billion. All of this helped us achieve our highest-ever level of quarterly ABF revenue. MSCI index progress was also underpinned by several product launches, including new data solutions that offer deeper insights into the building blocks of our indices, such as our constituent AUM and index liquidity data sets. For all these reasons, we are very excited about the tremendous potential of our index franchise. MSCI second quarter results also confirmed the value of our risk and performance analytics tools during periods of fast-moving market conditions and volatility. We achieved our highest-ever Q2 recurring sales in analytics, driven mainly by equity risk models. Meanwhile, we completed our largest-ever deal for MSCI Wealth Manager, which Baer will cover in greater detail. Let us shift to private assets, which is an attractive long-term opportunity where MSCI is expanding our tools to drive adoption across the investment community. We have made significant progress in boosting our capabilities for private capital solutions, with Q2 run rate growth of nearly 13%, while launching or enhancing a number of key products. For example, we introduced MSCI Asset & Deal Metrics, which include data from over 26,000 private equity deals, covering $2 trillion in net asset value. We recently unveiled the MSCI World Private Equity Return Tracker Index, which offers an approximation of private equity investments by replicating region, sector, and style exposures through public equities, leveraging fundamental data from MSCI Private Capital Universe. Already, we see strong interest from clients in launching tradable products linked to this index. Our first phase of private credit risk assessments in partnership with Moody’s is expected in the coming weeks, and we're very excited about the dialogue we've been having with clients on this product. In addition, we now have more than 30 LP clients using our private capital indices as their policy or performance benchmark. These offerings underscore our innovation and the benefits of our integrated franchise, which enhances all MSCI product lines, creating powerful network effects for our clients. In real assets, new recurring sales were challenged and down from Q2 of last year. However, we introduced new products targeted to the areas of relative acceleration in commercial real estate, including our new data centers product and RCA funds, a new intelligence offering covering over 8,000 real estate funds to empower GPs and LPs to optimize fundraising, investor engagement, and capital allocation decisions. Moving on to sustainability and climate. Despite the current cyclical slowdown, our tools have become a permanent feature of the global investment process. MSCI is and will continue to be a leader in this space. We recently won valuable climate mandates in index, and our climate physical risk and reporting solutions are helping us expand our footprint with newer client segments, such as insurance companies. While we expect sustainability to remain challenged, we're adapting and repositioning our tools to capture new opportunities when they arise. In conclusion, our solutions are strongly embedded in the global investment ecosystem. We're always intensely focused on anticipating and investing in the biggest trends across our industry to serve a broad base of client segments while delivering an attractive financial model for our shareholders. With that, let me turn things over to Baer. Thank you, Henry, and greetings, everyone. During the quarter, with rapidly moving markets, MSCI benefited from both traditional and newer product offerings, deepening our role in the global investment ecosystem while further diversifying our client base. Among banks and broker-dealers, we delivered subscription run rate growth of 10%, with strong traction in index and analytics. We are supporting these clients with MSCI equity, derivatives, and trading solutions amid market volatility, which is helping to fuel new wins in index. In Q2, for example, MSCI completed a large deal with a bank in the U.S. for ETF-linked custom index data sets. This deal captures not only our work on customization, but also rising capital markets activity tied to the ETF ecosystem, which is creating demand for advanced data on our index content. Meanwhile, another U.S. bank signed a global deal to use our equity analytics solutions for sell-side market making and quantitative investment strategies to support their clients' increasing interest in deploying capital to international markets. Deals like that helped MSCI drive equity analytics growth of nearly 13%, with our total run rate reaching almost $244 million across client segments. Supporting the asset liability management program within banks is another opportunity for MSCI. Most notably, we completed a large deal with the Treasury Division of a U.S. bank for our fixed income portfolio management solutions. Turning to hedge funds, we achieved subscription run rate growth of 12%, driven largely by analytics, which posted a record quarter in recurring sales with that segment. Long-short equity managers and multi-strategy hedge funds alike demand best-of-breed equity models, data, and risk insights to support their various alpha generation strategies across all market conditions. MSCI is focused on growing our footprint with this fast-money investor community. For example, in Q2, we completed a large deal with a hedge fund in the U.S. that expanded their relationship with MSCI to access our full suite of equity factor models and our security master crowding and factor lab data sets. Likewise, another prominent US hedge fund expanded their use of our equity models to help build out a factor model risk dashboard for portfolio construction and risk hedging. Moving on to asset owners, MSCI posted subscription run rate growth of 12%, driven primarily by analytics and private capital solutions. Across regions, asset owner clients increasingly need unified risk tools to help them consistently analyze different types of portfolios. This need has been amplified by the increased volatility in global markets, the shift to private assets, and the growing adoption of a total portfolio approach. In Q2, for example, MSCI completed a large deal with a US pension fund that plans to use our private asset tools and our total portfolio solutions to improve oversight and efficiency, replacing two incumbent providers. MSCI is also winning additional climate index mandates with asset owners across the world. In Q2, for example, we won a pair of mandates with European pension funds that are contributing to a combined $25 billion of new AUM benchmark to an MSCI climate index. All of this underscores the enduring value of climate data, models, and tools to asset owners, along with the value of MSCI's integrated franchise, which helps our index and climate teams develop stronger products. Turning to wealth managers, we achieved subscription run rate growth of 17%, driven mainly by index and analytics. Importantly, we completed our largest MSCI Wealth deal ever. A seven-figure deal with the wealth arm of a major U.S. regional bank. Covering our MSCI Wealth Manager and Borrow One platforms. This win, among others, demonstrates how MSCI can deliver unified solutions with advanced tools spanning the home office and advisors, including tools for model construction, proposal generation, personalized client portfolios, and regulatory support. With MSCI Wealth Manager, we have a foundational framework for driving similar wins in the future. In Q2, we also finalized a number of index deals where the key drivers of wealth demand remain discretionary portfolio management, chief investment officer solutions, and related content. If we look at another wealth-focused area, direct indexing AUM based on MSCI indexes, it grew by 20% globally to reach $135 billion in total. Shifting to asset managers, MSCI delivered subscription run rate growth of 6%, driven mostly by index. Looking ahead, we see a steady growth trajectory with asset managers. In Q2, we completed a seven-figure multi-year deal with a large European asset manager. As part of this deal, MSCI's fixed income indexes displaced a major competitor for our clients' corporate bond ETF products. We are supporting a growing list of asset managers with active ETFs, a fast-growing market as active managers seek to innovate their products, distribution, and business models using the highly efficient ETF wrapper. Year to date, we have licensed a number of such new active ETFs. Finally, turning to insurance companies, we posted subscription run rate growth of 12%. Driven mainly by index and climate. While MSCI's footprint among insurance companies remains small, we see promising growth potential. Especially for products that support index-linked annuities and for climate tools that support integration and reporting. In Q2, for example, we scored a key index mandate win with a leading US annuity provider, which we expect to result in $5 billion-10 billion of AUM benchmark to MSCI index. We also finalized a large sustainability and climate deal for the European location of a top APAC insurer in which MSCI displaced multiple competitors. As part of this deal, we will deliver our climate, biodiversity, and geospatial tools along wit`h our ESG ratings for both climate reporting, and commercial uses. In summary, MSCI is benefiting from our resilient financial model and the mission-critical, repeatable, and scalable applications of our solutions for a wide range of client segments across the investment ecosystem. And with that, let me turn it over to Andy. Andy? Thanks, Baer. Hello, everyone. Our second-quarter results demonstrate the strong momentum of our business model and the compounding impact of our investments. This is particularly evident in index, where asset-based fee run rate growth was 17%, benefiting from broad investor appetite for global market exposures. We experienced another quarter of strong flows into ETFs linked to our indexes. Equity ETF linked to MSCI indexes experienced $49 billion of inflows during the second quarter, capturing 29% of all inflows into indexed equity ETFs and representing the largest level of quarterly inflows since 2021. Fueling this strength were ETF products linked to MSCI Developed Markets ex-US indexes, which captured $32 billion, more than 50% of all flows into DM ex-US index equity ETFs in the quarter. We also saw solid inflows into equity ETFs linked to our factor indexes, capturing $9 billion of inflows with strong traction in quality and value and growth products. Index subscription run rate growth was 9%, reflecting a continuation of the dynamics we have seen in recent periods. We saw 16%, 14%, 12%, and 9% index subscription run rate growth from wealth managers, hedge funds, banks, and asset owners, respectively. Asset managers delivered index subscription run rate growth slightly below 7%, supported by steady performance in our DM and EM Core index modules. Custom index subscription run rate growth remained in the teens, with traction across asset managers, banks, and hedge funds. Our custom indexes are enabling our clients to create custom benchmarks, develop structure products, research markets, and backtest strategies. We're also directly seeing the commercial benefits of our ongoing investments in new product innovations. Year to date, we've generated over $4 million of total sales from new product areas released in the last six months, such as our ETF-Linked Custom Index Module, constituent AUM data, sustainability index methodology data, MSCI Investability Data, and our Venture-Backed Index Module. In analytics, we had subscription run rate growth of 8% and our strongest second quarter ever for new recurring sales, as well as recurring net new sales. This included our largest deal ever for MSCI Wealth Manager, several fixed income wins, and strong sales of our equity models to hedge funds, banks, and asset owners. In sustainability and climate, we drove 11% subscription run rate growth for the reportable segment, with roughly 9% subscription run rate growth from sustainability solutions and almost 20% subscription run rate growth from climate solutions. From a regional lens, sustainability and climate subscription run rate growth in Europe was 18%, with about 3% growth in the Americas and 6% growth in Asia. As a reminder, last year's recurring sales included meaningful contributions from our sustainability partnership with Moody’s Analytics. Clients use sustainability and climate considerations as critical inputs into their investment strategies, and we see numerous attractive opportunities. Although our through-the-cycle long-term target is still under review as we assess the impact of this period of muted demand on the longer-term trajectory, we expect the current dynamics to persist for the next several quarters. In private capital solutions, we had strong traction with GPs, banks, and wealth clients. In real assets, we see early momentum in some recently launched products, including our fund performance data set. The retention rate for private assets remained stable from last year's level at slightly over 91%. Finally, our guidance remains unchanged across all categories. Overall, our Q2 performance adds to MSCI's track record of consistent, durable financial results. We have many opportunities across client segments, regions, new products, and capabilities that we are unlocking to drive attractive growth for the second half of 2025. We look forward to keeping you posted on our progress, and with that, operator, please open the line for questions. Certainly. As a reminder, ladies and gentlemen, if you have more than one question, get back in the queue as time allows. Our first question comes from the line of Alex Kramm from UBS. Your question, please. Yeah. Hey, good morning, everyone. I think I'm going to ask the same question that I asked last quarter, which was really about the potential help you should get as assets flow more into international markets from the US. Obviously, you're starting to see it on the ABF side. We can all track that. I think we're seeing it on the active side already too, in terms of flows picking up there. Just wondering what your conversations with clients over there have been and how you expect that to hopefully manifest itself in an acceleration on the subscription side and index as well. Thank you. Yeah, Alex, thanks for the question. Clearly, the rotation of assets from the US market to the international, to the non-US markets, is a huge boost to our asset-based fee business. Just as a reminder, there are $6 trillion of our clients' assets that are index to our indices, to the MSCI indices. $2 trillion in ETF and $4 trillion in non-ETF AUM. We have seen the flows going into there in spades. That is the comment that Andy made about almost $50 billion in flows, almost 30% market share in the quarter. On the subscription side, for sure, the rotation is going to help significantly. It is still a little bit too early to tell how the subscription run rate picks up or the sales pick up on it. We do not believe that this is just going to be a huge sort of short-term catalyst in our subscription, because when you look at the—when we look at our client base, we already have a large client base in APAC, which is invested globally. We have a large client base in EMEA, which is invested globally, and a large client base in the U.S., which is invested globally. What we are hoping for is that the rotation to international markets brings other asset managers to launch funds on enhanced products, and that is where we will see the incremental demand. It is going to be incremental on top of an already high installed base of our data and our analytics, our data or indices analytics with global investors. As I said, it is certainly going to help a great deal. It is just going to take time, and it is not going to be like a galloping type of boost. Thank you. Our next question comes from the line of Manav Patnaik from Barclays. Your question, please. Thank you. Andy, you talked a lot, but your asset manager base kind of staying stable in that mid-single digit growth range. It sounds like for you guys to get back to faster growth, you need to get that growth accelerated again. I was just wondering, based on your conversations, clearly budget, spend, etc., is tight there. Is it innovation, or how do you think you can get that piece of the puzzle growing faster again? Manav, that's truly the crux of the question on the subscription business, right? When you look at it from a client segment perspective, not just a product perspective. As a reminder, we have $2.35 billion in run rate, in subscription run rate, of which about 50% is active asset managers. The other 50% is broken down into banks and hedge funds and asset owners and wealth managers and others. Just going through the facts a bit, and then I'll answer your question, 50% of active asset managers, basically stock pickers, is growing at a little over 6%. The other 50% is growing at 11.5%. Therefore, in order for us to accelerate the total subscription run rate, two things will need to happen. One is, which we're working really hard on, the 50% that is non-active asset managers need to grow at a faster pace than we've had in the past. As I said, right now it's 11.5%, and we're creating a lot of new products, relocating people and salespeople and consultants into these client segments in order to grow faster. The most promising part of that is what we call the fast money segment. Banks and hedge funds and market makers and people like that, because they feed off the indexed AUM ecosystem, and there's a huge amount of liquidity, a huge amount of flows that they can make money off. We're very focused on that. For sure, as I said in the past, we continue to be very focused on asset owners and, of course, the wealth segment, which is, in the last quarter, the wealth segment grew at over 17%, and the asset owners grew over 12%. That's the first thing that needs to happen. The second thing that needs to happen is to either remain steady or gradually accelerate the asset management subscription run rate. That part is not as easy because it is part of the industry that is still challenged with outflows, with fund outflows, with cost pressures, and with consolidation. What we're doing is we are clearly maintaining and enhancing our rotation rates in that client segment, trying to sell them incremental things, but we have a whole plan to create a lot of new products across the board, but especially index analytics, that can help them become better at what they do. One of those promising things is active ETFs. I think a big part of this active asset management industry needs to move from mutual funds for retail investors into active ETF. We have a large role to play there. We already have 50 clients that represent about $10 billion in AUM in active ETFs. That's something that we're pushing pretty hard. I don't see in the near future a major catalyst for acceleration of growth or rapid acceleration of growth on the active asset management industry. That is something that will continue to take time. While that is happening, we are clearly focused on growing as much as we can, the other 50% of the client segment, and accelerate that growth. Thank you. Our next question comes from the line of Toni Kaplan from Morgan Stanley. Your question, please. Thanks so much. Maybe this sort of dovetails on the last part of the last question, but just hoping to get an update on consolidation that you're seeing and how much that you're aware of will impact your results in sort of the upcoming quarters, if there's any way to sort of quantify that and talk about if you're seeing that trend maybe start to dissipate or if that's an ongoing thing that we should expect over the next number of quarters. Thanks. Toni, I think the consolidation is, there are periods in which we see two or three deals happening, large deals, in a particular year, and periods in which we do not see a lot happening. On a trended basis, it will continue, but we are not yet worried that that is going to accelerate and that will hurt us a lot. Therefore, we are not putting that into our forecast. We are not putting that into our pipelines and things like that. That obviously could be, we could be surprised by two big asset managers acquiring one another or merging with one another and the like. We are already assuming that there will continue to be a secular trend to some level of consolidation. What we are excited about is that that industry needs to transform, and a big part of that transformation is the movement that I was mentioning before from non-listed mutual funds to every kind of exchange-traded fund, whether it is a market cap, which is what we have been doing, passive market cap, or a passive non-market cap with some themes around it, whether it is fixed income, and now for sure on active asset management. We are beginning to see early signs of a major transformation in the industry by those participants reconfiguring their product line into active ETFs. Thank you. Our next question comes from the line of Ashish Sabadra from RBC Capital Markets. Your question, please. Thanks for taking my question. I just wanted to focus on the retention, which was a bit soft overall level, particularly on analytics and sustainability. I was wondering any color on that front. As we think about the rest of the year, any puts and takes on retention going forward? Thanks. Sure. Sure. This is Andy here. As you know, cancels can be a little bit lumpy quarter to quarter. If we look at Q2 and dive into what drove the lower retention in this Q2 versus Q2 a year ago, as you alluded to, we had lower retention in analytics. That is an area that tends to be lumpy. Actually, the year-ago period, we had quite high retention for the segment. We had slightly lower retention in sustainability and climate, which you alluded to. I'd say the main drivers of cancels continue to be client events and some financial/budget pressures that Henry alluded to. If we take a step back and look at where retention rates have been over the last year or so compared to where it was back in 2022, which is when we saw kind of all-time high retention rates, it is mostly lower in real assets and sustainability and climate. If we look from a client segment lens, it is really from hedge funds. We have seen some elevated cancels from hedge funds, which, as you know, represent a larger portion of our run rate now. We have also seen some higher cancels from corporate advisors within the sustainability and climate segment. I would say the place where we have seen the slightly elevated cancels being real assets and sustainability and climate, and then with hedge funds, which just naturally tend to run at a slightly lower retention rate, we would expect those dynamics to continue in the near- term. I would highlight that, linking it to the prior question, retention rate with asset managers continues to be quite solid at around 96%. In some of these other areas, we are seeing slightly lower retention rates relative to where we were a couple of years ago. Thank you. Our next question comes from the line of Owen Lau from Oppenheimer. Your question, please. Good morning, and thank you for taking my question. I do want to go back to the sales environment in the second quarter and also so far in the third quarter. I think it was $44 million in the second quarter and down a little bit year over year. I do think you had a one-off item in the second quarter of 2024. If you can unpack a little bit more on the sales environment and the outlook, that would be great. Thanks. Sure. Yeah. As you alluded to, in the second quarter of last year, we had a meaningful contribution from the Moody’s ESG partnership that we signed. We did not quantify that, but we did say that it was a meaningful contributor to the sales a year ago. Obviously, we did not have that in this second quarter. Just taking a step back and looking at the overall environment. The markets are in a good spot now, but it was a volatile quarter. The first half of the second quarter, we saw heightened uncertainty, volatility, general cautiousness from clients, as you all know. We are now in a position where the markets are hitting new highs, and we are clearly benefiting on the ABF side. I would say we are fortunate that most of our clients do not change their buying decisions in the short- term based on market swings up and market swings down. Overall, I would characterize the environment as remaining fairly consistent to what we have been seeing in recent quarters. As Henry alluded to, if we see sustained favorable market dynamics and momentum on the international front continuing, that can be constructive for us. We continue to be overall encouraged by the client engagement that we were seeing as you heard us talk about the healthy pipeline of products that we have. I would say at this stage, overall, we are seeing consistent dynamics with what we have seen in recent quarters. Thank you. Our next question comes from the line of Alexander Hess from JPMorgan. Your question, please. Hey, everybody. Maybe you could just help us puzzle in the various moving pieces here and understand a bit more, especially with Henry's comments to lead off the call. If asset managers are going to remain tricky, does that mean that sort of that 10% low double digits, excuse me, ABF revenue growth target is sort of now a bit of a stretchier target? I have a follow-up question on that as well. Look, I think the way that we look at the totality of the company, and we actually encourage you to look at that, is that a very meaningful part of our company, over 20%, 22%-23% in asset-based fees, is on a tier, and not only cyclically but secularly. I think the trend to do systematic investing in the form of either non-listed products or listed products like ETF is just starting. We started with market cap, we're now going to non-market cap, we're going to fixed income, we're going to active ETF, active fixed income, and all of that. Frankly, I think people are not focused on that in the success of the company, and that will continue to grow on a secular basis, on a trended basis significantly over the years and decades to come. The other part of the business is subscription, which is, as I mentioned, half of it is active management, half of it is dependent on the active management industry, and the other half is dependent on other client segments. The other client segments like wealth management, GPs for private assets, the fast money segment, as we call the market makers, those people are on a tier. They have enormous capital in the fast money segment, hedge funds, and market makers and all of that, and they need a lot of our products. The wealth management industry is expanding because of the wealth accumulation in the world and the professional management of assets, and now even the defined contribution management of assets in a lot of private equities in a lot of segments. We have enormous potential in all of that. MSCI started life in which we had two, three different product lines, look at benchmarks and equity analytics and things like that, sold to the active asset management industry. We've enjoyed that, and we will continue to enjoy that. That is a core of what we do. It will grow. It will turn around in a bigger way. I think there are two things that we're missing. From a lot of people, we're missing the focus on the asset-based fees and the futures and the options and all of that, and we're missing the non-asset management client segment and the enormous potential that the company has in there. We haven't even talked about the private assets with asset owners, LPs, and as the managers, the GPs, which we're only getting started. We're not talking about climate for banks' balance sheets and climate change for insurance companies, clearly, with risk management across the board and all of that. The company has enormous potential. It's just that we're in that process of going from a lot of product lines relying on active asset managers, with this huge other business of asset-based fees, to a transformation of the company to a lot of other client segments that use the same tools that a lot of people use. That's the way we're looking at the company. Thank you. Our next question comes from the line of Faiza Alwy from Deutsche Bank. Your question, please. Yes. Hi. Thank you. I wanted to ask about the demand environment for custom indexes because there was a slight slowdown in custom indexes subscription sales. I would have thought that given the Foxberry acquisition and some of the technology advancements that you've talked about, we could see potentially accelerating growth. I just wanted to hear more about what's going on there. Yeah. Thanks for that. Look, fundamentally, there's no change, right? I think that the direction that we're headed with this, we're very confident about it. I think the nature of these types of quarterly numbers, there can sometimes be a slight change or hiccup depending on what's happening with specific deals. Our outlook remains exactly the same. We're very positive on this. We're building out capabilities. Long story short, the story is unchanged, and this remains a very important growth opportunity for us unequivocally. Thank you. Our next question comes from the line of Kelsey Zhu from Autonomous. Your question, please. Hi. Good morning. Thanks for taking my question. Henry, I'm glad you mentioned active ETFs a few times in the prepared remarks and in the Q&A. What we really see is there's been a wave of active ETF launches globally since the start of 2024. A lot of them are based in the U.S., which I understand is a very big market for MSCI, but maybe not the strongest market. Just curious to hear more about how MSCI is positioned with active ETFs. If you could talk a little bit more about the economics of the products and services you provide there, that would be really helpful as well. This is an area of significant growth opportunity for us. The dialogue with pretty much every active asset manager is high. The active ETF product line with our clients is a range. It's a range from almost like enhanced indexation to targeting a particular universe with stock picking to a little bit more unconstrained and stock picking, which is what typically happens in mutual funds nowadays. Therefore, we can play a large role across all of that. In an unconstrained sort of stock picking environment, we can sell more of our data and our benchmarks and all of that. At the other end, on an almost like enhanced indexation or with overlays, our business model is not dramatically different from the passive model in which we license our universe, we license our indices, and we get AUM fees on that. Similarly, in between, right, when they do that. When you look at what's typically happening in an active ETF's, people are looking for a theme. They're looking for an investment thesis, and we are doing the work for them, quantitatively coming up with the investment thesis and putting it into an index so that they can pick from and go out and build their active ETF. We have a lot of dialogue in the US. As I said, we have 50 clients all over the world. There is a lot of dialogue in Europe about this. Many of the bank-owned asset managers and wealth managers want to play a large role in here, some of them with their own proprietary products, some of them with third-party products and the like. I think that gradually the active asset management industry, especially the mutual fund industry, is going to revive itself under this type of category and is going to create growth. That growth is going to be very beneficial to MSCI. Thank you. Our next question comes from the line of Craig Huber from Huber Research Partners. Your question, please. Great. Thank you. Andy, I wanted to ask you. What's sort of the puts and takes here, how we should think about getting to the high end of your outlook for cost for the year versus getting to the low end of the guidance range there? Within that, if you could answer the question, please, about, I think three months ago, you guys said you were assuming stock markets would gradually increase over the course of the year. Obviously, these last three months, they were quite strong. What are you guys assuming right now as for your base case when you think about your internal investment spending and cost overall? Thank you. Sure. Yeah. Thanks, Craig. As you know, we're continually calibrating the pace of spend. We do look at a wide range of factors, and it has been a volatile market backdrop over the last quarter or so. As we stated, our expense guidance ranges remain the same. We're still committed to delivering within that range. There are still a lot of moving pieces at this point in the year, but maybe to provide a bit more color on kind of where we are and what we're seeing. As you alluded to, we mentioned last quarter that if AUM levels remained around their then current levels, we would have been towards the lower end of our expense guidance ranges. Again, that was just giving you a reference point based on that factor, not necessarily our forecast for the year, but if AUM levels remained at that level, we would have been towards the lower end of our expense guidance ranges. I would say that if AUM levels remain around the current levels, which as you know are quite a bit higher than they were a quarter ago, for the remainder of the year, we would expect to come in towards probably the middle of our expense guidance ranges. I would caveat that by saying there are a whole host of other things that feed into expense growth beyond just the AUM levels, from business performance to FX movements, comp adjustments, severance, and other expense variations. All else equal, if AUM levels remain around their current level, we'd probably be towards the middle of our range. Thank you. Our next question comes from the line of Scott Wurtzel from Wolfe Research. Your question, please. Hey, good morning. Thanks for taking my questions. I wanted to touch on some of the emerging growth opportunities, in particular fixed income and wealth management and seeing the run rate growth accelerate up to the high teens this quarter versus last. Just wondering how you guys kind of view the sustainability of those growth rates as we look out over the near to medium term here. Sure. So look, we're clearly pleased with the results in both of those categories. And fixed income had a nice growth in analytics and the wealth numbers that I mentioned in my prepared remarks. So while I don't want to reference a particular percentage, I think we've been pretty consistent in saying that these are important investment areas for us. We continue to add to our capabilities. We're very focused also on not merely just the product capabilities, but the go-to-market capabilities in terms of marketing, training all our client coverage people, etc. So we believe that allowing for the broad way that we've characterized the environment and both the challenges, some of those challenges by segment, that's more of a comment on fixed income. But in terms of wealth, we're confident that we're making the right steps. I think generally the answer to your question is we are both planning to see these growth rates continue and assume that they will do so. Thank you. Our next question comes from the line of David Motemaden from Evercore ISI. Your question, please. Hey, thanks. Good morning. Totally hear you on the asset managers and the steady growth there. One of the other areas of opportunity just that you had mentioned was on hedge funds. I was surprised to hear the subscription run rate growth continue to decelerate. I think it was 12% this quarter. It was like 14 or 15% the past few quarters. Can you just unpack about what's driving that deceleration? Sure. Yeah. The hedge fund segment is by its nature lumpy. I alluded to this earlier, but tends to run at a lower retention rate. We can see that growth rate skewed by a cancel here or there. Actually, in the current quarter, we did have a client event-driven cancel on the index side. That fed into the index hedge fund growth rate. More generally, we can have large sales to hedge funds on both the index and the analytics side. It can also be driven by the pace of new content and modules that we release. In the past, we have had periods when we released things like our free float data set, which was in strong demand from hedge funds, drove the acceleration there. We have a number of product offerings that we alluded to in the prepared remarks that we are releasing now that similarly should be helpful to that fast money community, including hedge funds. It will vary period to period. As Henry alluded to, we continue to have conviction this is an attractive long-term growth opportunity for us. We have seen strong momentum across our equity models, much of our index content. As the index ecosystem continues to grow, this trading community between hedge funds, market makers, broker dealers, we continue to see a number of opportunities. It is an area where we have a lot of innovation taking place. It will be lumpy period to period. I would not read too much into a slowdown in one quarter there. Thank you. Our next question comes from the line of George Tong from Goldman Sachs. Your question, please. Hi, thanks. Good morning. Henry, you talked about a goal of accelerating your non-active subscription growth beyond 11.5% by creating new products and relocating sales and consultants into the segment. Can you comment on how long it would take to see meaningful acceleration here based on these initiatives and how much faster non-active subscriptions can grow? Yes. Sure, George. It's hard to predict the next few quarters, right, on it. But when you look at the set of opportunities that we have, they're very significant, very significant. We talked about what we call the fast money segment, market makers, hedge funds, and all of that. That will accelerate at some point and continue to grow, because when you have $6 trillion and about $17 trillion-$18 trillion of all benchmarks, either active or passive, that generates an incredible flow of capital that needs to be understood in terms of how it flows. People have to buy into the index, balancing portfolios and all of that. We talked a little bit about that. The other one is wealth management. The wealth management industry is institutionalizing, so to speak. The wealth management advisors are looking for institutional quality portfolio construction tools, portfolio management software, models, and all of that. That's why this MSCI Wealth Manager, which is a software platform that put in all of our data analytics and all of that, we're very excited about that. We had a large sale this quarter, and it has significant growth in there. The same thing that these people also buy enormous amounts of ETF, as we know well, as a basis for their portfolios. Many of them are going into direct indexing and need those custom index capabilities that we built. That's the wealth management segment. The GPs, remember that when you look at our private capital solutions business, excluding real assets, just the private capital solutions part, the vast majority of that run rate comes from institutional limited partners. There are two major initiatives that we have underway there. One is to make the wealth managers also a limited partner so that their allocations can increase dramatically. For that, they need the transparency of the tools, the tools that provide transparency, such as understanding the fund, understanding the performance, the credit worthiness, the risk assessment of the funds, and all of that. The other initiative is to develop product for the GPs, which is right now, our private capital sales to GPs are very low, very low. That presents enormous opportunities to help the GPs connect more with wealth managers and other institutional LPs and all of that. That's another area. On climate, we're seeing quite a lot of demand from, first of all, asset owners that are looking to overlay climate into an index portfolio, an equity index portfolio, or a fixed income portfolio. Also, the banks in their own balance sheet, given the physical risks that are going on in the world, are concerned about the climate change riskiness of their loans, and they're looking for solutions from us to understand how they deal with that risk. Similarly, the insurance companies, not only on their assets, but a lot of the insurance companies are even coming to us and say, "Can you help me understand. How do I price risk on the underwriting part of the insurance company?" We have all these opportunities, and therefore we're prioritizing them one by one. What I can tell you is since the beginning of the year, I've seen about 100 CEOs or C-level people in about 15 countries. The level of dialogue that we have, the demands for what we do are enormous. What we now have to. We deal with an issue of we have all that demand on the think of that as the non-asset management part of the business. What we're trying to do is, how do we prioritize it? How do we build it up? How do we put a value proposition on it? How do we sell it? It's just a matter of time before a lot of this stuff begins to show on the numbers. Thank you. Our next question comes from the line of Jason Haas from Wells Fargo. Your question, please. Hi, this is Jimmy On for Jason Haas. You touched on this briefly, but can you maybe give some more color on how adoption is trending for private capital solutions in the US and also internationally, where I think you're more under-penetrated and what you're doing to grow that adoption? Thank you. Let me take a crack at that. We closed on the Burgiss acquisition two and a half or so years ago. The first year plus, a year and a quarter, year and a half, we were intensely focused inward in making sure that we integrated the data sets, the technology, the people, and all of that in a way that was not going to be disruptive to our clients. We focused on an enormous amount of effort there. Another big focus of ours was how do we ramp up AI in terms of data capture? There is a massive amount of data that we collect on private assets, so documents and emails and reports and tables and all of that. We have been very busy in doing all of that. About a year ago or so, we started the process of building a business plan and how do we expand the business. That took about six-nine months. We went through all of those business plans at the beginning of this year, let's say in the first quarter. Now we are in the process of implementing that. None of that is at this point shown on the numbers that we can see. Everywhere we go, every asset manager on the planet wants to allocate more assets to private assets. They always tell us the same thing. The reason we have a lot of assets into the public market is because of two reasons: transparency and liquidity. In order for us to go bigger in private assets, we need transparency and liquidity. Our answer to them is, "We are going to give you all the transparency in the world. We cannot give you the liquidity because we are not a market maker, but we will give you an assessment of values." We are working on creating evaluated prices across some of these asset classes, starting with private credit, in order to give them a sense of value so that there are more transactions among LPs and all of that. You see that we have had consistent growth on this private capital solution over the last couple of years. The acceleration of the growth is going to come as we begin to roll out all these business plans, all this new product development, and all of that. That is going to take a little bit of time. We are at the cost of beginning that. Thank you. Our next question comes from the line of Wahid Amin from Bank of America. Your question, please. Hi, good morning. Could you talk about how you're thinking about the pricing environment as you begin having conversations with your clients, especially more so now since the macro is still uncertain, just sort of what the conversations are like and are there any areas where people are more not as receptive compared to prior years? Yeah, I'd say no major changes in our approach. Consistent with what I alluded to earlier, that we're seeing a fairly consistent environment and our approach to pricing remains the same. I would say the contribution of price increases to new recurring sales is roughly in line with what we've seen over the last four quarters. So consistent with what I've mentioned recently. It does vary a bit across product lines and client segments. Maybe compared to the second quarter of last year, we saw a slight increase in the contribution from price within analytics. I think that's intentional and reflects how we are monetizing many of the enhancements and added capabilities that we've been bringing to market. We do see a slightly higher contribution from price in sustainability, really driven by the overall drop in sales there. Across MSCI, it's been pretty consistent, and our approach has not changed. We are continually seeking to align the pricing of our solutions with the value that we are delivering to clients and the ongoing enhancements and investments that we've made. We do factor in as well the overall inflationary environment, pricing environment, our cost, and client health. We will continue to calibrate the appropriate price, but we are at the same time always trying to be a strong long-term partner to our clients while maximizing the value we can unlock from the solutions we deliver to our clients. Thank you. Our next question comes from the line of Russell Quelch from Rothschild & Company. Your question, please. Yeah, thank you for having me on. You mentioned earlier you're not reliant on partnerships with the GP for private fund data, but if I'm not mistaken, you are restricted from selling aggregated LP data without GP permissions. Can you update on your thinking here? Any progress in the conversation with GP around opening up on the data side and what products you might be able to offer to GP that would drive sort of greater engagement and growth from this sort of potential customer base? Yeah. Just to clarify. When we work for the LP, the LP instructs the GP to give us every piece of information and data that is given to the LP. That puts us at an incredibly advantageous position of capturing massive amounts of data in the underlying portfolios and the funds and all of that. Now, the flip side of that is that that data is proprietary to the GP, and obviously the LP that invests in those funds is entitled to that data. If you have an LP that is not invested in those funds currently, they're not entitled to see that data. Our contracts call for fairly generous anonymized rules, aggregated rules, to put all that data together and show it to people that are not invested in those funds, which we do, and is pretty valuable to a lot of those people. That is a system that has worked well for the institutional market because a lot of the relationships are one-to-one. That system is not going to work well for the wealth management space because there are tens of thousands, hundreds of thousands of wealth managers that will want to see the data ahead of time, even if their clients are not invested in those funds. We are having discussions with the GPs about liberalizing those data rights so that can be shown to that client base or the tail of the LPs, the smaller LPs. Given the enormous interest in capital raising by the GPs in the wealth management space and in the long tail of institutional LPs, sooner or later, they will liberalize those data rights so that we can show the more specific parts of those data to a wider audience. That is work in progress, but we're pretty hopeful that that will be a great avenue of success for us. Thank you. Our next question comes from the line of Gregory Simpson from BNP Paribas. Your question, please. Hi. Just on the asset-based fee side, the ETF licensing yield has been quite stable for a few quarters now. I just wanted to check in on what you're seeing around pricing trends of ETF issuers. Do you think we're more stable from here on? Are also asset-based fees quite stable or yields quite stable on the non-ETF passive side too? Thank you. Yeah. To your point, we've seen stable fees here the last several quarters on the ETF side. The fees have similarly been stable on the non-ETF side. Just to put a finer point on the 2.43 bps we saw in the second quarter, there was a small impact from contractual fee changes as AUMs moved into higher tiers as certain products grew. We also saw, offsetting that, some positive mix shift from growth in international markets. There are many international products that carry a higher fee load, and our fees are higher on those. The international rotation has been helpful. Listen, I wouldn't suggest that there are major changes to the longer-term trends we've talked about in the past. We do think fees will gradually come down over time in the ETF area. As Henry alluded to earlier, we believe there are massive, massive secular opportunities for us to capture assets to more than offset that and continue to have conviction that ABF is a growth area for us, a very strong growth area for us. On the non-ETF side, we've seen stability in fees for some time. That's an area where we are seeing strong traction of non-market cap weighted products, custom index mandates, passive mandates, and those can carry a higher fee load. The growth we've seen in the non-market cap weighted products in the non-ETF space has offset pressure on the market cap weighted side. I think that's a dynamic that we've seen for some time here. Thank you. Our next question is a follow-up from the line of Alexander Hess from JP Morgan. Your question, please. Hey, Al, thanks for letting me back in the call. I just want to touch on, Henry and team. You guys discussed the massive sort of secular opportunity in ABF. Your largest client is out there saying that their MSCI World-backed product, and I'm going to quote, is the darling of ETF savings plans in Europe. Do you guys foresee sort of the ability for the MSCI World maybe over the course of the next, I don't know, decade to look a bit like your competitor has here in the US, where you sort of have that deep ecosystem? Is that something you guys are actively trying to build towards? I'm just trying to think if we're going to be leaning a bit more on ABF going forward, what that vision might look like in particular. Yeah. Certainly, for sure. When you look at our global, all-country, or most countries' benchmarks, MSCI World, which is obviously the developed world, but also MSCI ACWI, which is the developed and emerging world. These sort of broad global benchmarks are increasingly becoming the core foundation of portfolios. I was just in Japan a couple of months ago, and the MSCI ACWI is used by one of our clients, and they raised, I think, $50 billion-75 billion of AUM on a mutual fund. Actually, the client wanted to develop a book, like a travel, like a tourist travel book that will have all the different countries and the stocks that they will be invested in. We worked together on the publishing or supported them on the publishing of that book. That's an example of a big client in Japan who is benefiting from that, and all the other competitors of them are very jealous and are trying to catch up to them. I think we see enormous potential on this. As the world globalizes, no matter what people say, the world will continue to globalize, especially in the capital markets. People are looking for global exposure, not just regional, not just country, not just the U.S., but global exposures. I think the role that these benchmarks play is going to be larger and larger as time goes by. Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Henry Fernandez for any further remarks. Thanks, everyone, for joining us today. As we have demonstrated here by our remarks and our financial results, MSCI is an all-weather franchise, delivering very strong performance. Sometimes in one part of our business, like ABF, and sometimes in another part of our business in subscription or parts of the subscription. We're benefiting from a very balanced approach to our business model. When one part of it is growing strongly and the other one is not, it gives us incredible benefits. Our footprint is growing fast with all client segments, existing products with a lot of the existing client segments, and a lot of new client segments that we're very focused on that are part of the whole investment industry that we're expanding on. Our franchise remains great and remains undervalued, in my view. As a large shareholder of the company, we are looking forward to continuing to be a long-term compounder of earnings and growth in the years and decades to come. Thank you for listening to us. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.