MSCI Enables Transformation of Wealth Management Offering With Acquisition of Fabric
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Insights
The acquisition of Fabric by MSCI Inc. represents a strategic move to enhance MSCI's offerings in the wealth management technology space. The focus on portfolio design and risk assessment tools is particularly relevant as the industry trends towards more personalized investment solutions. Fabric's technology enables wealth managers to construct and manage portfolios with a high degree of customization, aligning with client-specific objectives and preferences.
The demand for such customization at scale is a response to the growing complexity in investment options and the need for sophisticated risk management solutions, especially in light of evolving sustainability and climate considerations. The integration of Fabric's platform is expected to streamline investment activities and enhance the user experience for wealth managers and advisors, which could translate into a competitive edge for MSCI in a crowded market.
While the financial terms were not disclosed and are reported as non-material to MSCI, the long-term strategic benefits could be substantial. The ability to offer a more comprehensive suite of tools could potentially increase user engagement and expand MSCI's market share. However, the success of the acquisition will hinge on the seamless integration of technologies and the actual adoption of the new capabilities by wealth managers.
MSCI's acquisition of Fabric signifies a consolidation trend within the wealth technology industry. By integrating Fabric's rules-based portfolio construction with MSCI's existing analytics and models, MSCI is positioning itself to offer an end-to-end solution for wealth managers that covers everything from model portfolio construction to client reporting and analytics.
This move is indicative of the broader industry's shift towards data-driven decision making and personalized investment strategies. As wealth managers seek to differentiate their offerings, the ability to leverage sophisticated analytics and factor models becomes increasingly important. The combined capabilities of MSCI and Fabric could set a new industry standard for portfolio customization and risk management, potentially influencing how wealth management products are developed and marketed.
One potential drawback could be the integration of corporate cultures and systems, which often presents challenges in mergers and acquisitions. The success of this transaction will likely depend on the ability to maintain the innovative spirit of Fabric while leveraging the scale and reach of MSCI.
From a legal perspective, the acquisition is subject to customary closing conditions, which typically include regulatory approvals and the satisfaction of any other agreed-upon conditions by both parties. The lack of disclosed financial terms suggests that the deal may not be significant enough to trigger more stringent regulatory scrutiny, which could expedite the closing process.
However, it is important for MSCI to conduct thorough due diligence to ensure compliance with all relevant laws and regulations, including data privacy and protection, especially considering the global nature of the wealth management industry. The integration of Fabric's technology will also require careful examination of intellectual property rights and potential liabilities.
Additionally, the transaction's success will depend on the careful navigation of employment law considerations, as the integration of personnel from Fabric into MSCI's operations will need to be managed to minimize disruption and retain talent.
Fabric’s flexible wealth technology combined with MSCI’s investment portfolio solutions will help streamline portfolio construction and sales enablement to bring customization at scale to the global wealth management industry
Founded in 2019, Fabric was established to provide a previously underserved wealth management community with leading risk and portfolio design technology. Known for its rules-based portfolio construction tools and platform leveraging the MSCI Multi-Asset Class (MAC) Factor Model and MSCI Private Asset Model, Fabric is focused on providing wealth managers and advisors with a platform for modern portfolio design and risk assessment to customize portfolios and help individual investors achieve their unique financial objectives.
There is significant demand from wealth managers and advisors for institutional quality capabilities to build personalized client portfolios at scale and keep pace with evolving trends, risks, and opportunities across sustainability, climate, and more. The combination of MSCI’s total-portfolio toolkit and Fabric’s rules-based portfolio construction capabilities will help wealth managers and advisors streamline investment activities, enable a collaborative experience, report, and offer real-time delivery of insights to better serve their clients and bring more transparency to markets.
Through this deal, MSCI and Fabric’s combined offering will transform wealth managers’ abilities to consistently implement their investment guidance while meeting their client’s personal preferences and delivering customization at scale.
Jorge Mina, Head of Analytics, MSCI, said: “Today, MSCI offers wealth management tools for home office model portfolio construction, product due diligence, portfolio analysis, advisor goal-based planning, sales enablement proposals, and more. This combination with Fabric will not only enhance the use of our existing content and tools, but accelerate the development of new strategic functionalities related to rules-based portfolio construction. This transaction underscores MSCI’s commitment to expanding its market reach and offering a broader spectrum of solutions to meet the diverse needs of both institutional and individual investors.”
Govinda Quish, CEO and Co-Founder, Fabric, commented: “Fabric’s mission has always been focused on serving the global wealth management community by modernizing their approach to portfolio design and risk management. By bringing together our extensive data, systems, and teams, the combination of Fabric and MSCI aims to redefine how wealth managers design, manage, and optimize their clients’ portfolios.”
Rick Bookstaber, Co-Founder and Head of Risk, Fabric, added: “MSCI is a world leader in investment risk management solutions. Fabric has long leveraged MSCI’s leading factor models to power the platform’s risk/return decomposition, portfolio analysis, rebalancing optimization, and scenario analysis, as well as MSCI’s ESG and climate risk data. Together, we look forward to providing wealth managers and advisors with enhanced risk analysis capabilities that can help their clients achieve their investment objectives.”
The terms of the transaction were not disclosed, and the financial impact of the transaction is not expected to be material to MSCI. The transaction is expected to close next quarter, subject to customary closing conditions.
About MSCI Inc.
MSCI is a leading provider of critical decision support tools and services for the global investment community. With over 50 years of expertise in research, data, and technology, we power better investment decisions by enabling clients to understand and analyze key drivers of risk and return and confidently build more effective portfolios. We create industry-leading research-enhanced solutions that clients use to gain insight into and improve transparency across the investment process. To learn more, please visit www.msci.com. MSCI#IR
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, statements relating to the planned acquisition and prospects for the newly acquired business. These forward-looking statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond MSCI’s control and that could materially affect actual results, levels of activity, performance or achievements.
Other factors that could materially affect actual results, levels of activity, performance or achievements can be found in MSCI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission (“SEC”) on February 10, 2023 and in quarterly reports on Form 10-Q and current reports on Form 8-K filed or furnished with the SEC. If any of these risks or uncertainties materialize, or if MSCI’s underlying assumptions prove to be incorrect, actual results may vary significantly from what MSCI projected. Any forward-looking statement in this press release reflects MSCI’s current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to MSCI’s operations, results of operations, growth strategy and liquidity. MSCI assumes no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise, except as required by law.
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