TIVP043: MSCI (MSCI): THE FINANCIAL GIANT ENABLING PASSIVE INVESTING

W/ SHAWN O’MALLEY & DANIEL MAHNCKE

TIVP043: MSCI (MSCI): THE FINANCIAL GIANT ENABLING PASSIVE INVESTING W/ SHAWN O’MALLEY & DANIEL MAHNCKE

26 October 2025

Shawn O’Malley and Daniel Mahncke break down MSCI Inc. (ticker: MSCI), a company whose indexes are essential to tracking different parts of financial markets globally, becoming the go-to standard for following how stocks around the planet are performing via the MSCI World Index. MSCI has incredible market share and earnings leverage, combining the utility-like importance of a company like FICO, which was recently covered on the show, with royalty-like earnings similar to Universal Music Group, a holding in The Intrinsic Value Portfolio.

In this episode, you’ll learn about how MSCI came to dominate global financial indexes, how indexes helped fuel the passive investing revolution, why MSCI’s industry-leading position appears to be rock-solid, whether MSCI can continue to be a “compunder” going forward,  and whether MSCI’s stock is attractively priced, plus so much more!

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IN THIS EPISODE, YOU’LL LEARN:

  • How indexes produced by MSCI help to organize, simplify, and provide context for different aspects of financial markets
  • Why MSCI has become the industry standard for indexes outside of the U.S.
  • About MSCI’s relationship with major asset managers like Vanguard, BlackRock, and State Street
  • Whether direct indexing will disrupt MSCI’s golden goose
  • What makes MSCI one of the highest quality businesses we’ve ever looked at
  • Whether passive investing will be a boon going forward for MSCI, or if declining management fees in mutual funds will devastate the business
  • How to think about modeling MSCI’s intrinsic value
  • Whether Shawn and Daniel add MSCI to their Intrinsic Value Portfolio
  • And much, much more!

TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

[00:00:00] Shawn O’Malley: What S&P Global is to US markets through the S&P 500 is like what MSCI is to international equities. Their indexes are the most common way to categorize, benchmark, and describe the performance of stocks all over the world.

[00:00:14] Daniel Mahncke: They really benefit from this network effect where ETFs and mutual funds need to benchmark against appropriate indexes and with companies like MSCI and S&P have by far the most recognizable names in this business.

[00:00:27] Daniel Mahncke: That’s just a huge advantage to have as the world becomes more financialized and as passive investing continues to eat financial markets. MSCI just continues winning.

[00:00:37] Shawn O’Malley: It’s really as good of a toll road business as any out there like Moody’s and fico, MSCI’s dominance over indexes make the company nothing other than a high quality compounder.

[00:00:48] Intro: You are listening to The Intrinsic Value Podcast by The Investor’s Podcast Network. Since 2014, with over 180 million downloads, we’ve learned directly from the world’s best investors. Now we are applying those lessons to analyze businesses and investment opportunities every week, helping you uncover intrinsic value. And now here are your hosts, Shawn O’Malley and Daniel Mahncke.

[00:01:20] Daniel Mahncke: Welcome to another episode of The Intrinsic Value Podcast, where Shawn and I discuss a new company each week to build a portfolio of companies that hopefully have the potential to outperform the market. And I think it’s fair to say that we’ve been guilty of having a bias for quality components in the past, which means not much more than that.

[00:01:38] Daniel Mahncke: We love wide moat businesses with track records of crushing the competition or some sort of positioning that gives them monopoly like advantages. And one of the interesting patterns we’ve come across is that there are quite a few of these types of businesses in financial services from Visa and Mastercard to S&P, global Moody’s, FICO, Equifax, and PayPal.

[00:01:59] Daniel Mahncke: And there are many more. We fund a number of intermediaries in the financial world with critical roles as middleman and as such, extremely stable businesses protected by very wide moats and correspondingly excellent returns on capital. And we haven’t invested in each of these businesses we’ve looked at though, but that’s usually more due valuation reasons than anything else.

[00:02:20] Daniel Mahncke: I mean, quality is certainly not the problem for most of those businesses. And today we’re looking at another company that I would say fits this mold. And before I ramble too much, Shawn, how about I’d let you take it from here because it’s your pitch today.

[00:02:35] Shawn O’Malley: Hey Daniel, always good to see you. Yeah, no one can accuse us of making too many deep value pitches because today’s pitch is going to be, once again, a pretty well-known company in quality investing circles.

[00:02:45] Shawn O’Malley: That is MSCI and for anyone who hasn’t directly looked into the company before and maybe just isn’t entirely sure of what they do, I can tell you this, you’ve almost certainly come across MSCI in one way or another before, especially if you’ve ever looked closely at some of the ETFs and mutual funds you might be invested in.

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