So we’re delighted with the way things have gone so far and I think we’ve got a big opportunity globally to expand significantly the footprint in private capital solutions. So, so far so good. Good end to the year and we hope to keep delivering some strong numbers during the course of 2024.
Operator: Our next question comes from the line of Kelsey Zhu with Autonomous. Please go ahead.
Kelsey Zhu: Hi, good morning. Thanks for taking my question. On your expenses guidance, I was just wondering if you can walk us through kind of the puts and takes of that expense guidance range? What would take it to the higher end versus the lower end of that guidance? Thanks.
Andy Wiechmann: Sure. So, listen, on expenses, it’s a similar story to what we give every year. I think we outlined in the prepared remarks here that the AUM assumption that underlies the expense guidance assumes that the markets remain relatively flat for the first half of the year and then rebound slightly in the back half of the year. As we always do we will continue to monitor the market and we’ll continue to monitor business performance. And so we will go to our upturn and downturn playbooks throughout the year if we do see sustained improvements, which could cause us to move towards the higher end of that range, or similarly cause us to manage expenses more tightly if things deteriorate. As you know, and I think is evident, there is a meaningful contribution from acquisitions as well in the expense guidance for the year.
I think we’ve given color on the Burgiss margin profile and I think we indicated Trove and Fabric are relatively small in terms of their impact. But from that you can back into the organic expense growth being in, call it the mid to high single digit range embedded in that guidance, and the balance being contributed from mainly Burgiss, but to a lesser degree the smaller acquisitions coming in. The last thing that’s probably worth lagging, and we’ve mentioned this in past years, is we have seasonally high payroll tax and benefits related expenses in the first quarter. And so we tend to see about $10 million to $15 million higher of those expenses coming through, which adds to some seasonality and higher expenses in Q1. But other than that, I’d say it’s something that we continue to monitor and our goal ultimately is to continue to invest in the business to drive long-term growth and we’ll use opportunities if the market improves here to continue to do that, but also continuing to deliver attractive profitability and profitability growth in all periods and attractive free cash flow growth.
Operator: Our next question comes from the line of Ashish Sabadra with RBC Capital Markets. Please go ahead.
Ashish Sabadra: Thanks for taking my question. A quick question on the pricing actions that you might have instituted in 2024, and how should we think about the pricing tailwinds in Index and overall business for 2024? Thanks.
Andy Wiechmann: Yes, sure. So listen, it’s important to underscore that we will continue to be very measured on our price increases and ensure that we are linking them to the value that we are delivering to our clients in terms of enhanced solutions, enhanced services and broader usage of our tools. As we mentioned in prior quarters, during 2023, price increases were higher than they’ve been in recent years and contributed a larger percentage of new recurring sales relative to recent years. I would say in Index that contribution is similar where the contribution from price increases within Index was above 40% for the year, which I think is consistent with what we’ve mentioned before. And it’s important to underscore that there are numerous factors that feed into our price increases, including most notably, the value that we’re delivering to clients.
But the broader environment and client health are all things we think about. And so to the extent that inflation continues to moderate. We will likely moderate price increases in certain areas, all else equal. But we’ll continue to monitor all those factors, including the enhancements in value that we deliver to clients and calibrate price increases accordingly going forward.
Operator: Our next question comes from the line of George Tong with Goldman Sachs. Please go ahead.
George Tong: All right. Thanks. Good morning. Going back to the topic of ESG, you mentioned regulations are causing some delays in client purchases. Can you elaborate on which regulations you’re watching as well as how different outcomes of the U.S. election cycle could potentially impact ESG demand?
Baer Pettit: Sure. So I think there has been a component of the changes in the regulation in Europe delaying product issuance. But there’s also a broader context that the regulatory framework in Europe, in the EU, is driving a lot of growth as well. And you can see that in the numbers that we’ve mentioned. So I think that overall, the regulatory topic related to ESG and climate has definitely become a positive for us in balance. Look, I don’t – it’s not our role to speculate on U.S. politics and outcomes. My only observation would be that when we look notably at a lot of the major asset owners in the U.S., their approach to this topic has not changed and it remains central for them. I think there may be a question as to when product issuance will pick up again in the U.S., and time will tell.
But we’re also seeing a significant increase in Asia [ph] of interest. So on balance, the landscape remains one with some significant opportunities, some areas a little bit slower, but we’re just doing our business of interacting with clients every day and impressing them the value of our services. And then politics will be what politics is.
Operator: Our next question comes from the line of Faiza Alwy with Deutsche Bank. Please go ahead.
Faiza Alwy: Yes, hi. Thank you. Good morning. Wanted to follow up on the expense question. And I wonder if you could talk about some of the puts and takes around investments, because it seems that you’ve sort of been executing on more of a downturn playbook over the last couple of years. And I’m curious how much runway you think you have around expense savings. Are there areas where you’d like to invest more? Sort of how should we think about your approach towards investments?
Andy Wiechmann: Yes, yes. So it’s an area that we spend a huge amount of time on. And we are continually focused on driving efficiencies, enhancing productivity across organizations so that we can invest more in the business. And even though it’s been a tougher environment, we’ve been able to continue to enhance and increase the amount of money we put into investment areas. To your point, we would love to invest more. We have very attractive opportunities across all the areas we’ve talked about in terms of new solutions, new client segments, technology-enabled capabilities. Those are all areas that we have the upturn ready to go. But we will be measured and ensure that we see sustained improvements in the market and business performance before we take up the level of investment materially.
But it’s something that we are laser-focused on and want to continue to maintain our Triple-Crown discipline and ensure that we are putting those investment dollars into those areas that are going to generate attractive near-term returns for us. And so it’s something that we are on top of and continually monitoring. And that’s something that, to the extent the market performance and business performance fluctuates, we’ll look for opportunities to put more investment to work.
Henry Fernandez: Let me add a comment to what Andy said. The long term – given the significant and incredible opportunity that we face at MSCI in all of our product lines from customization in index and direct indexing, to climate risk and climate opportunities, to ESG, to Private Assets, and of course, the significant uptick that we’ve seen in Analytics, the long-term value creation of MSCI will depend a great deal on incremental investment in all these growth areas. You can’t grow without creating new products, creating new services, creating innovation, reaching out to new client segments like wealth, like insurance, like corporates, like GPs and private assets, et cetera. So our overriding amount of time that Andy alluded to is spent on this area is to balance out the profitability of the business and the margin of the business with incremental investment.
