MSCI

In 1986, MSCI created EAFE, Europe, Australia, Far East. Pension funds needed to track non-US markets. The index captured 21 developed markets outside America in a single benchmark. Investors adopted EAF. Passive investing appeared. Index funds needed benchmarks. Vanguard, BlackRock, hundreds of funds tracked EAF. Every dollar flowing into passive investing paid MSCI a toll. MSCI did not manage money, take risk or need desks. It licensed an index. Once licensed, the cost to add dollars was zero. Trillions flowed into passive investing. The flows were multiplicative. MSCI owns more than 200 indices across global equity, fixed income and alternatives.