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Friday, October 05, 2012

Analysts Expect Fink to Pay MSCI Less

News summary by MFWire's editors

While MSCI reels from Vanguard's [profile] defection, Larry Fink may win better indexing pricing for BlackRock's iShares [profile] ETFs. And it all comes a month after a key executive sold shares in the New York City-based index provider.

On Tuesday the world's largest mutual fund shop revealed plans to drop MSCI as index provider from $537 billion in mutual fund and ETF assets, and separately MSCI disclosed a Wells Notice from the SEC. MSCI's shares fell from 23 percent from Monday to close at $27.34 each yesterday. Now Aaron Pressman of Reuters offers the latest follow up on the implications of Vanguard's move.

While Vanguard was MSCI's second biggest indexing client, BlackRock is the indexer's biggest. And last month Fink told investors that iShares was "going to have reduce fees and reduce margins" on some ETFs.

After the Vanguard announcement, global iShares head Mark Wiedman stood by MSCI, calling the index provider "the gold standard of global and international equity indexes." Yet now Reuters reports that the world's largest asset manager "declined to comment on pricing issues."

The wire service reports that investors fear, and analysts expect, New York City-based BlackRock "would get fee concessions but would not switch index providers." Reuters talked to analysts from Credit Suisse, Raymond James and others. The wire service said that "MSCI's crown jewel has always been indexing."

On Tuesday MSCI CEO Henry Fernandez told analysts that ETF assets "may not be as stick as we all thought" and that ETF providers can jump from one index to another in "relatively short periods of time."

Meanwhile, Reuters also notes that Vanguard's move also comes one month after MSCI's indexing chief, Baer Pettitt sold shares in MSCI for the first time since 2010. According to a September 10 filing with the SEC, on September 7 Pettitt sold 72,276 shares of MSCI common stock for $36.61 per share, for a grand total of nearly $2.65 million.

To find out more about why Vanguard made the switch, watch chief investment officer Gus Sauter's explanation. And click here for analysis of what the switch means for investors. 

Edited by: Neil Anderson, Managing Editor

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