MSCI announced Wednesday it signed a purchase agreement to acquire Fabric, an advanced risk modelling platform for financial advisors.
Fabric’s platform has been used by advisors to better illustrate long-term portfolio outcomes and probabilities for clients using methodologies similar to those relied upon by large institutions.
Terms of the impending transaction were not disclosed. The deal is expected to close next quarter.
The two firms had been partners with Fabric relying on MSCI’s Multi-Asset Class and Factor and Private Asset Models to help power its own analytics engine.
Advisors have sought the ability to quickly and affordably build personalized portfolios at scale for high net worth clients for years, especially recently with the emphasis on ESG and sustainability-related investing.
Fabric was founded in 2019 and co-founder and CEO Govinda Quish was among WealthManagement.com's Ten to Watch in 2023.
During its initial two-year development Fabric interviewed hundreds of financial advisors and a key differentiator of its technology and that of other risk analytics platforms that rely on historical returns is that Fabric uses data to create forward-looking models.
Co-founder Rick Bookstaber, who also serves as "Head of Risk" at Fabric has long been a proponent of more sophisticated and robust measurement and estimation of risk.
"The mantra that past performance is not indicative of future returns applies to risk as well," he wrote in a contributed piece for WealthManagement. Bookstaber had previously held chief risk officer roles at Morgan Stanley, Salomon Brothers, Bridgewater Associates, and the University of California Regents and served at the U.S. Treasury in the aftermath of the 2008 crisis.
Fabric Risk currently has integrations with Black Diamond, Orion, Envestnet | Tamarac and Addepar, with others in the pipeline, which allows advisors using those platforms to easily bring in their client portfolios or models.
MSCI is a major provider of investment research, analytics, tools and indices with an annual revenue of more than $2 billion.
The firm has regularly, over the years grown its product and technology portfolio through acquisitions. In August, the firm acquired the remaining 66% of data and analytics provider Burgiss Group for $697 million in cash.
In addition to is well-known indices, the firm has provided model portfolio construction, product due diligence, portfolio analysis, advisor goal-based planning, sales enablement proposals and other tools to its customers.
According to Jorge Mina, MSCI’s head of analytics, the acquisition should assist the firm in building out rules-based portfolio construction for wealth managers and financial advisors that serve individual investors.
MSCI, an outgrowth of Morgan Stanley that was formed in 1968, became fully independent in 2009.