This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
Operator
Ladies and gentlemen, and welcome to the MSCI fourth quarter 2022 earnings conference call. As a reminder, this call is being recorded. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session, where we will limit participants to one question and one follow-up. We will have further instructions for you at that time on how to join. I would like to now turn the call over to Jeremy Ulan, Head of Investor Relations and Treasurer. You may now begin.
Jeremy Ulan
Thank you, operator. Good day and welcome to the MSCI fourth quarter 2022 earnings conference call. Earlier this morning, we issued a press release announcing our results for the fourth quarter of 2022. This press release, along with an earnings presentation, will be referenced on this call, as well as a brief quarterly update are available on our website, msci.com, under the investor relations tab. Let me remind you that this call contains forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made and are governed by the language on the second slide of today's presentation. For discussion of additional risks and uncertainties, please see the risk factors and forward-looking statements disclaimer in our most recent form 10-K and in our other SEC filings. During today's call, in addition to results presented on the basis of U.S. GAAP, We also refer to non-GAAP measures, including but not limited to adjusted EBITDA, adjusted EBITDA expenses, adjusted EPS, and free cash flow. We believe our non-GAAP measures facilitate meaningful period-to-period comparisons and provide insight into our core operating performance. You'll find a reconciliation to the equivalent GAAP measures in the earnings materials, and an explanation of why we deem this information to be meaningful, as well as how management uses these measures in the appendix of the earnings presentation. We will also discuss run rate, which estimates at a particular point in time the annualized value of the recurring revenues under our client agreements for the next 12 months, subject to a variety of adjustments and exclusions that we detail in our SEC filings. As a result of those adjustments and exclusions, the actual amount of recurring revenues we will realize over the following 12 months will differ from run rate. We therefore caution you not to place undue reliance on run rate to estimate or forecast recurring revenues. We will also discuss organic growth figures, which exclude the impact of changes in foreign currency and the impact of any acquisitions or divestitures. On the call today are Henry Fernandez, our Chairman and CEO, Bear Pettit, our president and COO, and Andy Wishman, our chief financial officer. Finally, I would like to point out that members of the media may be on the call this morning in a listen-only mode. With that, let me now turn the call over to Henry Fernandez. Henry? Thank you, Jeremy.
Henry Fernandez
Welcome, everyone, and thank you for joining us today. In the face of significant global hell winds, MSCI delivered strong fourth quarter results to cap off another successful year. And on our fourth quarter highlights, we posted organic revenue growth of 7%, including organic subscription revenue growth of 16%, despite a reduction in our AUM link revenue. This growth combined with our intense focus on expense management, drove adjusted EPS growth of 13%. In terms of capital management, we repurchased more than $70 million worth of MSCI shares. You should also note that our board of directors has approved increasing the dividend by 10% to $1.38 per share. For 2022 as a whole, we posted organic revenue growth of 9%, including organic subscription revenue growth of 15%. We also achieved adjusted EPS growth of 15%, and our share repurchases total nearly $1.3 billion. We delivered these results despite historic levels of market volatility. which makes us cautiously optimistic about the year ahead. MSCI continues to benefit from our diversified all-weather franchise, which allows us to thrive in all environments. In 2022, over 97% of our revenue came from three recurring revenue streams, including Recurring subscription revenue, which was about 74% of the total. Recurring AUM link revenue, which was 21%. And recurring listed futures and options transaction-based revenue, which was about 3%. While the external environment created headwinds and more variability for AUM, our subscription and transaction-based derivatives businesses perform well through difficult operating conditions. We have once again demonstrated the balance, adaptability, and resilience of our franchise, which has enabled us to continue making critical investments in long-term secular growth areas. These investments are helping MSCI expand and enhance our solutions to meet the needs of an increasingly diversified and diverse client base. There we'll talk about our solutions in greater detail. For now, I would like to explore the strategic backdrop for both our 2022 results and our 2023 priorities. MSCI continues to see enormous growth opportunities across product lines, asset classes, and client segments. At times like this, investors become even more reliant on high-quality data, models, analytics, and research to help them understand fast-moving market change. MSCI is constantly monitoring for signs of pressure that our clients could face, from reduced budgets and longer sell cycles to increased layoffs and fewer new fund raises. That being said, we are cautiously optimistic on the path forward. Our strategy continues to capture major structural shifts in the investment world. For starters, indexed investing is increasingly popular across regions, asset classes, and investor types. The reason is simple. Indexed investing gives investors an efficient mechanism to express their investment thesis and preferences and to focus on asset allocation. During periods of financial turmoil, the unique strength of MSCI's index business become even more salient. We can offer one-stop shop for different types of indices across many layers including asset classes, exposures, styles, and investment themes. I have spoken before about the massive potential of direct indexing in particular. I want to emphasize that MSCI dramatically strengthened our direct indexing market position in 2022. For the full year, we increased our total number of direct indexing clients by 200%. The indexed investing trend reflects a broader shift toward outcome-oriented investment strategies. ESG investing is a big part of that. As you know, ESG has become a hot button political issue, especially in the United States. However, political noise is different from investment reality. And the reality is that ESG risks are financial risks. That is why, even as the partisan debate gets louder, investors continue to make ESG integration a priority. For example, The Index Industry Association recently surveyed investment fund companies across the U.S., U.K., Germany, and France. An overwhelming majority of the respondents said that ESG had become more important to their investment strategy between 2021 and 2022. These findings are reinforced by client demand for MSCI's ESG solutions which has remained strong. No single issue has done more to elevate ESG than climate change. In 2022, climate risk became increasingly visible as countries around the world suffer from record heat waves, record drought conditions, and record flooding. What is true of ESG risk in general is true of climate risks in particular. They can be material financial risks. Investors understand that. For example, in a recent Deutsche Bank investor survey, more than three quarters of respondents said that climate change either is already having a severely negative impact on the global economy or will have such an impact over the next 10 years if left unchecked. Investors recognize that climate change is also not only a risk, but an opportunity. Consider a recent report from the International Energy Agency on Renewable Technologies. The IIA now projects that the world will add, quote, as much renewable power in the next five years as it did in the past 20, end quote. MSCI is determined to become the undisputed leader in climate-related investment tools. To support these ambitions, we continue to make key investments across asset classes and geographies. As a result, MSCI is now well positioned to help all types of clients achieve their net zero pledges. In 2022, we saw especially strong growth in climate sales among non-traditional client segments, especially corporates, banks and traders, wealth managers, and hedge funds. We have also developed innovative climate tools for private assets, an area where we continue to see tremendous possibilities for growth. One example is the carbon footprinting of private equity and private debt funds tool that we launched with Burgess toward the end of 2021. The key enablers for all of this remain our data and technology. MSCI's ongoing tech-driven data transformation is helping us improve the client experience in so many different ways. Last month, we expanded our strategic partnership with Microsoft to support our new MSCI One technology platform, which is built on Microsoft Azure. Just last week, MSCI announced another strategic partnership with Google Cloud to build an investment data acquisition and development platform. This new platform will make it easier for ourselves and our clients to translate raw data into actionable insights. As I mentioned earlier, the importance of our data, models, analytics, and research only increases during periods of market turmoil. Our solutions play an essential role in helping investors navigate today's volatile landscape and build better portfolios. At the same time, MSCI's resilient all-weather franchise continues to allow us to invest for the future while maintaining strong profitability growth. Just one final note before I turn the call over to Bear. Earlier this morning, we issued a press release announcing that Bear has been appointed to the MSCI Board of Directors effective immediately. I would like to congratulate him on his well-deserved appointment. As many of you know, Bear and I have been close business partners for 23 years, and he has been instrumental in building MSCI into what it is today. Bear's unique skills experience and strategic thinking will significantly strengthen the board's effectiveness and ability to continue to create shareholder value. I would also like to be clear that my role is not changing at all. I have no plan or timetable to retire or step down as CEO or chairman of the board. I remain extremely engaged and energized by the company's tremendous growth prospects. If anything, I am more excited today about our significant opportunity that I have been at any time in the 27 years that I've been leading this business. I look forward to continuing to partner very closely with Bayer for many more years as CEO and President, and now as fellow board members. Again, congratulations to Bear, whom I now will turn the call over to. Bear?
MSCI
Thank you, Henry. I'm excited to join the board and serve our shareholders in this very important role. MSCI is in the midst of many strategic transformations. As President and Chief Operating Officer, I've developed the operational insights and strategic vision that I believe will bring a new dimension to the Board to help MSCI drive shareholder value and deliver on our growth initiatives. Now I will turn to my comments on our quarterly performance. I'll begin by going over some of the highlights for the quarter, the steps that we took to manage in the current environment, and some of our priorities for 2023. MSCI's continued ability to deliver strong organic growth and resilient retention during the quarter is directly linked to the investments that we have consistently made over the years, both in good markets and in less supportive ones. As we had indicated to you previously, with the backdrop of unprecedented market headwinds and volatility, We aggressively managed the pace of our discretionary spend and also made select headcount realignments to best position MSEI for 2023 and beyond and to preserve our ability to deploy our investments to the greatest opportunities guided by client demand. For our 2023 investment plan, these areas continue to include climate, client-designed indexes, fixed income, and the ongoing modernization of the client experience. To further illustrate the success of our approach, I will spotlight specific accomplishments during the quarter in index, analytics, and climate. In index, we delivered 12% organic recurring subscription revenue growth and 95% retention, which was certainly reflective of the strength of our franchise, our strong client relationships, and the investments we've made. In custom indexes, our subscription run rate grew 15% as we continued to invest heavily in the development of our models, software, and data to deliver custom indexes at scale. These investments have increased our index building capabilities, reduced turnaround time, and strengthened our global support model, positioning us well to capture the enormous opportunities that we see ahead. We are also benefiting from continued investments into our index derivatives franchise. In listed futures and options, We've delivered record full-year revenue of $61 million, where we're benefiting from new product launches for Paris-aligned climate action and low carbon target indexes with exchanges, driven by ongoing asset owner demand to facilitate the net zero transition. In addition, sales of structured products linked to our indexes were $23 million. growing more than 60% year-on-year for the full year. We remain excited by the opportunities in fixed income indexes, another long-term investment area for MSEI, especially in the current period where investors are focused on credit allocations now that they can earn higher yields with less duration. At the end of December, fixed income ETF AUM linked to MSCI's proprietary and partner indexes was $46 billion after attracting more than $19 billion of inflows during 2022. We believe our flanking strategy, where we play to MSCI's strengths in ESG and climate, as well as our ability to forge partnerships with key players in the fixed income space, have all been growth enablers. Let me now turn to analytics, where we drove 7% subscription run rate growth, excluding FX. New subscription sales were lower versus a strong fourth quarter in 2021, while also experiencing higher cancels, which were not so much reflective of higher cancel volumes, but rather from a few concentrated large client events. It's important to remember what MSEI is trying to achieve in analytics. We already have a large business in enterprise risk and performance, which drove about 60% of our new subscription sales. These tools can serve as large operating systems for investors to help investors in asset allocation decisions and in calculating and understanding their risk and performance attribution. We also offer tools for more targeted use cases, such as our equity models and portfolio construction tools that clients can integrate into their investment processes and third-party vendors can integrate into their platforms. These offerings comprise roughly a third of our new recurring sales during the quarter. Throughout 2022, Our analytics growth came from both types of tools, and we believe the same will be true in 2023. The investments MSCI has made in modern flexible distribution channels are enabling us to chip away at new opportunities, including with front office investment professionals and increasingly for climate use cases where we see a strong pipeline for the upcoming year. These include our investments in platforms such as Climate Lab Enterprise, where we have delivered over 15,000 climate reports throughout the year for our analytics clients since our launch in late 2021. Our unique position of having our clients' portfolios loaded in maps represents a competitive differentiator. It has allowed us to help clients understand all the carbon emissions as well as physical and transition risks associated with their holdings. As Henry indicated, climate remains one of the most attractive and tangible opportunities for MSCI as a firm to help the investment industry. Across all MSCI product lines, we delivered $79 million of run rate. growing around 80% year over year, with momentum across all client segments and regions. Back in June, we launched our total portfolio footprinting tool, which helps clients measure portfolio-wide emissions across asset classes, including equities, munis, corporate bonds, sovereigns, and private assets. Since then, it's been a key enabler for closing several strategic deals with asset managers, banks, insurance companies, and others. It's also enabled us to help clients align with emerging PCAF standards. We also continue to drive new wins with large asset manager and asset owner clients to help them with specific use cases, including TCFD reporting, climate stress testing, and scenario analysis. Following the recent launch of MSCI One, I wanted to make a few clarifying observations of what we're trying to accomplish. It is not a new product or a standalone new platform to replace other products. It is instead a vehicle for integrating MSCI's world-leading content and analytics using software powered by Azure. we are now providing clients with a common entry point to access some of our key products and applications that they rely on day to day, including Climate Lab, Risk Manager, ESG Manager, and others, which we believe will also enable self-servicing, self-discovery, and upsell opportunities. In summary, the high returning investments we made in 2022 and our rigorous financial management helped us execute successfully during the year. Our success provides a template for how MSEI will continue to operate and thrive in 2023 and the years ahead. And with that, I'll turn the call over to Andy.
Henry
Andy? Thanks, Bear, and hi, everyone. As Henry mentioned, we completed 2022 by delivering organic subscription revenue growth nearly 16% for the quarter, and 15% for the full year, outperforming our long-term target of low double-digit growth. In the face of market headwinds, our results reflect the durability of our franchise and the benefits of the consistent investments we've made into attractive high-growth areas. In index, subscription run rate growth was 12% in the quarter, our 36th consecutive quarter of double-digit growth. We've seen tremendous traction and healthy growth within our market cap weighted modules, as our buy-side clients broaden their usage of our indexes. And we continue to see the utility of our index content expand across a wide range of high-growth segments. Across our index subscription base, asset managers and asset owners together had subscription run rate growth of 10%, while hedge funds, broker-dealers, and wealth managers together grew 17%. We also saw continued momentum in our investment thesis index offerings, with non-market cap index modules collectively achieving a subscription run rate growth of 14%. From the end of September through year end, market appreciation contributed approximately $119 billion to AUM balances of equity ETFs linked to MSCI indexes. Although for the full year, we saw a net decline of $284 billion in AUM balances. Additionally, we were encouraged by the $23 billion of cash inflows into ETFs linked to our equity indexes during the quarter with roughly $15 billion of inflows into emerging market exposures and over $9 billion into developed market exposures. Equity ETFs linked to MSCI ESG and climate indexes experienced inflows of $6.5 billion, representing approximately 70% market share. Flows into ETFs linked to MSCI factor indexes were more muted but still positive, with investor appetite more focused on yield and income, where we have less presence than on other factors where indexes are more widely used, such as momentum and minimum volatility. During the fourth quarter, the run rate basis points on AUM paid to us by ETF clients was flat year over year, supported by a mixed shift out of lower fee products. Despite the steady levels over the last year, we continue to believe the average basis points on AUM paid to us by ETF clients will gradually decline over time, although we expect the declines will be more than offset by strong growth in assets. In listed futures and options, we once again saw some of the natural hedges embedded in our asset base fee revenue line, as traded volume showed healthy growth against the choppy market backdrop. Looking ahead, if market levels continue to rebound and stabilize, we would hope this would be constructive to AUM-linked revenues from ETFs and non-ETF passives. At the same time, futures and options volume and revenues may decline compared to the volatile period a year ago. We continue to believe our opportunity is significant in licensing indexes for both AUM-linked ETF and non-ETF passive products, as well as in transaction-based listed derivatives products. In analytics, subscription run rate growth was nearly 7%, excluding FX. As Bear mentioned, we continue to gain traction in front office use cases, supported by tremendous strength in our factor analytics and our climate tools in recent quarters. Additionally, our growth has been supported by firm-wide enhancements to our interfaces and progress in delivering broader, more flexible access to our content. However, as we have previously noted, we expect some lumpiness in the segment across both sales and cancels given the broad range of clients and use cases that we support. In our ESG and climate segment, new recurring subscription sales grew 64% from the third quarter, as we saw some rebound in large ticket deals in both ESG research and in climate, and tremendous traction closing deals in EMEA. Climate remains one of the most attractive growth engines for MSCI. Our firm-wide climate run rate reached $79 million, an increase of 80% from a year ago, reflecting exceptional growth across geographies, product offerings, and client segments. Across all of our segments, we continue to see strong secular demand for our mission-critical must-have tools, and we continue to see a strong sales pipeline, although we remain cautious given the market backdrop. As we have mentioned previously, in past periods of sustained equity market pullbacks, we can sometimes see slightly elevated levels of cancels and lengthening of sales cycles. In connection with our downturn playbook, we continue to identify efficiencies to aggressively reposition our expense base to drive attractive profitability growth while preserving investments in the most critical growth opportunities. As part of our regular review of our talent and our expense base in the fourth quarter, we took proactive actions to recalibrate our employee footprint, resulting in a $16 million severance charge, which was roughly $13 million higher than a year ago. These tough actions have allowed us to preserve and even enhance our investment spending in certain key areas. This expense discipline, coupled with our subscription revenue growth, has enabled us to drive strong growth in adjusted EPS, even through tough environments. The tremendous growth in our subscription base has been supported by doing more for our clients, continuing to penetrate newer, large addressable markets, and capturing price increases enabled by the continuous enhancements to our products and client experience. During the fourth quarter, price increases contributed about 35% of our new subscription sales firm-wide across all products, and more than 40% within index. We ended the year with a cash balance of $994 million, of which well over $600 million is readily available. Free cash flow came in slightly below the low end of our previous guidance. We saw a small slowdown in client collection cycles as a result of extra approvals within certain clients, which we believe is related to the market backdrop. But we believe overall collections remain healthy, and we see no issues around collectability. Our capital allocation framework, which is focused on maximizing shareholder returns, remained unchanged. We will continue to deploy our investment dollars towards the highest returning organic growth areas, return capital through a steady dividend that increases with adjusted EPS, opportunistically capitalize on share repurchases, and pursue value generative MP&A. As Henry indicated earlier, we have decided to increase our dividend in the first quarter. We are not making any changes to our dividend policy or a broader approach to capital allocation. We have decided to shift our annual dividend increase from the third quarter, where we have historically announced the increase, to the first quarter in order to more closely align with our annual planning process. Lastly, I want to underscore that we also continue to actively evaluate and source Bolton M&A opportunities, particularly in areas of unique content and differentiating capabilities, such as private assets, climate and ESG, as well as fixed income. Lastly, I would like to turn to our 2023 guidance, which we published earlier this morning. Our guidance ranges reflect the assumption of continued volatility in financial markets, with overall equity market levels down slightly from current levels during the first half of the year and gradually recovering in the second half of the year. Our expense guidance range reflects the efficiency actions we have taken in recent months, and captures the investments we will continue to make in order to deliver growth. We expect normal seasonality in our expenses with $15 to $20 million of elevated benefits and compensation related expenses in the first quarter. I also want to highlight that our CapEx guidance reflects a continued high level of software capitalization as we continue to enhance our platforms and interfaces across product lines. Our tax rate guidance highlights that we expect our effective tax rate to increase slightly year over year. primarily reflecting that we expect to receive a smaller windfall benefit in the first quarter as a result of where the share price is relative to the price at grant, as well as based on the amount of awards vesting. There could be pressure on year-over-year adjusted EPS growth in the first quarter due to the higher tax rate and the significant decline in average ETF AUM levels relative to the average levels during Q1 of last year. Lastly, I want to highlight that our free cash flow guidance reflects the expectation of higher cash tax payments in 2023, as well as a slight degree of caution on client collection cycles based on the environment, consistent with what we saw in the fourth quarter. Overall, we're well positioned for the year ahead, and we're excited to continue to drive growth and differentiation. In periods of volatility and uncertainty, we believe MSCI is uniquely positioned to help our clients capitalize on unique opportunities and drive value creation. These are the times when MSCI thrives. We look forward to keeping you all posted on our progress, and with that, operator, please open the line for questions.
Operator
We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. At any time, If your question has been addressed and you would like to withdraw your question, please press Start 2. At this time, we'll pause momentarily to assemble our roster.
Tony
Thank you. Our first question comes from Alex Cram from UBS.
Operator
Alex, please go ahead.
Alex
Yes, thank you. Good morning, everyone. Starting off maybe on the retention side for a second here, that dropped, I guess, from the 3Q to 4Q pretty decently relative to the last couple of years. I think if I look in history, it's probably more seasonal, but I'm just wondering if there's anything that you saw that gives you any sort of pause into this year. You mentioned the things on the analytics side, but outside of that, Anything that gives you a little bit more pause as you think about the sustainability of results?
Henry
Yeah. Hi, Alex. It's Andy. So we, as you know, and you alluded to, we typically do have slightly lower retention rates in the fourth quarter, given that it's our largest period of renewals. I would say outside of analytics, and you can see this, the retention rates were reasonably strong. And if you look at full year retention rates, even for analytics, but across all product segments, the retention rates were actually quite healthy. I'd say it continues to highlight that our products really do benefit from the fact that they are mission critical and in areas of long-term secular growth, which does create some resiliency. And I think you see that heavily in retention rates for the full year. However, I would say we do remain cautious, as I've alluded to in the past, when we see a few quarters of sustained market pullback. we tend to see a pickup in client events, things like fund closures, desk closures, restructurings, other mergers. So despite the overall strong retention rates for the year, we are proceeding with a degree of caution and are pretty sober that we might see some clients pulling back a little bit in certain areas. So we are cautious moving forward here.
Alex
Okay. And then secondly, and this is somewhat related, but First of all, thanks for clarifying some of the moving pieces on free cash flow. I think some people are trying to read too much into what that means on the revenue side, which is kind of like my question. I know you don't guide revenues, but you highlighted again the long-term targets and history of delivering double-digit, I guess, subscription growth. Forget the asset-based side for a minute. Anything that would change your view on that low double digits as we think about 2023, given some of the starting off points and some of the cautionary comments you potentially made a little bit just now?
Henry Fernandez
So, Alex, Henry, not at all. I mean, obviously, on a tactical, you know, short-term basis in 2023, We've done well in 2022. We have a strong pipeline going into 2023. But, you know, there is the prospects of a global recession, you know, global softness. There is a war going on in Europe. There is disruption in many markets, including the energy markets. We have to see if there is a real reopening of China or a return to lockdowns. So we remain cautious, you know, in the very short term. You know, beyond that, we remain extremely positive. The number of opportunities that we see at MSCI is increasing exponentially, you know, pretty much every day. Whether it's, you know, custom indices, which we have high demand for, whether it is, you know, direct indexing, whether it's climate risk in the context of analytics, clearly ESG, climate as a whole, the work that we're beginning to do in private asset classes, enormous. So that should bode well for a continuation of our growth trajectory for the company in the years to come.
Alex
Fair enough. Thanks, guys.
Operator
Our next question comes from Tony Kaplan from Morgan Stanley. Tony, please go ahead.
Tony Kaplan
Thanks so much. I wanted to take a step back and look at margins within the analytics business. Really stepped up a lot this year. I guess, how are you thinking about investment in that business? Are you investing enough there? You know, just maybe talk about the drivers of the margin expansion and you know, basically investment needs or growth opportunities?
Henry
Yeah, so similar to recent quarters, there have been several factors that have been contributing to the high analytics margin. I would point out that we have been capitalizing a higher level of expenses related to the development work that we've been doing around things like our climate lab enterprise, risk insights, broader enhancements that we're making to the capabilities and analytics I would also highlight that many of the downturn actions that we've been taking end up hitting analytics. And that's not just directly within the segment, but when we take actions in corporate functions, a meaningful portion of those expenses are allocated to analytics. And then I would highlight that the analytics has benefited from the strong US dollar as well. Given the size of the expense base, a lot of the FX benefits that we've been getting have hit analytics. And so there are a bunch of those more technical or tactical factors that have impacted the analytics margin and caused it to run up a bit here. But to your question around investments, listen, we continue to be very targeted with our investments in analytics, so we are investing there. It is not one of our top investment areas. I think you're familiar with those areas where we are heavily focused on, but within analytics, We are focused on investing in those capabilities that support the broader MSCI franchise, as well as continuing to focus on investments in areas like the front office, so front office content, including our factor models, how we go to the office on the equity and fixed income front office capabilities, as well as some of the broader interfaces and applications that not only benefit the analytics users, but also the broader MSCI franchise.
Henry Fernandez
I would like to add, Tony, if you don't mind, clearly there are parts of analytics that we're putting heavy investments on, like Climate Lab Enterprise, fixed income portfolio analytics, equity portfolio analytics, and some of the content. But also, for the benefit of everyone in this call, we also run a very disciplined very rigorous triple crown investment process in the company in which each one of the product areas, each one of the client segment areas, and some of the support areas, when they come in front of this investment process, they have to demonstrate elements of the triple crown. One is high returns, high IRRs. you know, shorter time paybacks and in areas of high multiple valuations, you know, for the company. So in the case of analytics, you know, they've been able to rationalize investment in some of the areas that I mentioned, but not in other areas. So they haven't gotten capital, you know, from us because of that. Other areas like climate and ESG and cost of indices and the like have gotten the capital.
Tony Kaplan
Terrific. I wanted to ask my follow-up on MSCI one I know you you recently launched that maybe just clarify I know you said it's not really supposed to replace an old product or be sort of a new standalone platform to replace other products so I guess maybe help us with who the main users are there what the opportunity is there and Because I think it seems meaningful, and I just want to understand it a little bit better. Thanks.
MSCI
Sure, Tony. Bear here. So look, I think the way to think about it is through a few different layers. One is we clearly have a diverse range of calculation engines, which create kind of state-of-the-art analytics of various kinds and outputs. which are, you know, distributed throughout the firm in different asset classes, et cetera. Then we have some traditional platforms and other distribution methods through files, et cetera, that we've had. And then we have sort of a newer content that we're building. So the best way to think about MSCI-1 is a combination of those traditional outputs if you like, our calculation factory and sort of industry standard software that allows those to be presented in a more user-friendly way and brought together in a similar type of platform, which in turn, you know, improves both the user experience and users' ability to manipulate that data, to have greater flexibility in how they present it, et cetera. So for sure, we think we're on a very important path forward here. It's incremental. As we move forward during the course of 2023, we think that the client impact of that will, you know, will increase. And we hope, definitely hope and intend, you know, to continue to give you, you know, positive news and update around all of that. So I think there is maybe a, how shall we put it, a risk that we're understating this somewhat. That's what I kind of wanted to make some comments about it today. You know, at the same time, we want to make sure that we, you know, that we are the delivery department and not the promise department in this area. So, as the year progresses, we'll make sure that as we bring out new functionality, new capabilities, new ways of integrating, and our clients start using those more, you know, we'll keep you abreast of that. But we're certainly very positive about it, and we think that over time this will really be a way that our clients start to think of MSCI in a different way as regards the flexibility and ease and use, you know, of their day-to-day working with our content.
Tony
Super. Sounds great. Thanks.
Operator
Our next question comes from Manav Patnaik from Barclays. Manav, please go ahead.
Manav Patnaik
Thank you. Andy, I just wanted to get back to the retention rate comments you made. You know, the drop, I guess, particularly in analytics. Can you just give us some color around, you know, I guess where those cancellations or the drop came from and were they, you know, more kind of one high enclosures in each? I know you said you're being a little bit more cautious going into 23, but just trying to understand what that is and how that might continue into 23.
Henry
Sure, sure. Yeah, thanks, Manav. So Bear noted this in his prepared remarks, but the cancels weren't so much reflective of a higher frequency of cancels across the board in the segment, but rather a concentration of a few large ones. On those few large ones, there were some competitive dynamics and some client event-related dynamics at play. And as we've mentioned in the past, we do expect some continued lumpiness in both sales and cancels within analytics and potentially some impact from the environment. So more broadly, we are really encouraged by the momentum and improving competitive position we continue to see in the strategic focus areas that we're focused on in analytics, like equity and fixed income portfolio management tools, our climate tools, our enhancements to content and capabilities. And we are committed to the long-term growth targets that we've got for the segment of high single digits, which actually we're quite close to in the fourth quarter. The subscription run rate growth on an organic basis was close to 7%, and the revenue was 9.5% excluding FX. So it was a quarter that demonstrated some of the lumpiness, but overall, we continue to be encouraged by the momentum we see in the segment.
Manav Patnaik
Got it. Thank you. And then, you know, Henry or Bear, I guess just a broader question, you know, just trying to, I mean, I think I somewhat get it, but I thought I'd take the opportunity, just trying to understand, you know, the the cloud and technology strategy here, the recent Google announcement versus your key partnership you already have with Microsoft. Just trying to appreciate the differences in each of those agreements and what to look forward to.
Henry Fernandez
Thank you, Manav. First of all, one of the major impetus and investments in our firm it's in our data and technology platforms. MSCI, in the past, this can pass, was a very large data processing company. We took third-party data and ran it through risk models, factor models, indices and the like, index methodologies and the like. What MSCI has become, starting with the ESG business, now with climate and private assets and so on and so forth, is a large data building company in addition to data processing company. So we are now the original source of a lot of data in addition to sourcing data from third parties. And all of that needs to be distributed to our clients in a very effective way. So we have basically three partnerships that we're trying to work and expand and specialize on. The first one clearly has been the Microsoft partnership in Azure, in which they're helping us with the data processing part, processing large amounts of data, especially in our risk systems and all of that, index systems, et cetera. And the partnership there is also with helping us on their software and how do we use their software to build products, like Empower BI. Obviously, we announced the MSCI One. It's a partnership with them, et cetera. So that is Microsoft, and that continues to deepen and strengthen. The second one that we announced is Google and the Google Cloud. That partnership is about technology. Google helping us build data, collect data, organize data, index data in this data building transformation that we're going through, and then run all of that data through their cloud as well. So that is different. There's always a component of cloud computing, but the push here is data building. As you know, Google is, one of the largest data building and data processing companies in the world. Everyone focuses on the search engine, but the search engine won't be as good at all without the underlying data. And the third partnership is Snowflake, which is in the distribution of our content, our data, in a very effective way with our clients.
Alex
So we're trying to strengthen and deepen that relationship with Snowflake. Thank you very much.
Tony
And now we have a question from Alexander Hess from JP Morgan.
Operator
Alexander, please go ahead.
Henry
Yes. Hi, everybody. I'd like to step back and maybe look at the firm-wide ESG and climate run rate growth, which remain pretty resilient despite the US political headlines and then maybe in Europe some of the SFDR implementation I wanted to know, maybe stepping back high level, what do you see sort of as the big opportunities, the big sort of regulatory and market tailwinds and headwinds as well, and how we should think about maybe ESG and climate's ability to grow over the next few years?
Henry Fernandez
So let me provide some quick comments and then pass it on to Bear. First of all, as I said in my prepared remarks, there is a lot of political, football here going on on ESG, and eventually we'll get to climate as well. But the first point is our ESG business has nothing to do with political ideology or political philosophies. Our ESG business is totally grounded on the fact that ESG or non-financial risks are material investment risks. and material financial risks in a company. You know, think about Danny right now. Corporate governance, right? You know, the governance of the company and the auditors and all of that and $60 billion market cap for now. If somebody tells you that's political and that's not investment risk, then I don't know what is investment risk. So that is very clear what we're doing, and therefore we don't know of any single client, you know, in the world that, at least we haven't heard of, that they're not, you know, looking to integrate this non-financial risk, you know, in the environment, in governance, in social issues into their investment processes. And we are the preferred provider of tools, you know, to them. Secondly, clearly, there is a lot of regulations around the world, and a lot of our clients are trying to figure out how do they respond to that regulation, you know, especially in Europe by far, but also, you know, in the U.S. with the SEC proposals. So there is a little bit of a cost by clients and certain purchasers because they're trying to determine what are the right sets of data and tools and risks that they need to do to incorporate into their product. So that's been a little bit of the blip that you see in the sales, much less so the political component. But Barry, anything else on this?
MSCI
I think you've covered it well, Henry. I think the only other element is clearly the, you know, you mentioned the regulatory element on our clients, which has been, you know, notably a complex one for funds in Europe and the EU. So that is something that we're very focused on, on working with our clients on. Equally, you know, there will doubtless be an increase of regulation on the providers of data information ratings of ESG, which would include us. And I think in that instance, we don't view that as something which is, you know, a particular risk to the business. We believe that we run, you know, very high quality business, that we've been structured with a view that as an index, some form of further regulation could come to us. And as a reminder, our legal entity in the U.S. that issues ESG ratings is already a registered investment advisor. And we're confident about the way that that is run and have actually been in contact with regulators related to that. So I think overall, You know, it's clearly an environment which is very noisy and complex from a number of grounds, but that doesn't in any way compromise the scale of the opportunity, which remains very real. And in many regards, precisely this regulatory complexity is something which we believe we can benefit from. you know, as a provider of high-quality data and, you know, adjacent research and services.
Henry
Thanks. And then as a quick follow-up, maybe, Todd, can you speak a little bit to the opportunity in Paris-aligned benchmarks and climate transition benchmarks with the Index franchise? Is that a meaningful opportunity going forward?
MSCI
Absolutely. So, you know, we're clearly benefiting from our leadership role both in ESG and climate, and our market share in, you know, in such indexing and related ETF products is very high, and has been consistently so. There are some questions related, you know, to flows in the short run, but, you know, we're, if you look at, I'm very confident that if you look back on this in a number of years' time, that this will be a moment that passes. And the fact of the matter is that with all categories of investors globally, this is an enormous transition they have to go through. They will clearly do so through active management, but equally they will need to do so by allocating capital in a timely basis through, you know, rule, you know, through indexes, through rules-based portfolios that, you know, that indexes serve as a benchmark and underlying for. So we only see this category as growing. And, you know, you mentioned certain specific methodologies. Those will continue to grow, as will many customized versions of things which serves specific investors' specific needs. So we certainly view it as an important and growing category.
Alex
Thank you.
Operator
Our next question comes from Owen Lau from Oppenheimer. Owen, please go ahead.
Owen Lau
Thank you for taking my question. I want to go back to your guidance. Could you please talk about your assumption of the market trend to come up with your free cash flow guidance? Do you expect the market to go up, stay flat, or to go lower from here? And then on the expense side, could you please talk about the walk of the adjusted EBITDA expense bill from 2022 to 2023? And what does it take to go to the low end of the guidance? And also, what does it take to get to the high end of the guidance? Thank you.
Henry
Sure, sure. So a lot in there. I'll try to unpack it in a logical fashion here. So firstly, on the market assumptions that underlie all of our guidance, so we are assuming that market levels decline slightly from their current levels through the first half of the year and then rebound in the second half of the year. And so that assumption is underlying every piece of our guidance. You alluded to free cash flow. I do want to make a comment around our free cash flow guidance more generally, just to underscore that we are being cautious on it. If you look at the full year of 2022 relative to 2021 and even the fourth quarter of 2022 relative to the fourth quarter of 21, we saw a pretty healthy growth in free cash flow. Although if you remember after the third quarter, we increased our free cash flow guidance. We made that change feeling confident about the strong momentum we had seen in collections. To be frank, we probably got a bit ahead of ourselves on that one, and we actually saw a bit of a slowdown in collection cycles in the fourth quarter. And so we are making that same assumption of caution around collection cycles for 2023. And as a result, we have a degree of caution on our cash flow guidance for this year. On the expense guidance piece, I don't want to get too specific here, but I want to underscore that and you saw this in the fourth quarter, actually the last six months or so, we have been taking very tough actions in our expenses and identifying efficiencies to be able to continue to invest. So we are being very measured on our pace of expense growth. We're continuing to find efficiencies. You saw we took some significant actions on the severance front in the fourth quarter. And so that has a meaningful impact on the expense base, although we are continuing to invest in key areas. And so despite those efficiencies and continued actions on the headcount front, we are planning to grow our investment spend in 2023 by 13%. And that's more than double the overall expense growth. And so we are in our guidance, assuming that we continue to be quite disciplined in a number of areas, especially for the first half of the year. but we are continuing to grow Headcount and invest in those key investment areas, those key growth areas for us as a firm.
Owen Lau
Got it. That's super helpful. Thank you, Andy. And then I want to go back to the Google partnership, the Google Cloud partnership. Henry, could you please talk about maybe the potential incremental revenue and expense opportunity for this partnership? I mean, it would be great if you can even give us some more specific samples so that we can better understand the value creation of this partnership. Thank you.
Henry Fernandez
So, look, I can't at this point, you know, give you any numeric analysis of the revenue or profits or any of that too early to tell. What is very key is that, you know, in us becoming a very large data building company, You know, we need to use the most advanced, you know, methods and protocols and technologies and all of that, and this partnership with Google will give us that. And, for example, one specific area that we're focused on right now is asset locations. So, you know, in order for us to be the best on the spirit leader in climate, we need to have, you know, understanding of every manufacturing facility, every mine, every office, of every single company in the world, whether it's private or public company. So being able to work with Google in gathering that information through Google Maps and Google's geospatial services and the like will put us at a significant, you know, advantage there. That would be clearly one example of that. You know, another example clearly is the, you know, in the work that we're doing in our private assets. There is a lot of data that we're collecting from GPs and LPs and all of that, and we need to figure out how to index that data, organize it, and the like. So the way to think about us, if you want to compare us to, obviously, to the work that Google does, is that everyone focuses on the search engine of Google, right? And that's at the top. But underneath that search engine is clearly data. So think about our investment tools, whether it's indexes, methodologies and ratings and risk models and stress testing models and all that as the equivalent of search engines, like the equivalent of algorithms. And then underneath that, there has to be a base of data that is large, whether it's third-party data or our own data, that is large, and that's what we're trying to build with it.
Alex
Got it. Thank you very much.
Operator
And we have a question now from George Tong from Goldman Sachs. George, please go ahead.
George Tong
Hi, thanks. Good morning. You mentioned it's possible you'll see higher cancels and longer sales cycles during protracted periods of market volatility. Can you elaborate on where in your subscription businesses you're seeing most sensitivity to the macro environment and, conversely, where you're seeing most resiliency?
Henry
Yeah, I mean, it's very much a general comment that I made. You can see in the retention rates that with the exception of the lumpiness we saw in analytics in the fourth quarter, actually retention rates have remained quite resilient. I think you've heard us make comments in particularly last quarter that we saw some slowdown in sales cycle in ESG. I'd say that the point that I would underscore is it's going to be dynamic across the board. So I don't think it will be necessarily concentrated in one product area or region or client segment. But these are things that just as the environment remains choppy and volatile and large financial organizations start to implement cost controls, it can cause slowdowns across the board. And so we're just baking in our color and our commentary here, a degree of caution. Although I do want to underscore that our pipeline remains quite healthy and the overall size of the pipeline is quite large. And we are having active dialogue and engagement and healthy discussion with our clients. It's just we've seen in past cycles that we should be prudent and cautious in our outlook.
George Tong
Got it. That's helpful. You've taken actions to recalibrate headcount and expenses as part of your downturn playbook. Can you talk about how much further runway you have for expense reduction? What kind of leverage you have remaining? And would you say the majority of your cost right-sizing actions are now behind you?
Henry
Yeah, I would say, and I alluded to this in a prior question, it's important to really underscore that the tough actions we've been taking are really to enable investment. And so, as I alluded to, we plan to continue to invest at a pretty healthy rate. rate in those key investment areas. And we're going to continue to have an intense focus on efficiencies throughout the year. Beyond the proactive actions that we took on the severance front, and I alluded to this in the past, we've continued to slow down and even stop hiring in certain less critical areas. We've been very selective about the areas where we are adding people. We've imposed certain expense controls in areas like T&E and other professional fees. But it is important to underscore we have numerous levers at our disposal, and we haven't fully flexed the downturn playbook, nor does our guidance reflect that we are flexing fully our downturn playbook. We can stop hiring in certain areas, implement hiring freezes, closing backfills. We have degrees of freedom on the non-comp side. As you know, our incentive compensation will move with the performance of the business. So it is a constant calibration and something that we're going to continue to proactively manage. But we are being cautious and implementing cost controls. But we do have many more levers if we need to flex down further, including slowing down investment, which hopefully we don't have to do. But that clearly can help us manage expenses.
Alex
Very helpful. Thank you.
Operator
Now we have a question from Faiza Aoui from Deutsche Bank. Faiza, please go ahead.
Faiza Aoui
Yes, hi. Thank you. Good morning. So I wanted to talk a little bit more about ESG. Give us a sense of, you know, the new subscription sales that you signed on this quarter. How much of that is, you know, just a seasonal acceleration from 3Q to 4Q? Or are you seeing sort of sales cycles, Andy, as you alluded to, that last quarter that those had increased a little bit? Are you seeing further increase in those sales cycles or things sort of normalizing from your perspective?
Henry
Yeah, and I think you could see this in the past, and this is the case across most product areas. But as you alluded to, the fourth quarter does tend to be a strong quarter for us. I would underscore that ESG and climate had a very strong year overall. And when you drill into it, and we've alluded to this, climate within there continues to grow at an incredible growth rate and is making a more meaningful contribution to the overall segment. And so that is something that is helping to fuel some momentum. Just to put a finer point on that, 45 million of the 79 million of climate growth run rate is actually within the ESG and climate segment, and that is growing at close to 80%. So that's helping to drive some of the momentum we've seen. As Henry alluded to earlier, there are many layers and dimensions of growth in ESG and climate across a wide range of solutions serving various objectives and a wide range of use cases. And we're seeing that the thinking around how to integrate ESG continues to evolve. The regulations continue to evolve. And as a result, investors in spots are being more measured in their buying decisions. And so I think there is some element of that. There's some element of the market backdrop that are helping to contribute to the fact that the pace of sales in ESG and climate is likely to fluctuate up and down based on all those dimensions that I alluded to. Overall, we continue to see very healthy growth and strong demand But for those reasons, we think the growth rate will be a little bit dynamic and the sales could be a little bit dynamic quarter to quarter. I would highlight that because you asked about it. Some of those sales that we did see slip from the third quarter that we alluded to on the last call. We were successfully able to close a lot of those and we had particular strength within EMEA. I think that just speaks to some of those dynamics that will fluctuate up and down over time. But overall, we continue to be very, very encouraged about the overall demand for the products. It's just a very dynamic engagement and discussion with our clients.
Faiza Aoui
Understood. Thank you. And then just a follow up on I guess capital allocation, are you assuming, I think your interest expense guide is a little bit higher than I was anticipating. And I'm curious if you're expecting to, you know, maybe incur higher debt to buy back shares or sort of what's embedded in your free cash flow guide as it relates to capital allocations.
Henry
Yeah. So the, Interest expense guidance does not assume any incremental financings for the year. One thing that is driving the interest expense slightly higher is our floating rate term loan A. So we have a $350 million term loan A, which is floating rate. And so we do have some expectation of rate increases and higher rates for the year, which factors into that interest expense guidance. So that's what's embedded in our guidance. But I'd say more broadly, no change to our approach to capital allocation. We are mindful of the overall financing market and rate market. And so we will, over time, as our leverage starts to come down, look for opportunities to raise capital. But given where rates are right now, we're not in a rush to do that, and we think we're in a strong capital position to continue to be very opportunistic on the MP&A front as well as on the repurchase front if there continues to be volatility in the market.
Tony
Great. Thank you so much.
Operator
We have a question from Craig Huber from Huber Research Partners. Craig, please go ahead.
Craig Huber
Great. Thank you. I wanted to focus first, if we could, on the recurring subscription part of your business and indexes. Obviously, the numbers continue to be extremely strong there, but maybe just talk a little further, if you would, about the sales cycles there, your sales pipeline, client budgets. Is there anything there that you're feeling a little less positive about, particularly the sales cycle?
Henry
Yeah, I would say you've actually seen remarkable strength on the index subscription business that we have with index subscription revenue line. It's been quite encouraging, given the backdrop to your point, where we've been having very constructive discussions within our more established client segments like asset owners and asset managers. And I mentioned we saw subscription run rate growth within that segment of 10%. which is quite healthy. And we've also seen, continue to see strong dialogue and engagement with hedge funds, wealth managers, broker dealers, where we saw that elevated growth that I alluded to. Similarly, from a product lens standpoint, we are having strong momentum within our market cap modules. So our market cap modules actually had strong growth of about 11%. in subscription run rate. And we saw outsized growth within some of our non-market cap modules relative to that. And so across the board, we've seen a healthy dialogue and momentum. And it's not only with these newer high growth segments, but doing more for existing clients. And so at this point, we haven't seen a lot of impact from the environment, although we are conscious that the index segment tends to have a shorter sales cycle. And so there could be some impact, but right now it's overall a very, very healthy dialogue.
Craig Huber
Great. My follow-up question, you talked a lot about the enhance that you guys made in the analytics products. I'd like to hear further on the fixed income side of things, what you guys, the investment spending you're doing there, what are you really focused on within the fixed income area, please?
MSCI
Sure. So, look, this has clearly been a multi-year effort. where we have continuously improved everything that we're doing. We've had some important wins on fixed income in the last few quarters. And clearly, you know, we can't go into individual client names here because, you know, it's not what we do. But we're, I think, at a really important inflection point where we have some pretty significant deals in the pipeline. And those deals are ones which we hope if we can get a few of them done, they should have, you know, really positive knock-on effects for our credibility in this asset class. And then hopefully become kind of a virtuous circle. So I would say that across the teams, You know, people have never felt more positive than today about what we're doing in fixed income. As you know, this has not been, you know, a fast thing. This has been more of an oil tanker than a speedboat. But I really hope, and I think I've got good grounds for believing so, that during the course of this coming year, we should be able to really show that we're making a lot of progress in fixed income and starting to win some pretty serious investors over to our fixed income analytics. So in short, I don't think it's one thing. I think it's a compound over various sub-asset classes in fixed income, different types of analytics. So it's what we're doing across the board. And I really do think we're in a great place to have a strong year for 2023 in fixed income.
Alex
Great, thank you.
Operator
Our next question comes from Russell Qualch from Redburn Partners. Russell, please go ahead.
Russell Qualch
Yeah, thank you, Jen. I just wanted to come back to the analytic business to start. Can you pin down exactly what's driven the heightened growth in the last couple of quarters? I know you've made a few comments to this already, but is it new product? Is it tech enhancements to existing products? Is it pricing? I'm trying to get a bit of a sense as to is this structural or cyclical, the growth, and just kind of link to that. How does it get decided if climate-related product revenues get booked in ESG and climate or analytics? I just want to check there's been no shift in the revenue allocation, which is flattering the growth in the analytics segments.
Henry Fernandez
Look, in some, the analytics follow-up line, we have been revamping the strategy, and the hub or the core is continued work on enterprise risk and performance. And we make some good progress there, but the growth rates are not dramatically different than they were before. The growth areas are in three elements that we're pivoting towards. One is the front office, so equity portfolio analytics and fixed income portfolio analytics along the lines of what Bear was mentioning. Those are high growth areas for us. Secondly is climate risk with Climate Lab Enterprise. And the third area, which we just launched a whole bunch of products, is more content. We launched a product called Insights and the like. So we're hoping that The 60% of the run rate, which is central risk, continues to grow at a reasonable pace, but the acceleration of the growth will come from those three pivots that I mentioned.
Henry
Russell, there's no shifting of run rate from ESG and climate to the analytics segment. There are some climate and ESG-focused tools that are analytics tools that are showing up in the segment, like our Climate Lab Enterprise tool. and some of our ESG reporting capabilities, but those are not shifting. Those have always been there.
Russell Qualch
Okay. Okay, thank you. And then just as a short follow-up, the basis point feed charge on the AUM, the index business, that was notably up in Q4 versus Q3 to 2.54. Is that a lagged effect from lower AUM previous quarters? I'm just wondering, should we expect that to fall again as AUM stays higher in Q1?
Henry
Yeah, I would say it was impacted by flows out of lower fee products. So there was that mixed impact. We saw a very small impact from a positive fee adjustment as well, despite the steadiness that you've seen over the last year. I do want to underscore that we do expect average basis points to continue to decline gradually over time, as we've seen over the last, call it, eight to 10 years or so. Although we do expect the assets to increase at a faster growth rate and continue to be bullish about the growth in the ETF front. But we do expect fees to gradually come down over time.
Alex
Gotcha. Thanks very much.
Operator
We have a question from Greg Simpson from BNP Paribas. Greg, please go ahead.
Greg Simpson
Thank you. I think you mentioned price increases being 35% to 40% of new subscription sales firm-wide in the fourth quarter. Could you provide some color around how this compares versus history? Do you get the impression that you're increasing pricing more, less, or similar to some of your competitors in index and ESG?
Henry
Sure. Yeah, I don't want to comment on what our competitors are doing, but I would say that, yes, we are generally increasing prices more than we have in the past. The 35% contribution from pricing to new subscription sales across the subscription base and the 40% plus that we are seeing in index, the contribution within index from price increases, those are about 5% plus percentage points higher than what we've seen in the recent past. And so yes, price is contributing more than it has in the past. I would just underscore that in our price increases, we are heavily focused on delivering value together with the price increases. And so we're continuing to enhance the content that we deliver to our clients, the capabilities, the functionality. and the overall client service that they are getting. We do recognize that our growth is heavily going to come from our existing clients, and we want to do it in a constructive fashion. But given the overall pricing environment and cost environment, we are increasing prices more than we have in the past.
Greg Simpson
Great. Thank you. And then just quickly on the real estate business, new sales were down year over year here. Is there anything in particular to call out, and what is maybe a trickier backdrop for real estate? More broadly, how is RCA progressing since your acquisition?
Henry
Yeah, I mean, it's a similar message to what we've seen in the past, which is things are progressing well in the segment. I would highlight that some of our portfolio services are getting a lot of traction and a lot of interest. Investors in particular are focused on understanding what is driving the performance and the risk in their portfolios. And so we're seeing strong engagement there. On the data side, including the RCA data, we do see some pressure from the backdrop to your point. There are aspects of the RCA business and the data that we have that are used as part of transactions in the real estate space. And we have seen a slowdown in transaction volumes across the space. But you can see the overall growth rate on an organic basis at 12% is still pretty good. And we think there are some environmental impacts going on, given the backdrop in the real estate space, but we continue to be quite encouraged about the long-term opportunity there.
Alex
Thank you.
Operator
And we have a question from Simon Clinch from Atlantic Equities. Simon, please go ahead.
Simon Clinch
Hi, everyone. Thanks for taking my question. I want us to just get your perspectives, please, on, I guess, the opportunity in the futures and options line, which to date is still relatively small in the context of your overall index business. I mean, how should we think about the structural growth opportunity here for that? Obviously, the larger it is, the more diversified benefits you'll see during times of risk, and I imagine that's quite a desirable thing to have. Thanks. Yeah.
Henry Fernandez
There are three legs of any large and successful index business. You know, the active management, the fees that we charge to active managers, what we call the subscription business, the fees that we charge to passive managers, both in any wrapper ETF or institutional or forms of mutual funds. And the third leg is policy. is the licensing of indices into all sorts of derivative products. Some of them are listed, like futures and options, and some of them are unlisted, such as swaps and options and structured products that investment banks make. We are very, very intent and focused on building that third leg. What you see and that we comment on is the listed futures and options, and there's still a lot of runway for us to continue to grow in new products. You know, we have a lot of listed futures. We're now focused on our listed options franchise and are pushing new initiatives in that front. More to come on that. And what you don't hear as often, although there were comments earlier today on this, is the structured products and the, you know, and the other forms of OTC derivatives. And that is, those are growing very nicely
Alex
and there's still the ground floor where we can achieve it. Okay, that's really useful. Thank you.
Simon Clinch
And then I guess just lastly, on the environment for M&A and Bolton acquisitions, just give us a sense of how rapidly that's changing and thus, I guess, just give a sense of the opportunities you have ahead of you.
Henry
Yeah. Yeah. So listen, you, you know, and you see this on the repurchase front, we are an organization that likes to be contrarian and opportunistic. And so in these environments, there are potentially opportunities to acquire companies that otherwise wouldn't be available. And so we are seeing some early stage companies that need growth capital. They're finding that the growth capital is more expensive or tougher to find than it was in the past. And so as a result, they are open to partnerships, investments, even acquisitions in certain instances. And so we're being very proactive and looking for those opportunities and think they can be instrumental in helping to accelerate those strategic opportunities in our key focus areas that we've talked about in areas like private assets, climate, ESG, fixed income, broader technology and data capabilities. So, yeah, it's an intense focus for us right now.
Operator
Thank you. This concludes our question and answer session. I would like to turn the conference back over to MSCI's Chairman and CEO, Mr. Henry Fernandez. Please go ahead.
Henry Fernandez
Well, thank you everyone for joining. As you can hear in our commentary, we continue to see strong demand for our solutions. We continue to invest significantly in large growth opportunities that are ahead of us and preserve and enhance profitability growth in the company. We're very excited about this momentum, especially in such areas like climate, where we are determined to become the undisputed leader.
Alex
Thank you, everyone, and we look forward to a continued dialogue with all of you.
Tony
Thank you. The conference has now concluded. Thank you for attending today's presentation.
Operator
You may now disconnect.
Disclaimer