Jeffrey Ubben’s ValueAct Capital was disappointed with MSCI for rejecting its request to join the board of directors of the company. The activist hedge fund owns 9.3 million shares or 8.3% of MSCI.
In a letter to MSCI, Ubben said that ValueAct Capital first requested a seat on the company’s board last August due to “significant and unanswered questions of strategy and organization.”
Ubben emphasized that his firm have respects MCSI’s leading franchise in performance benchmarking and index creation and believes that the company’s businesses have strong competitive positions and great potential.
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“We are disappointed in your decision not to pursue our request for a board seat, and the way in which you handled our request,” wrote Ubben.
He pointed out that ValueAct Capital served on the boards of 37 public companies and offered MSCI an extensive reference list of board members and CEOs familiar with the hedge fund.
Ubben said, “The way the MSCI board handled our request for a board seat leaves us with serious concerns about the board’s independence from management and alignment with shareholders.”
ValueAct questions ‘One MSCI’ strategy
However, ValueAct Capital is questioning the “One MSCI” strategy of centralizing its management and bundling license contracts across its Portfolio Analytics and Risk Analytics businesses in some cases. Ubben pointed out that they have not seen market share gains in any of the businesses.
Ubben said, “As the index business continues to grow at a double digit rate, with its attendant high incremental margin; we cannot understand where all the money is going?”
According to him, the answers to the questions of ValueAct Capital are not clear from the public record and its discussions with the management of MSCI. Ubben added that MSCI’s track record of value creation was below its peers in recent years.
ValueAct urged MSCI to engage directly with larger shareholders
ValueAct is urging MSCI’s board to engage directly with its larger shareholders to learn about their perspective on the performance of the company’s management and their interest on a major change on its governance and the composition of independent directors.
In response to ValueAct, MSCI issued a statement indicating that the company “appreciates and values the input from its shareholders.”
According to the company, it “had extensive interactions” with the activist hedge fund since its initial investment and it board is carefully evaluating the views of ValueAct. MSCI emphasized that it has “delivered significant value to shareholders.”