BARRA INC

BARRA INC

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Company Overview
Barra, Inc., also known as MSCI Barra, is an investment risk management company that provides portfolio risk management and enterprise risk management systems, support and software products. The company was founded in 1975, and since then it has been providing solutions to financial professionals worldwide. Barra, Inc. is headquartered in Berkeley, California in the United States.
Barra’s products and services support the business-critical portfolio and enterprise-wide risk management needs of global investment professionals and are designed to allow clients to make strategic investment decisions with confidence. The company’s business is organized into two business units: core business, which accounted for 88 percent of revenues in the fiscal year ended March 2003 (fiscal 2003), and Ventures Business, which accounted for 12 percent of revenues in fiscal 2003. The core business segment provides risk management solutions to investment professionals. The Barra ventures businesses consist of investments, joint ventures or significant licensing arrangements that leverage the ideas and intellectual property of the core business.
Barra is recognized as a leading provider of investment decision support tools to investment institutions worldwide. The company’s goal is to leverage its deep understanding of the world’s financial markets to turn data-driven insights into tools that its clients can use to meet their investment process needs.
In June 2004, Barra, Inc. was acquired by Morgan Stanley Capital International Inc.’s majority shareholder, Morgan Stanley.
Business Summary
Barra, Inc. is an investment risk management company that provides solutions to financial professionals worldwide. The Company’s products and services support the business-critical portfolio and enterprise-wide risk management needs of global investment professionals and are designed to allow clients to make strategic investment decisions with confidence. Barra’s business is organized into two business units: core business, which accounted for 88% of revenues in the fiscal year ended March 31, 2003 (fiscal 2003), and Ventures Business, which accounted for 12% of revenues in fiscal 2003. The core business segment provides risk management solutions to investment professionals. The Barra ventures businesses consist of investments, joint ventures or significant licensing arrangements that leverage the ideas and intellectual property of the core business. In June 2004, the Company was acquired by Morgan Stanley Capital International Inc.’s majority shareholder, Morgan Stanley.
Description and history
Barra, Inc., incorporated in 1991, is an investment risk management company that provides solutions to financial professionals worldwide. The Company’s products and services support the business-critical portfolio and enterprise-wide risk management needs of global investment professionals and are designed to allow clients to make strategic investment decisions with confidence. Barra’s business is organized into two business units: core business, which accounted for 88% of revenues in the fiscal year ended March 31, 2003 (fiscal 2003), and Ventures Business, which accounted for 12% of revenues in fiscal 2003. The core business segment provides risk management solutions to investment professionals. The Barra ventures businesses consist of investments, joint ventures or significant licensing arrangements that leverage the ideas and intellectual property of the core business. The POSIT joint venture licenses institutional trading systems that allow institutional investors to trade portfolios of securities directly with each other in a confidential environment. In June 2004, the Company was acquired by Morgan Stanley Capital International Inc.’s (MSCI’s) majority shareholder, Morgan Stanley. MSCI is a provider of equity, fixed income and hedge fund indices and related products and services.

Core Business

The Company’s core business develops and sells portfolio, enterprise-wide and derivative risk management systems. Its derivative risk management products are developed and sold by Financial Engineering Associates, Inc. (FEA), a business Barra acquired in December 2002. Its core business product suite is divided into portfolio risk management, enterprise risk management and FEA product offerings. These product suites target trading, portfolio, risk and senior business level decision-makers.

Portfolio risk management products are designed to help investment professionals construct optimal portfolios by measuring and managing risk. Barra’s portfolio risk management products are divided into four application suites. The Barra Aegis System is a suite of equity risk management software applications for managing equity securities and derivatives. It provides a flexible, comprehensive framework for portfolio managers to develop return forecasts, as well as control risk and costs. The Barra Cosmos System allows global fixed-income portfolio managers to manage risk and optimize return in a multi-currency, global bond portfolio. BarraOne is intended to meet the needs of smaller investment management firms and even larger firms looking for simplified large-scale deployment of risk reporting tools. In its first release, BarraOne offers portfolio level risk analysis accessible via a Web browser. Barra Risk Factor Analysis is designed to meet the needs of brokers, investment advisors and online brokerages that want the ability to compare individual stocks to the broad market or to peers in same sector or industry. Barra Risk Factor Analysis enables analysis at the security level, using industry-standard measures to compare the risk of an individual stock relative to the broad market, sectors or industries.

The Company’s enterprise risk management products provide senior business managers in large asset management firms and corporations with the tools they need to manage their investment risks firm-wide. The Barra TotalRisk System integrates the Company’s models into a firm-wide risk platform that addresses both the business and technology issues of delivering a consolidated view of financial risk across a given enterprise. It offers the benefits of a flexible software architecture that adapts to evolving business and technology requirements and is scalable across multiple user sites. Barra Enterprise Performance analyzes investment performance for multi-asset class portfolios along user-defined dimensions (asset buckets) and at the security level. It enables accurate daily performance attribution analysis and reporting that complies with industry standards, such as global investment performance standards.

The FEA Product Suite is renowned for the development of option valuation models and market risk assessment software, FEA’s product suite offers a host of analytics toolkits that focus on the energy, financial and commodities markets. The FEA product suite offers a variety of pricing models and authoritative risk management tools for the most complex of financial instruments.

The Company’s core business products, other than the FEA products, are generally provided to clients on an annual subscription basis. Comprehensive subscriptions often consist of a combination of the Company’s products and have significantly higher annual subscription prices. FEA products are generally licensed to clients on a one-time perpetual basis, with recurring annual charges for maintenance and support. Beginning in 2004, FEA expects to implement a term-license fee schedule, in addition to continuing to offer perpetual license sales.

Competitors include Wilshire Associates, Northfield, Algorithmics, SunGard, Factset, Vestek, Caminus and GFI.

Ventures Business

The ventures business develops new lines of business by leveraging Barra’s core research and development into new markets. During the fiscal year ended in March 2002 (fiscal 2002) and earlier, the ventures business unit consisted of several distinct, generally autonomous companies including POSIT, Symphony Asset Management, Bond Express, Barra RogersCasey and the Barra Strategic Consulting Group. During fiscal 2002, the Company sold or terminated many venture businesses as part of its strategy to focus on its core business.

The Company’s research into transactions has focused on cost control. In 1987, this focus resulted in the launch of POSIT, an electronic system for low-cost, confidential trade matching during the market day. POSIT is a computerized trading system through which clients enter buy and sell orders to trade single stocks and portfolios of securities among themselves in a confidential environment. The POSIT crossing network is designed to minimize market impact and other trading costs.

The POSIT technology is owned by a 50-50 general partnership between subsidiaries of Barra and Investment Technology Group, Inc. (ITG). The Company initially developed the POSIT technology and has since jointly enhanced it with ITG. Orders may be placed in the POSIT system directly via ITG’s front-end software products, QuantEX, ITG Platform and ITG WebAccess or other computer-to-computer links, or indirectly via ITG’s Electronic Trading Desk personnel or the TriAct system. ITG has also entered into arrangements with vendors of other trading systems to allow users the flexibility to route orders directly to POSIT from trading products distributed by Bridge Information Systems, BRASS, Bloomberg and others.

Prior to their divestiture, several wholly owned businesses comprised the other ventures business segment, including Bond Express, Inc., Barra RogersCasey, Inc. and Barra Strategic Consulting Group. The other ventures business segment consists of minority equity interests in other businesses, the most significant of which are Alacra and ValuBond.

Barra owns approximately 17% of Alacra, Inc. on a fully diluted basis. Alacra aggregates, cross-indexes, repackages and resells over 90 different business databases, delivering quantitative information directly to Microsoft Excel and textual information in hypertext mark-up language (HTML), Microsoft Word and as portable digital file (PDF) documents.

The Company holds approximately 8% of ValuBond’s equity on a fully diluted basis. ValuBond uses technology to offer financial services firms trading and private-label products that enable them to provide access to primary and secondary inventory and infrastructure for trading and execution.

Competitors include Nasdaq National Market, Instinet, Island and Archipelago.

Business Line
An investment risk management company that provides portfolio risk management and enterprise risk management systems, support and software products
Subsidiary
BARRA INTERNATIONAL LTD
Advisor
DELOITTE & TOUCHE LLP
IPO date

US SIC Code
7372
Company Address
2100, Milvia Street

City province or state postal code
94704, BERKELEY, CA
Phone: +1 510 548 5442
Fax: +1 510 548 4374
Country address: UNITED STATES OF AMERICA
Website url: www.barra.com