Re: Consultation on Eligibility of Non-Operating Companies for the MSCI Global
Investable Market Indexes Methodology
Miller Value Partners welcomes the opportunity to respond to MSCI’s request for consultation on a proposal concerning the eligibility of non-operating companies for its Global Investable Market Indexes Methodology.
While the proposal wears the veneer of an objective, rules-based exercise to bolster index constituencies, its history, process and results suggest that it is closer to an outcome-oriented exercise designed primarily to exclude certain digital asset treasury companies, based on a loosely defined set of reverse-engineered rules. The bigger point of concern for the Committee should be that the effort has potential long-lasting negative consequences for MSCI’s relevance while clearly contradicting the cover page of MSCI’s “Global Indexes” document, which holds its indexes as “measuring the full equity opportunity set, with no gaps or overlaps.”
One of the reasons that a truly objective and comprehensive equity market index is hard to outperform is that it encapsulates a huge cross-section of industries and the potential innovations arising therefrom. Digital assets and cryptocurrencies are among the most novel concepts at the intersection of finance, technology and human behavior today – Bitcoin specifically represents an opt-in accountability system backed by open source code, energy and transparency, unlike traditional fiat systems backed by a local monopoly on the threat of violence. The technologies’ novelty and infrastructure, however, make their direct ownership largely inaccessible to institutional fund managers due to multiple stale, but evolving, regulatory frameworks. Indeed, digital assets existed for over a decade prior to becoming accessible through the equity of Strategy (formerly MicroStrategy) in 2020. The company’s innovation and bold execution have generated returns to equity holders that have trounced indices which would have been better off with Strategy in them.
Innovation comes in many forms, and it does not always fit neatly into preconceived boxes or financing structure precedents. Not only does excluding a top performing equity reek of sour grapes, it would also mean that MSCI indexes do not measure “the full equity opportunity set,” unless MSCI would like to devise its own unique definition of “equity,” which risks driving a relevance wedge between MSCI’s product and its end customers.
If MSCI is considering devising a novel definition of “equity,” its definition of what comprises an “operating asset” is also particularly problematic. Inventing hard quantitative cut-offs with nebulous definitions for what constitutes “operating” is a slippery slope that will likely need constant reevaluation, thereby calling the authority and processes behind index construction into question. Consider this thought experiment: if Bitcoin treasury company C custodies all of its assets at Coinbase, and Bitcoin treasury company O develops robust operational protocols to custody it internally with complete transparency, would MSCI then consider company O to be “operating” while company C is not? This is just one example of many possibilities as the world and technology evolve; further, MSCI must already be aware that the proposed framework could already exclude gold miners, real estate firms, biotech start-ups, royalty companies, and holding firms like Berkshire Hathaway, among others.
In the interest of a good faith and wholly consultative approach, I would humbly suggest that a decision of this potential magnitude requires a broader rethink of what MSCI’s purpose is along with what implicit value judgments MSCI wants to make about the future, including the potential implications the decisions could have on MSCI’s relevance and value over the long term. Such a decision deserves C-suite attention and personal accountability rather than being foisted onto a nameless committee.
/s/ William H Miller IV, CFA, CMT
Chairman and CIO
Miller Value Partners, LLC
PS. As the revised proposal does not alleviate the concerns we raised in our December 2025 letter to the Committee, we are reattaching it here for reference.