Understanding MSCI’s Criteria for Index Inclusion

MSCI, a leading provider of critical decision support tools and services for the global investment community, has established rigorous criteria for including companies in its indices. This assessment is particularly relevant to companies that resemble investment funds, where new regulations apply. The recent evaluation process has significant implications for various firms, including Strategy, previously known as MicroStrategy.

Company Overview: Strategy’s Operations

Founded by Michael Saylor, Strategy operates fundamentally as a business intelligence software entity, catering to clients such as Coca-Cola and Porsche. Saylor emphasizes that the company’s Bitcoin holdings represent a separate segment of its operations, distancing it from conventional investment funds.

MSCI’s Exclusion Criteria

To streamline its index, MSCI excludes investment funds and similar entities. The newly implemented guidelines further refine this by targeting companies that exhibit characteristics typically associated with investment vehicles.

The evaluation begins with an assessment of whether a company has substantial operating assets, indicating a firm grounded in tangible business activity. Should a company not meet this requirement, it will face a second layer of scrutiny based on five specific financial ratios that evaluate:

• Expenses
• Cash flow
• Changes in asset values
• Dependence on external financing

Companies that fail four or more of these financial indicators are deemed ineligible for index inclusion.

Buffer Mechanisms to Avoid Rapid Changes

To maintain stability within its indices, MSCI has instituted buffer mechanisms. A company will not be removed from the index unless it consistently fails the criteria across two successive annual reporting periods. Conversely, a company cannot join the index if it has not met the financial criteria in either of its two most recent evaluations.

Recent Evaluations and Potential Removals

In an initial assessment using data from May 2026, MSCI flagged three companies for potential removal from its ACWI Investable Market Index. The companies under scrutiny include:

• Strategy
• Metaplanet
• Yellow Cake, a UK-based uranium investment firm

This potential removal reflects MSCI’s ongoing commitment to refining its approaches while ensuring only robust, operationally focused companies remain within its indices.

Conclusion

As MSCI continues to adapt its evaluation processes, the implications for firms like Strategy are significant. By reinforcing the boundaries between traditional businesses and investment fund-like entities, MSCI helps maintain a clear distinction in the indices, ultimately guiding investors towards more stable and operationally sound companies.