Even before I learned about Ken Fisher’s crudeness and disregard for the lessons of the #MeToo movement, I’d have nothing to do with his eponymous firm. For seemingly forever, Fisher Investments has been junking up my mailbox with slick flyers touting the founder’s investment prowess. When it comes to money management, I’m wary of firms with aggressive and costly marketing practices because I know I’d be one of the chumps funding them.

Ken Fisher

Researching Fisher and his firm this past weekend I discovered the in-your-face mailings are quite effective, particularly with people in their mid-sixties who have a minimum of $500,000 in investible savings and don’t mind paying above-average fees for money management. Fisher Investments is a powerhouse managing over $100 billion in retail and institutional assets, an impressive accomplishment for a high school dropout who launched his firm in 1979 with a $250 investment. The Financial Times has ranked Fisher’s firm among the top 300 U.S. investment advisors for six consecutive years and the media for decades has cited Fisher as one of the most influential figures in money management. He has written 11 investment books, four of them bestsellers.

Fisher’s mailings are part of a strategy designed to minimize taxes. Despite $1 billion in annual revenues and “fat gross operating profit margins,” Fisher says the firm isn’t very profitable because it spends “almost everything down to where we don’t make money.” Says Fisher: “It’s never been our goal to pay taxes!” Fisher contributed $50,000 to Trump’s 2016 election campaign and he was one of the major donors to a Republican campaign to derail an effort by Washington Democrats to raise taxes in his home state.

Fisher says his firm, based in Camas on the outskirts of Portland, OR, earmarks six percent of revenue on marketing and advertising and relies heavily on focus groups. While prevailing marketing wisdom says money management firms must feature women in their ads, Fisher says the company’s experience is that ads featuring only men draw more customers. The firm has no idea why.

Annuities: Ken Fisher’s Bete Noire

Fisher, with an estimated net worth of nearly $4 billion, isn’t a proponent of ESG, or socially responsible investing. In fact, I came across an example of Fisher recommending a company he despised and found socially harmful. Here’s what he said in his 2016 Forbes column about Comcast, parent of NBC and a significant holding in Vanguard’s fund of socially responsible investments.

There is nothing I like about entertainment giant Comcast – its offerings rot our social fabric—except the stock, which is great, growing endlessly and profitably. Want to get ahead from sliming the world? Then buy Comcast at twice annual revenue and 16 times my 2017 earnings estimate.

Fisher, who stepped down as CEO three years ago, reportedly has been making crude sexual references for years but his talks are typically deemed confidential, so attendees just cringed and listened. (Even on Wall Street, Fisher’s vulgar comments are unacceptably over-the-top). But his recent female anatomical references and other comments such as referring to charities as “immoral” at a recent conference were too much for Alex Chalekian, CEO of a tiny advisory firm in Pasadena, CA, whose product offerings ironically include high commission annuities, which Fisher has long railed against. Chalekin violated a confidentiality agreement and posted a video to his Twitter account, which found its way to the Washington Post.

Given Fisher’s crudity, I looked for evidence that his firm is a hotbed of activity hostile to women or supportive of executives who are. The best I could find was a reference to the firm’s frat-like atmosphere on Glassdoor and a few complaints about lack of diversity, hardly unique for a Wall Street firm.

By comparison, Morgan Stanley continued to employ a top broker repeatedly accused of violence against his ex-wives and girlfriends until the New York Times reported on the matter. A top female Morgan Stanley broker, who was lured to another firm with a $1 million bonus, has charged that her former Morgan Stanley business partner “openly questioned my choice to have children.”

Fisher Investments offers one of the best benefits packages I’ve come across, though reviews make it clear that if you aren’t an ambitious high achiever you won’t survive. The firm was recently ranked No. 20 among the best places to work Texas, No. 8 in the Portland region, and one of the Top 25 places for recent graduates. Treatment of employees is one of the qualitative metrics of socially responsible investing.

“Integrity and Respect”

Nevertheless, various pension funds promptly announced they were terminating Fisher Investments as their advisor, led by the Michigan Retirement System. Though no one on its staff experienced or witnessed any inappropriate comments or behavior, the agency said it “has high expectations” of how managers exhibit “integrity and respect.”

Fisher Investments was Michigan’s top performing manager: For trailing 3-years and 5-years the firm generated the highest “excess return” relative to benchmark of any of the state’s equity investment managers. It’s debatable whether Michigan’s pension agency acted in accordance with the values of most state residents, the majority of whom voted for President Trump despite his crude comments about women and their body parts.

Blackstone’s Stephen Schwarzman

As for its concern for “integrity and respect,” the agency recently committed $125 million to the Blackstone Group whose CEO Stephen Schwarzman once compared Obama-era tax hikes on corporations to Hitler invading Poland. Blackstone in 2015 agreed to pay $39 million to settle SEC charges about the firm’s disclosure practices.

Public pension funds, which are running a $4.2 deficit, for years have been imposing social responsibility requirements on its managers, which are crippling investment returns.  The California Public Employees’ Retirement System, a leader of this movement, and other public pension agencies are under growing pressure to adhere to their fiduciary requirements and focus solely on their mandates to provide retirement income for public-sector workers.

WSJ, June 16, 2019

In blowing out its top performing manager for inappropriate comments, Michigan has undermined the fiduciary argument as a defense against political interference to impose social, gender, or other requirements in its money manager selections. State pension fund agencies typically take months considering hiring and firing investment manager decisions; given the speed Michigan moved to fire Fisher Investments it seems safe to assume the broader implications of the decision weren’t intently considered and debated.

Ken Fisher’s comments were indeed despicable and indefensible. But non-conformity and a willingness to challenge popular thinking and behavior are often the traits of the rare money manager who can beat their benchmarks. If wokeness and likability now trump performance in institutional money management selection, I know of some other money managers who also should be taken out and shot.

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