Ken Fisher’s Lewd Comments Cost Him a Big Client

Due to sexist comments at a public forum, billionaire Ken Fisher, CEO of Fisher Investments, has lost a major client. The $70 billion State of Michigan Retirement Fund pulled $600 million of its pension fund from Fisher’s firm.

Fisher made the inappropriate comments during a keynote discussion at the Tiburon CEO Summit at the Ritz Carlton in San Francisco last week. During a moderated talk on Tuesday with Chip Roame, managing partner at Tiburon Strategic Advisors, Fisher, 68, claimed that gaining a client’s trust was like “trying to get into a girl’s pants,” according to interviews with summit attendees who broke non-disclosure agreements to report the remarks.

“I don’t want you to confuse me with Epstein,” Fisher reportedly added, referring to disgraced financier Jeffrey Epstein, who was indicted on federal sex trafficking charges before committing suicide in prison.

Two days later, Fisher apologized. “Some of the words and phrases I used during a recent conference to make certain points were clearly wrong and I shouldn’t have made them,” Fisher said in a statement. “I realize this kind of language has no place in our company or industry. I sincerely apologize.”

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Roame said in a statement on Thursday that he was “extremely disappointed” and barred Fisher from future events.

Michigan Chief Investment Officer Jon Braeutigam wrote in a letter on October 10 to the state’s investment board that its bureau of investments, part of the state Treasury Department, canceled the contract because of Fisher’s lewd comments. The state has been a Fisher client for 15 years.

“There is no excuse not to treat everyone with dignity and respect,” Braeutigam wrote. “We have high expectations of our managers (and staff) not just with regards to returns but also in how they exhibit integrity and respect to all individuals.”

Other funds took note. Shawna Lode, a spokeswoman for Iowa Public Employees’ Retirement System, told Bloomberg News in an email that “Fisher’s remarks are obviously concerning.” She continued: “Although our investment management contracts do not include a conduct policy, we hold our partners to the highest standards and reserve the right to amend or sever any contract at our discretion.” Fisher reportedly manages $386 million of the pension’s $34 billion fund.

Fisher established his Camas, Washington, firm in 1979. Fisher, who manages about $112 billion, boasts more than 175 large institutions as clients, including state pension plans and company 401(k)s, as well as 65,000 high-net-worth individuals. He is a frequent speaker at conferences and other public events. About 15 women were at the Tiburon event, which had about 220 attendees.

Women have been marginalized in the investment industry for years. According to the Harvard Business Review, gender equity in the business is lacking. Women control between 1% and 3.5% of assets under management and female portfolio managers manage only 2% of mutual funds. Only 4% of portfolio managers are women. Research has shown that gender diversity brings higher returns.

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Tags: Chip Roame, Diversity, Iowa Public Employees' Retirement System, Ken Fisher, sexual language, University of Michigan

The Virginia Retirement System is lowering its assumed rate of return to 6.75% from 7% following a Thursday board meeting. The change is in effect retroactively as of July 1, 2019. The $82 billion system, based in Richmond, reportedly made the change based on the recommendation of Verus, a consulting firm.

The system is also making modifications to asset allocation and will revise several benchmarks to be less reliant on public funds. The notable new long-term targets are 34% public equity, 15% fixed income, and 14% credit strategies. These new benchmarks will go into effect Jan. 1, 2020.

For public equity, Virginia is turning to a new MSCI ACWI IMI index, leaving behind a 50% hedged index for one that is not hedged and a peer universe index for hedge funds. For credit strategies, the state will use a benchmark of 60% S&P/LSTA Performing Loan index, 30% ICE BofAML BB/B US High Yield Constrained index, and 10% Bloomberg Barclays US Aggregate Bond index.

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In fiscal year 2019, the system received a 6.7% return on its portfolio. The private equity program returned 14% and fixed income 8.3%. Other high-performing major asset classes were real assets and credit strategies.

The Center for Retirement at Boston College found that public plans invest a larger share in risky assets than private plans. From 2009-2015, public plans had 72% in risky assets, with 50% in equities and 22% in alternatives. Private plans had 62% in risky assets, with 44% in equities and 18% in alternatives.

There are reasons for the disparity in the share of risky assets. Risk tolerance tends to be lower for more mature plans. Other reasons include the health of a plan—risk may be reduced to lower the potential for default. Smaller plans may be more able to cushion risky investments. The higher a return, the less likely a plan may turn to risky assets. Other factors include the health and debt obligations of plan sponsor.

There is a reckoning occurring over overly rosy expectations. The University of California Board of Regents recently dropped its expected rate of return. Lower inflation projections and a looming recession are also triggering the decline. When inflation falls, the level of benefits also falls and plans make downward adjustments.

In March, a Virginia Retirement System report found that the state’s pension fund is less prepared today for a market crash than it was before the financial crisis, when its funding status fell nearly 25%. The state’s pension plan would see an increase in unfunded liability of about $6.9 billion.