How Ken Fisher collided with a new finance culture

The fallout for Ken Fisher shows that a new culture pervades the finance industry.

The billionaire chairman of Fisher Investments landed himself in hot water in October with a series of lewd and sexist remarks he made at a conference, in which he compared investment with sex. A subsequent trawl through his deleted tweets revealed jokes about having sex with subordinates and questions over the merits of outlawing slavery in the US.

In decades prior, Mr Fisher’s remarks may have elicited a warm hum of laughter from the usual greying, male crowd. He may even have impressed some would-be allocator in charge of a family office or endowment with his maverick touch. Not so today. Instead, this has ended up being a costly mistake.

Pensions that represent city and state workers quickly began pulling assets, including a $522m investment mandate from the Los Angeles Fire and Police pension fund. The fund had asked Mr Fisher to attend an investment committee meeting but he did not appear. Michigan’s state employees’ pension fund pulled a $600m mandate, while Iowa’s state pension fund has cut the firm from a $386m investment deal. Boston’s city pension fund has taken back $248m and Philadelphia’s city pension pulled $54m.

Fidelity Investments and Goldman Sachs, two of Wall Street’s most influential firms, followed, sending the total withdrawn to nearly $3bn.

The Financial Times, for which Mr Fisher wrote a monthly column, dropped him in mid-October upon learning of the allegations.

In his first public statement since investors began pulling funds, Mr Fisher apologised and attempted to distance himself from the remarks, arguing that the media had unfairly maligned his company through “false” allegations. When asked for details, however, the company gave no specific examples. Instead, it made a broad allusion to criticisms of its corporate culture it felt were inaccurate, and highlighted what it sees as the diversity of its staff.

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Mr Fisher even permitted himself a coded sideswipe at NEPC, an influential investment consultant that advises pensions. It had publicly labelled Fisher Investments “unsustainable” after the flood of outflows. The lost assets, which represent a small fraction of the $112bn the group managed at the middle of the year but a sizeable chunk of its pension assets, did “not reflect a firm . . . that has any sustainability problem”, Mr Fisher wrote in an open letter.

Mr Fisher is the latest example of awkward, stale views in the finance industry, but he is not alone, and the offensive, out-of-touch banter can go beyond sexist jokes.

Marc Faber, the Swiss fund manager, was dropped as a commentator from US television stations in 2017 after claiming the success of the US was because of white people.

Banking and investment still have a long way to go before casual bigotry is eliminated. “The finance industry is the archetypal boys’ club,” said Matthew LaGarde, an attorney at Katz, Marshall and Banks who represents victims of sexual harassment and retaliation.

“Many women in finance rightly fear that if they speak up about harassment, including verbal harassment, they could face career-derailing retaliation or become known for their complaints instead of their contributions,” Mr LaGarde said.

The backlash against Mr Fisher’s comments comes at a crucial moment for the asset management business. Fund managers are haemorrhaging assets from actively managed portfolios, squeezing revenues. Simply put, the fight to win assets has never been more intense. Against this backdrop, two growth areas have emerged.

A boom in environmental, social and governance investing, where fund managers buy stocks and bonds in companies based on the ability of the businesses to manage changes in these fields, has nudged the focus of fund managers beyond balance sheets and quarterly earnings scorecards.

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At the same time, growth in passive investing means fund managers with large index businesses face growing demands to vote in company shareholder meetings and face the scrutiny of consultants who tally the votes on behalf of pensions, foundations, endowments and sovereign wealth funds.

The flare-up over Mr Fisher’s comments shows that investors expect asset managers to impose this framework on themselves, as well as on the companies whose stocks they buy.

Boston’s city pension fund is the type of institutional investor that relies on asset managers like Fisher Investments to steward its money on behalf of retired workers. When the pension fund pulled nearly a quarter of a billion dollars from the fund manager, Boston mayor Martin Walsh said Mr Fisher’s comments showed “an attitude and mentality that run counter to our values, but that also evidence a profound lack of judgment”.


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