- Poor diversification & over reliance on North America
- Restricted options, and poor choice for investors
- Outperformed by some of their largest competitors
- Lack of Government protection under the Financial Services Compensation Scheme
- Lack of transparency relating to fixed interest recommendations
- High initial investment charges
Ken Fisher, the billionaire investment manager is well known for aggressively marketing his firm ‘Fisher Investments’. His marketing acumen as an author and columnist has helped build his investment firm into a significant global investment management brand that has proven particularly popular with UK investors in recent years. Globally, the firm manages more than £80 billion of investors’ money with £10 billion coming from investors here in the UK.
Fisher Investments has a growth focused, no frills investment strategy that is heavily focused on North American companies which isn’t surprising considering this is the market Ken Fisher built his reputation on. But there are concerns that his portfolios are overweight in this asset class with a lack of diversification across other key Global markets potentially a risk for investors.
In this article we review the Fisher Investments strategy highlighting potential risks and issues UK investors should consider. We also compared the performance of the core fund utilised by Fisher for their UK based portfolios alongside some of the most popular alternative options on the market.
The Fisher Investment Strategy
Like most investment managers, Fisher Investments use several factors to determine the portfolio they recommend, including investment time horizon, investment objectives, cash flow requirements, risk tolerance and any specific personal requirements.
Once this information is collated their investment team will decide on the asset allocation of a portfolio based on each clients goals and objectives.
Typically, for an investor with a medium to higher risk profile, Fisher Investments would recommend a portfolio allocation of 70% equities and 30% fixed interest. Whereas, for an adventurous investor they would recommend that up to 100% of their portfolio’s allocation is placed within equities.
The fixed interest element will be a selection of Exchange Traded Funds (ETF’s), the breakdown of which Fishers will only share should their clients formally request this.
The equity proportion will be invested in the Purisima Global Total Return fund (otherwise known as the Fisher GTR fund).
Fisher Investments Performance
The growth of Fisher portfolios has primarily been from the equity element of their portfolios (Fisher GTR fund).This fund is classified as a Global fund, which implies that it has a Globally diverse range of holdings. But the fund is essentially a North American equity fund with 76.42% of the fund's assets invested in North America. Under Investment Association rules this is just below the 80% threshold for the fund to be classified as a North American equity fund. In our opinion their proposition demonstrates a lack of true global diversification and is a concern as it signifies an over reliance on one country.
The North American market is key to any equity based investment strategy, but no strategy should be over reliant on it. A truly diversified portfolio that invests in funds that specialise within specific regional markets is the most efficient strategy for risk and performance management.
In the chart below we compare the performance of the Fisher GTR fund to that of the UBS US Growth fund, which is one of the funds we utilise to represent the North American equity portion of our portfolios as well as the average North American sector returns for the 5 year period up to 31st May 2022.
Based on performance over the past 5 years the Fisher GTR fund has underperformed the IA sector average despite returning growth of 62.99%.
Although the Fisher GTR fund has a high weighting in North American equities it is classified within the IA Global sector. Below we compare the funds performance over 5 different time frames to that of the sector average and a selection of the most popular Global classified funds on the market.
6 Month Performance
1 Year Performance
3 Year Performance
5 Year Performance
10 Year Performance
With the exception of the past 12 months, the above charts identify the Fisher GTR fund to have primarily outperformed the sector average over the past 10 years. But it's also apparent that when compared to some of the most popular funds in the Global sector, the fund has been unable to match their performance.
The Cost of Investing with Fisher Investments
Fisher Investments will only advise clients with a minimum investment value of £250,000. By having a minimum account size their proposition enables Fisher Investments to keep their charges comparatively low percentage wise, but their model of attracting only high net worth clients with large portfolios ensures their low percentage initial and ongoing annual charges generates significant revenue.
In regards to initial charges Fisher has a sliding scale that ranges from 2.25%. Also Fisher Investments clients will also pay a one-off advice fee of £825.
For their ongoing charges the equity portion of an investor's portfolio has a fixed annual management charge of 1.50%. For the fixed interest portion, this starts at 1.50% for the first £500,000 but reduces to 1.25% for the next £500,000, then to 1.125% for the next £9 million and finally to 0.90% for anything above £10 million.
Using a portfolio split of 70% equities and 30% fixed interest an account size of £500,000 would generate Fisher initial fees of £5,825 and ongoing management fees of £8,950 including custodian charges and a further 0.3% fixed interest ongoing charge
Using the above example we regard Fisher Investments’ initial and ongoing service costs to be on the high side for such a simple sliding scale templated offering with limited options.
On top of Fisher’s management fees there are also additional costs. There are ongoing fund charges that range between 0.30% and 0.40% per annum and transaction costs of between 0.02% and 0.05% as well as an additional 0.069% to 0.089% charge for clients who invest in a SIPP.
The Fisher GTR Fund Is Heavily Reliant on North America
Clients of Fisher investments will mainly invest in Ken Fisher’s own fund - the Purisima Global Total Return fund or Fisher GTR fund as it is otherwise known. This is a global fund with an overwhelming weighting in North America stocks. Over 76% of the fund's underlying holdings is invested in North American stocks. This a high risk strategy, and one that may cost Fisher clients dearly should North America hit hard times.
The Fisher Global Total Return fund is classified as a Global fund by the Investment Association alongside 344 other funds with a similar classification.
The fund itself has performed well ranking within the top 25% of its sector over the past 5 years. As a global fund the underlying holdings are spread across different global regions, as opposed to a UK Equity fund for example, which would primarily invest in UK companies.
Even though the Fisher’s Global Total Return fund is a global fund, it is primarily weighted and overly reliant in North American equities. This is our biggest concern with the Fisher Investment proposition.
Nobel prize-winning economist Robert Shiller cautioned investors of the risks of overexposure to North American equities should markets crash. The economist told investors that it is prudent to diversify in asset classes and not be overexposed to US stocks particularly during the threat of the pandemic and potential fallout of the US election.
North American equities is one of the most favoured asset classes as it is home to some of the worlds largest global brands such as Google and Amazon.
The North America sector has consistently been among the highest growth sectors, which has led to investors seeking to capitalise on its high growth by increasing their portfolios weighting in North American equities. However, this increased exposure can amplify risk, and as a consequence, it could have a serious detrimental impact on a portfolio's value should the region experience a fallout.
As identified in the table below the Fisher Global Total Return fund has over 76% of its holdings invested in North American companies, with Europe representing the next largest asset class.
The Importance of Diversification
Our strategy is to have a diversified portfolio of funds, each of which are specialist in different regions and asset classes, and this is the most efficient way to manage risk while optimising performance opportunities. Fisher's investment model is deeply rooted in the North American sector, with limited exposure to other core markets.
The importance of spreading the weighting of investments across asset classes cannot be understated. This is widely accepted among investment professionals, chief investment managers and academics as a more efficient risk based model.
Diversification across multiple asset classes and regions that are suitably balanced to fit an investors risk profile will ensure an investor is not over-reliant on the performance of any one asset class in the event of a sector downturn.
Lack of Government Protection for UK Clients
Fisher’s UK clients are poorly protected under the Government's Financial Services compensation scheme.
The UK Government guarantees to protect investors assets up to £85,000 per provider. Fisher clients with more than £85,000 in their Global Total Return fund will not be fully protected. Therefore, the majority of investors with Fisher Investments have limited protection under the FSCS due to the fact Fisher Investments do not diversify the equity portion of their portfolios across multiple fund managers.
With a minimum entry value per client of £250,000 this will leave the vast majority of Fisher Investment clients unprotected under the Government scheme, something that would be completely avoidable under the guidance of a quality whole of market /independent financial advice firm.
To maximise protection under the FSCS and mitigate the risk of a fund provider failing investors must spread their portfolio of funds across multiple providers. Yodelar Investments employs a comprehensive process for building and maintaining efficient portfolios for performance and security.
Conclusion
Performance: The Fisher GTR fund is a good performing global fund, but a lot of similar structured funds with a high proportion invested in North America have done just as well if not better. With heavy reliance in one global sector/asset class, we feel this is a real risk for Fisher clients.
Cost: We find their initial costs to be high. Ongoing costs are marginally high, but due to the lack of diversification we feel the value/cost ratio to be low.
Risk: Our two biggest issues with Fisher Investments are the over reliance on North America, and the lack of protection UK investors will have under the Government's Financial Services Compensation Scheme. We come across Fisher clients regularly with £500k or more invested with Fisher's GTR fund who are unaware they are only protected up to £85K under FSCS rules.
Choice: As a discretionary advice service Fisher Investments UK operate on a restricted basis promoting their own funds, and a number of key partners. This offering stops UK investors accessing the best funds across many sectors, limiting growth and diversification.
