Fisher investments returns have been a hot topic among investors in recent years, especially after its underperformance against the S&P 500 in 2020. As one of the largest RIAs in the US, Fisher Investments manages over $197 billion assets for private clients and institutions globally. However, its flagship Private Client Group delivered a return of 15.5% in 2020, lagging behind the S&P 500’s 18.4% return. This has raised questions about Fisher’s investment strategies and whether investors could be better off just passively investing in index funds. In this article, we will analyze Fisher’s returns versus the S&P 500 in 2020, examine the reasons behind its underperformance, and evaluate whether Fisher can bounce back and provide market-beating returns for clients going forward.
Fisher investments returns trailed the S&P 500 significantly in 2020
According to reports, Fisher Investments’ Private Client Group, which manages money for over 65,000 high net worth individuals globally, returned 15.5% net of fees in 2020. This is nearly 3 percentage points below the S&P 500’s total return of 18.4% for the same period.
While a 15.5% return would be considered strong in most years, 2020 was an unusually good year for the stock market despite the COVID-19 pandemic and economic disruption. The S&P 500 managed to return over 18% fueled by massive stimulus spending and low interest rates. However, Fisher failed to match or beat the market return investors could have simply achieved via a low-cost S&P 500 index fund.
Fisher’s value-oriented investment approach underperformed in 2020’s growth-driven market
According to investment experts, the primary reason behind Fisher’s underperformance in 2020 was its value-oriented investment approach. Fisher favors undervalued stocks with low price multiples and stable dividend yields. However, in 2020’s market, growth stocks far outperformed value stocks.
The S&P 500 Growth index returned 38.5% in 2020 compared to just 2.8% for the S&P 500 Value index. Fisher’s value tilt meant it missed out on many of the high-flying tech and growth names like Apple, Microsoft, Amazon that led the market’s rally. Its decision to underweight or avoid hyper-growth stocks like Tesla also contributed to its relative underperformance.
Fisher increased cash holdings due to pandemic uncertainty
In addition to its value focus, Fisher’s large cash position also acted as a drag on its 2020 returns compared to a 100% invested S&P 500 index fund. As the COVID-19 pandemic unfolded, Fisher turned cautious and built up cash levels to over 20% of client portfolios by the end of March 2020.
Holding cash provided some downside protection during the market sell-off but also reduced Fisher’s participation in the sharp rebound off the lows. With the benefit of hindsight, Fisher’s cash allocations look overly conservative as the Fed’s rapid policy response fueled a faster-than-expected economic and market recovery.
High fees amplified underperformance versus the index
High fees charged by Fisher also exacerbated underperformance versus the near zero-cost S&P 500 index fund. Fisher’s fee schedule shows it charges 1.5% on the first $1 million, 1.0% on the next $4 million, and 0.75% above $5 million. All-in fees can reach over 2% after administrative fees.
In contrast, S&P 500 index funds from Vanguard and Fidelity charge only 0.03%-0.04% in fees. This huge fee difference compounded over decades can result in hundreds of thousands in extra costs for Fisher clients and widen underperformance.
Fisher investments returns underperformed the S&P 500 index significantly in 2020 due to its value-oriented approach and high cash allocations. Its high fees also amplified the underperformance. This has raised doubts whether Fisher can consistently deliver market-beating returns net of fees for clients. More time is needed to evaluate Fisher’s long-term track record and strategy going forward.