Mercer is the latest investment consultant to caution its clients about Fisher Investments in the wake of sexist comments made by Kenneth L. Fisher, the firm's executive chairman and co-chief investment officer at a conference earlier this month.
In an Oct. 14 memo from Mercer to clients obtained by Pensions & Investments, Mercer consultants said: "We are concerned that as clients and Fisher Investment(s) professionals process the reported comments attributable to Ken Fisher, along with (Mr.) Fisher's response, the economic stability/viability and the integrity of the strategies rated by Mercer, as well as that of Fisher Investments as a firm, has the potential to be diminished."
Mercer recommended that clients apply "a provisional qualifier to all rated strategies" in the memo.
In contrast, NEPC recommended that its consulting clients terminate Fisher Investments because the combination of Mr. Fisher's behavior and the resulting high-profile redemptions led consultants there to question the firm's stability, according to a client memo obtained by P&I.
After meeting with Fisher Investments' representatives, Mercer consultants said in an Oct. 16 client memo that they intend to continue their dialog with the firm regarding the effects of Mr. Fisher's comments on the company.
"We remain mindful that concerns regarding potential AUM loss and staff turnover may take time to play out," Mercer said in the memo, noting that consultants also will assess the impact of the new diversity and inclusion task force that Fisher Investments is creating.
The provisional rating assigned to Fisher Investments and its actively managed equity strategies will be maintained, consultants said in the memo, but the team will review the rating and change it if necessary if they have further concerns "about firm viability, an investment team's ability to deliver the results we expect from Fisher Investments and/or cultural issues arise."
Mercer spokeswoman Alayna Francis did not immediately respond to a request for further comment.
John Dillard, a Fisher Investments spokesman, did not respond to a request for comment about Mercer's provisional rating for the firm and its investment strategies.
As of Oct. 25, asset owners and money managers that hired Fisher Investments as a subadviser redeemed about $3 billion from the firm, P&I reporting showed.
The Florida State Board of Administration, Tallahassee, a Mercer client, continues to review its relationship with Fisher Investments, which runs $175 million in actively managed U.S. small-cap equity strategy for the board, said fund spokesman John Kuczwanski in an email.
He said the board's investment teams "constantly monitor our external investment managers. When something such as this comes to light, we conduct additional due diligence to ensure the manager continues to perform as expected. That heightened monitoring will last as long as necessary, and until at least we are satisfied there is no additional negative impacts from an event."
Mr. Kuczwanski said the SBA's review is "still at the heightened monitoring stage."
The SBA manages a total of $205.6 billion in state funds of which $165.2 billion is for the Florida State Retirement System.