Ken Fisher, who owns his namesake investment advisory firm, has sold a minority stake in the company to Advent International, a private equity fund, and Abu Dhabi Investment Authority, which is the kingdom’s sovereign wealth fund.

Fisher started Fisher Investments in 1979 with a mere $250 and now has a net worth in excess of $12 billion after the deal valued the company at just under $13 billion. Notably, Fisher’s net worth before the transaction was estimated at around $5 billion based on the estimated valuation of his investment firm based on comparable companies.

However, his net worth has skyrocketed, adding $7 billion to his name after the stake sale valued Fisher Investments at significantly higher than what it was previously estimated. Here’s how Fisher made his massive fortune, and learnings from the famed investor.

Ken Fisher Was Trained by His Father

While Ken Fisher is a self-made billionaire, his father Philip Fisher has made a significant contribution to his success. Philip was a famed investment strategist and money manager who authored Common Stocks and Uncommon Profits. Philip Fisher was a proponent of growth investing and the buy-and-hold approach. He professionally trained Ken Fisher who then launched Fisher Investments in 1979 as a sole proprietorship firm.

Before Fisher founded the firm, his theoretical work helped pioneer the price-to-sales multiple. The multiple is widely used now, especially in valuing startups, and newly listed companies, as well as those companies that are posting losses and hence cannot be valued based on earnings-based metrics like price-to-earnings or PE multiple.

Fisher Investments Grew Rapidly

In his early days at Fisher Investments, Ken Fisher pioneered an investing strategy; “domestic small cap value equity.” In the mid-1980s he contributed to the definition of six investing styles. These are

  • Big Cap Value
  • Mid Cap Value
  • Small Cap Value
  • Big Cap Growth
  • Mid Cap Growth
  • Small Cap Growth

In the 1990s Fisher Investments created new investment strategies for institutional investors including Global Total Return. The fund hit the milestone of reaching $1 billion in total assets in 1993 and has since grown multi-fold.

In 1984, he became a “Portfolio Strategy” columnist for Forbes magazine and held the position until 2016 which made him the longest-running columnist in the journal’s history stretching over a century.

In the 1980s he wrote three books which are; “Super Stocks,” “The Wall Street Waltz,” and “100 Minds That Made the Market.” He has since written many other books including “The Only Three Questions That Count,” “The Ten Roads to Riches,” and “How to Smell a Rat.”

The fund expanded internationally in the 2000s and set operations in Europe, Canada, Japan, and the Middle East. In 2016, Fisher stepped down as the CEO and handed over the baton to long-time employee Damian Ornani.

Where Does Fisher Investments Stand Now?

Fisher Investments manages money for over 150,000 clients including individuals, families, institutions, and businesses. The fund has total assets of $275 billion and has around 5,500 employees.

In his statement on the deal, Fisher said that the company has been his “life.” He added, “This transaction is aimed dually at estate tax and planning purposes while assuring that FI (Fisher Investments) will maintain its traditional culture, growth evolution and devotion to exceptional client service.”

Fisher would continue in his current role as executive chair and co-CIO. He emphasized that the deal ensures the company’s “independence” in case he steps down.

In an interview, Fisher said, “This unique transaction, unlike common private-equity deals, solves any untoward death-tax problems allowing Fisher Investments to continue as a private investment advisory firm in the ways that it has before until after my death.”

Investing Can Lead to Significant Wealth Creation

Fisher’s massive net worth is testimony to how smart investing can lead to tremendous wealth creation. He is a proponent of long-term investing as it brings the power of compounding to the picture. According to Fisher, “I got in my bones how compound interest works. Compound interest deployed right is magic, not just in finance, but in all of life. I compound my human capital at a slightly higher annual rate than most folks do because most don’t try to-and I never, ever stop compounding.”

The fund follows a top-down approach and scouts different markets and sectors to shortlist securities that fall within the high-level themes in its forecast. Finally, the company pins out securities from that list.

top down approach

Along with its investment approach, the fund’s independence and client-centric approach has helped it become so valuable.

What Can We Learn from Ken’s Investing Strategy?

There is a lot to learn from Ken Fisher, who went from earning a mere $1.20 an hour picking fruit, sawing, and fertilizing in his native San Mateo County when he was 13, to a multi-billionaire. Fisher went on to become one of the most successful people in the history of investment management, all because of his perseverance and smart investing.

Particularly, his focus on long-term investing and relying on compounding is something worth emulating. Incidentally, even Warren Buffett – who is among the best value investors of all time – follows a buy-and-hold approach. The nonagenarian also had humble beginnings like Fisher but is now among the richest persons in the world with a net worth of around $135 billion, which is mostly concentrated in Berkshire Hathaway shares.

Fisher also advises against over-diversification echoing Buffett’s views as the “Oracle of Omaha” also termed too much diversification as “diworsification.” He knows that if you find fantastic opportunities, it’s often best to concentrate your resources in them in stead of spreading them out between less favorable assets. Notably, while Berkshire holds many stocks in the portfolio the bulk of it is concentrated in five stocks which include Apple, Bank of America, Coca-Cola, American Express, and Chevron.

Fisher also bats for asset allocation and advises reviewing it regularly. Notably, asset allocation is quite important and a portfolio that has different assets like stocks, bonds, real estate, and gold can not only help optimize the returns but also reduce risks. Furthermore, the more evolved investors also consider emerging asset classes like cryptocurrencies to diversify their asset allocation.

Fisher has a nuanced view of cryptocurrencies and advices investors to proceed with caution. In a podcast last month, he said, “I suggest that if you’re thinking about Bitcoin or crypto in any regard, be very sure you really know what you’re doing. Be very sure you know about its volatility. Be very sure you know about the risk that you have that it blows up in your face.”