A trailblazing money manager is embarking on new territory for the firm while driving Congressional scrutiny into the largest fund firms’ racial equity pledges.
Ariel Investments — the Chicago-based asset manager led by co-CEOs John Rogers and Mellody Hobson and the first Black-owned mutual fund company at its launch in 1983 — has unveiled new collaborations in the past four months with
At the same time,
“In both cases, there's a very long-standing relationship between our organizations,” Orlowski said. “We have just a tremendous amount of respect for what Schwab and Vanguard have accomplished.”
A thought and industry leader
Ariel has accomplished quite a lot itself. The firm has $18.3 billion in assets under management, with a company motto of “slow and steady wins the race” and a logo with a turtle. As examples of the ties between Ariel and the other firms, for more than two decades Schwab and Ariel have
Rogers is the son of a Tuskegee Airman and the first African American woman to graduate from the University of Chicago Law School, and he has been a
“These findings reinforce what we heard in that initial hearing last Congress from John Rogers, who sat where you're sitting now to testify, when he said we must tackle inequality through business opportunity,” said Rep. Beatty, a Democrat from Ohio. “While this report and hearing will not transform the industry overnight, we seek to bend the arc of progress and expand employment and business opportunities for both men and women and minorities by opening eyes and drawing attention to the glaring inequities in this corner of our society.”
In his
“Third, many banks, corporations and nonprofits have embraced well-intentioned supplier diversity programs emphasizing construction, catering, janitorial services and other commodity-related fields,” Rogers said. “However, this approach excludes us from the parts of the economy where wealth, power and jobs are created today, such as asset management and other professional services. I would go as far as calling it a modern-day Jim Crow.”
Rogers praised Hobson as one of the leaders helping to change the industry. Ariel appointed her its co-CEO in 2019 after she spent nearly 20 years as its president. Hobson currently serves as the chair of the board with Starbucks and as a director with J.P. Morgan after prior tenures as chairman of DreamWorks Animation’s board and a member of Estée Lauder Companies’ board.
New business areas
Last February, the firm
“This scale — which heretofore has been largely absent among minority-owned businesses — will enable these enterprises to compete on the same footing with Tier 1 suppliers,” Hobson
The Schwab-Ariel product is a semi-transparent ETF with a focus on small- and midsize equities rather than the growth and large-cap securities often included in funds using ESG criteria. With an operating expense ratio of 59 basis points, the fund screens out companies who get their main sources of revenue from tobacco, fossil fuels, private detention firms and weapons manufacturers.
“Our first proprietary ESG fund addresses a clear gap in the market for a small- to mid-cap ESG fund managed through a value investing lens,” Malik Sievers, Schwab’s head of ESG strategy, said in a statement. “We are excited to bring investors a new option for incorporating ESG into their portfolios and which may help them to tailor their exposure to ESG investing based on their goals and preferences.”
Vanguard’s collaboration with Ariel added it to the group of active managers tapped by the passive investing pioneer that also has more than $1.8 trillion in active assets. Alongside existing sub-advisors Cardinal Capital Management and Frontier Capital Management, Ariel is now helping to manage the Vanguard Explorer Value Fund, which has $1.2 billion in assets. In the initial phase of the collaboration, Ariel will oversee 10% of the fund’s assets.
“Vanguard continuously seeks out leading investment firms that demonstrate the expertise, diversity of thought and accountability needed to drive successful outcomes for investors," Dan Reyes, head of the firm’s Portfolio Review Department, said in a statement. "We believe that Ariel's talented portfolio management team and patient approach to investing complements the fund's strategy and existing advisors.”
A long track record into the future
Orlowski, the firm’s head of consultant relations and financial intermediaries, works with institutions and buyers who act as gatekeepers for large wealth managers. While she has limited interactions with advisors, Ariel’s mutual funds are “pretty widely available” through the major wealth managers, Orlowski said. With only about 100 employees across the firm, Ariel won’t be calling advisors’ practices and bombarding them with LinkedIn messages.
“We're a smaller firm,” she said. “We don't have the luxury of an army of wholesalers engaging with advisors.”
This past November brought the 35th anniversary of the launch of Ariel’s flagship Ariel Fund, where Rogers remains the lead portfolio manager. From its inception through October 2021, the fund has an annualized return of 11.60%, and it’s one of only 63 mutual funds that have track records of more than three decades.
“As we have mentioned on many occasions: Anyone can get lucky over the short term; real skill shines through over time,” Hobson
