45 Great Moments in Black Business – No. 29: Ariel Investments’ $16 Billion Milestone

Mellody Hobson, President of Ariel Investments

This year BLACK ENTERPRISE celebrates the 45th anniversary of its roster of the nation’s largest black-owned businesses—The BE 100s. To commemorate the significance of this collective’s widespread impact on black business and economic development as well as American industry over four decades, we have presented 45 milestones moments. We now resume this tribute with the continuation of our yearlong countdown.  

Today we reveal No. 29 in the web series “Great Moments in Black Business.” 

2003: Ariel Investments, No. 1 on the BE ASSET MANAGERS list and the first black money manager to launch a family of mutual funds, achieves an investment milestone when 17 major corporations select its mutual funds for their 401(k) plans.

Led by Ariel founder, CEO, and Chief Investment Officer John W. Rogers Jr., the firm broke new ground with that landmark achievement despite a hypercompetitive environment and greater compliance pressure from the newly enacted Sarbanes-Oxley legislation. Due to the relentless efforts of Rogers, Mellody Hobson, the firm’s president, and the rest of the team, Ariel snared new accounts while applying a value investment style to produce hefty returns for individual and institutional investors. The results: Assets under management grew in 2003 to $16.1 billion, an explosive 58% increase from the previous year.

(John Rogers, center, with Mellody Hobson. Image: File)

 

Rogers, listed among BE’s Most Powerful Blacks on Wall Street, has broken barriers in the nation’s asset management industry and helped paved the way for other African Americans to gain entry into a business dominated by non-diverse firms.

A New Approach to Investing

 

Like the tortoise of Aesop’s fable, he took a slow-and-steady approach to investing in undervalued small and medium-sized companies over the long term and has built wealth for investors, including millions of African Americans. It was an approach that was in contrast to many of his growth-oriented peers as Rogers would recount in an April 1992 BLACK ENTERPRISE cover story.

The journey for Rogers began in 1983 when he launched Ariel Capital Management, now Ariel Investments. In that 1992 BLACK ENTERPRISE article, Rogers, who worked more than two years for the brokerage firm William Blair, used a connection to gain his first account: $100,000 investment from the Howard University endowment fund.  He also developed The Patient Investor, a newsletter describing his stock-picking philosophy —complete with a picture of a tortoise and the “slow and steady” tagline gracing its cover. Due to his performance, assets under management grew to $2 million by 1986.

(John Rogers. Image: File)

 

As Rogers built his mutual fund family—the first was Ariel Fund—he brought on Calvert Group Inc., a financial services company, in 1986 to serve as the distributor and transfer agent. Yet eight years later, in a bold move to gain independence, he paid $4 million to separate from Calvert and assumed responsibility for all operations. “We went from managing $2.3 billion to $1.1 billion over a short period of time, and it was extraordinarily uncomfortable and frightening,” Rogers told BE at the time.  

Steering Through the Great Recession

 

Ariel persevered through such rough patches and learned valuable lessons from business volatility and severe market downturns, including the financial crisis in 2009. Rogers, an investment icon and former captain of the basketball team when he attended Princeton University, has repeatedly demonstrated his resilience. In 2010, Crain’s Chicago Business reported Ariel emerged from the financial crisis with its best performance ever.

The firm’s flagship Ariel Fund rose 56% for the past 12 months, beating the 38% average rise for rivals, according to investment rating firm Morningstar. Most recently, as of Sept. 30, 2017, the Ariel Fund produced an annualized return of 11.34% since its Nov. 6, 1986, inception date, according to Ariel’s website. That compares with the same period for the Russell 2500 Value Index, a 10.86% return for the Russell 2500 Index, and a 10.32% return for the S&P 500 Index.

With offices in New York and Sydney, the Chicago-based Ariel offers investors six no-load mutual funds and nine separate accounts, and as of Feb. 28, 2017, the firm reported assets under management of $11.5 billion.

Fierce Diversity Advocate

 

When not operating Ariel, Rogers and Hobson have been active in the business, philanthropic, and social fronts. For instance, Rogers, a board member of McDonald’s Corp. and Exelon Corp., and Hobson, who serves on the boards of Starbucks Corp. and Estée Lauder Cos., can be found on the BLACK ENTERPRISE Registry of Corporate Directors. As such, they represent some of the fiercest advocates for diversity in corporate governance.

black directors

 

Despite the milestone that Ariel achieved some 14 years ago, Rogers is still actively fighting for greater opportunities for black firms to gain access to opportunities to manage corporate, pension fund, and endowment dollars. According to a 2015 Wall Street Project Asset Management study released at the annual summit created by civil rights leader Rev. Jesse L. Jackson, minority firms have been unable to gain a foothold in a sector in which assets under management totaled a whopping $68.7 trillion and profits grew to $93 billion in 2013. Using data from the BE ASSET MANAGERS list, the study further revealed that top black firms manage a total of $118.4 billion in assets—a mere 0.3% of the total $36 trillion in domestic institutional assets under management. Rogers believes greater boardroom diversity will make the difference in the creation of a more equitable asset management selection process.

It is fitting, however, that Ariel has been able and will continue to break barriers in asset management, in great part, due to Rogers’ vision, tenacity, and investment prowess. In 2013, he was featured with legendary investors Warren Buffett, Sir John Templeton, and Benjamin Graham in the book, The World’s 99 Greatest Investors.

 

 

 

Source: Black Enterprise

Membership Libraries / Exclusive playgrounds for book lovers

The Mechanics' Institute Library in San Francisco

Books used to be such rare and wonderful things. I’m not talking about centuries ago, either. As recently as a couple of decades ago, when I was in school, I felt awestruck every time I visited the large public library downtown. It was amazing to me that as an ordinary citizen—a kid, no less—I could walk in and borrow nearly any book, no matter how old, famous, or important it was. Searching through endless card catalogs seemed like a mysterious black art, and I was always slightly surprised to find that a book I was looking for was actually on the shelves. Wouldn’t everyone in the city want to read this?

I’m equally amazed at the profound changes that have taken place in the last ten years or so with respect to how people think about books. On the one hand, there seems to be an increasingly common assumption that all useful knowledge exists in digital form, or is at least catalogued that way. Where once a search for information would begin at the library, now it seems that’s the last place many people look—if it isn’t on the Web, how important can it be? On the other hand, despite the ever-increasing numbers of books being published and mega-bookstores like Borders, Barnes & Noble, and Amazon.com, the meme of borrowing books from a library has lost a lot of its vigor. You can pick up any book you might want on the way home from work, or order it online with one click. For a certain segment of modern western society, going to a library for books is now seen as a sign of lower, rather than higher, class.

Be that as it may, libraries remain the primary repository of a huge portion of the world’s knowledge, ready to be uncovered by seekers of all kinds. But there are libraries…and then there are libraries.

Members Only
Public libraries funded by taxes are a relatively modern invention, dating back only to the mid-1800s in the United States. Before that time, members of the general public who wanted access to a large collection of books had to pay for it. One very common form of library required patrons to pay monthly or annual dues in exchange for access (which may or may not have included borrowing rights). When public libraries began to catch on, these membership libraries (also called subscription libraries) began to dwindle rapidly; there are now just 18 still functioning in the U.S.

One such library is the Mechanics’ Institute Library in San Francisco, of which I’m a member. The library was founded in 1854 as an educational resource for “mechanics”—that is, anyone in an engineering or technical field—providing not just books but classes, lectures, and cultural programs. By 1906, the library’s collection had reached nearly 200,000 volumes, but they were completely destroyed by the fire resulting from the great earthquake that hit the city that year. Within four years, however, a new building was erected for the library, and with a number of generous donations, it was back in business—this time, with a more general collection to appeal to a wider and less technically oriented audience. It also added a chess room, home to one of the oldest chess clubs in the country but available for use by all members. Today, the Mechanics’ Institute Library is still going strong, with an up-to-date and ever-expanding collection of books, periodicals, CDs, videotapes, and DVDs; high-speed wireless internet access; and a very popular series of cultural events. It’s one of my favorite spots to do research, write, or just get away from the noise and chaos of the city.

Putting Your Best Book Forward
Why would I pay to go to the Mechanics’ Institute Library when there is a perfectly good public library in town that’s much larger, closer to where I live, and free? That’s a bit like asking why I’d eat at a small, out of the way, expensive French restaurant when there’s a perfectly good mall food court nearby. In other words: you get what you pay for. When I go to the Mechanics’ Institute, I know that I will be walking into a clean, quiet, beautiful setting filled with great books—as well as intelligent and thoughtful people who, like me, care enough about the quality of their library experience to pay for it. Both patrons and staff take books very seriously—much more so, on average, than what I’ve seen in public libraries.

Plus, for all my facility with internet searches, there’s still something deeply satisfying about finding a piece of information buried in a book or magazine on a shelf in a library. Membership in the Mechanics’ Institute Library is not terribly expensive, but it does give me a certain sense of power and status to be able to swipe my magnetic card and gain access to rooms full of books that most members of the general public have never even heard of. That makes those discoveries of information all the more rewarding.

And there’s something else: reference librarians who are positively itching to help you find information. I always have to avert my eyes when I walk by the reference desk. If I make eye contact, I invariably get this guilt-inducing “why-aren’t-you-asking-me-where-to-find-old-periodicals” look, and I just can’t bear it.

Membership libraries are somewhat of an anachronism; strictly speaking, no one needs them anymore, because there are other (and, usually, cheaper) ways of obtaining almost any kind of information you may want. Yet the Mechanics’ Institute and the few other institutions like it are, to all accounts, thriving nonetheless. In part, I believe it’s because they don’t just offer information; the seriousness with which they treat their books and their mission imparts a sacred sense of knowledge as power. That reminder alone is worth the cost. —Joe Kissell

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More Information about Membership Libraries…

This article was featured in Carnival of the Infosciences #43.

A concise history of membership libraries can be found on the Redwood Library Web site, which also lists all the surviving membership libraries in the U.S.

For more information on the Mechanics’ Institute Library, visit their Web site; you may also want to read about it in reasons to be stoked you’re in san francisco. The library offers free weekly tours that include a photographic history of San Francisco.

Among the other membership libraries in the U.S. are The New York Society Library and The Providence Athenaeum in Rhode Island.

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