Financial Services: In Search of Healthy Returns
Applying Ariel Investments L.L.C.’s “slow and steady” technique, John Rogers Jr. has watched his firm outperform many of its peers on Wall Street. The Chicago-based firm’s founder and CEO says its investment focus helped it deliver solid returns since the stock market bottomed out on March 9, 2009. Since that time through last December, the Ariel Fund garnered a cumulative return of 215.06% versus 135.66% for the Russell 2500 Value Index.
No. 6 on the BE asset managers list with $5.47 billion in assets under management, Ariel invested in media stocks such as Gannett and CBS and retailers such as Nordstrom and Tiffany that rebounded from their lows. “We picked up great companies at bargain prices,” Rogers says. The strong performance helped Ariel boost assets under management by more than $300 million in 2010. To sustain its momentum, Ariel is launching the Ariel Discovery Fund, a small cap fund geared to individuals and institutions. The firm is also expanding its sales, marketing, and client services departments. In November, it plans a big splash to celebrate the 25th anniversary of Ariel Fund, the firm’s flagship mutual fund.
Fighting back from the scars of the financial market’s abysmal performance in 2008 and 2009, Ariel is among many black-owned asset managers, banks, investment banks, and private equity firms implementing or reviewing new strategies to boost sales and profits. Some were slugged last year by a barrage of economic punches: less consumer spending; an anemic housing market; and instability in the credit, real estate, and equity markets. To overcome such adversity, CEOs at a number of the nation’s top black-owned financial firms applied fresh approaches by targeting new clientele, aggressively marketing innovative services, and tapping into social media.
The equity markets finished up bullish last year: the Dow Jones industrial average gained 9.4%, the S&P 500 rose 11%, and the Nasdaq composite index climbed 15%, according to SNL Financial, a financial information research firm based in Charlottesville, Virginia. Meanwhile, the yield on the benchmark 30-year Treasury note slipped 31 basis points to 4.34%.
Houston-based Smith, Graham & Co. Investment Advisors L.P. (No. 7 on the BE asset managers list with $4.98 billion in assets under management) slightly grew assets under management by about $70 million last year. Aside from the aforementioned gains, Chairman and CEO Gerald B. Smith said that assets under the firm’s investment advisory business—which counts the hefty New York State Common Fund and State Street Global Advisory/U.S. Treasury as clients—total $180 billion. He plans to launch an “absolute return” product this summer in the open market geared to investors such as pension funds and endowments. “We’re real excited because it’s an alternative product in a growing market space,” Smith says.
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