Ariel Investments, a US$10.7 billion Chicago-based boutique equities manager, has opened its first office outside of the US, recruiting experienced institutional marketer Ian Webber to cover the Asia Pacific region from Sydney.
Ariel, which was established in 1983 and is almost wholly owned by its 88 staff, plus directors, refers to itself as an “intrinsic value” manager, with one of its defining features being an early focus on risk in its process. Portfolio holdings, however, blend value and growth.
Ariel takes contrarian independent views on stocks, which typically number 70-90 in the global all-country portfolio, which will be Webber’s initial focus in Australia. The top 10 stocks are those in which the manager has the most conviction. Currently, these account for about 44 per cent of the assets.
The global equity fund was launched in December 2011 and has about US$1.4 billion under management. The firm has about another US$800 million in international (non-US) developed and emerging markets portfolios. It also has a range of US equity funds and separately managed accounts.
Webber said Ariel had a unique process and style, aiming to manage portfolios through an investment cycle to not only outperform the index but, unlike most other long-only managers, to preserve capital through an investment cycle of between five and seven years.. The firm’s motto is based on Aesop’s Fables: “Slow and steady wins the race”.
Rupal Bhansali, chief investment officer for international and global equities, is also the lead portfolio manager on the global fund. She is a 25-year veteran of both sell and buy-side investing, including long-short portfolios, which Webber believes gives her a greater respect than most for the importance of risk management.
Although the global fund is benchmark agnostic, the first screen performed in the manager’s process, which deletes about 60 per cent of the universe, is a risk screen which looks at fundamentals such as the likelihood of the company going broke, corporate governance, balance-sheet strength, whether or not the company is too acquisitive and whether its business is “binary” i.e. whether it’s either going to win a lot or lose a lot. Benchmark risks are not too restrictive. For instance, sector weightings can go up to 25 per cent of the portfolio and individual stock weightings up to 5 per cent.
Ariel, as a firm, has also built a reputation around attempting to improve financial literacy in the community, particularly among minorities and in underprivileged areas.
For the past19 years the firm has sponsored the Ariel Community Academy, a Chicago Public School. The Academy offers classes from pre-kindergarten through to eighth grade, serving more than 500 students, 98 per cent of whom are African American and more than 85 per cent of whom come from families living on low incomes.
Ariel’s president, Mellody Hobson, is a nationally recognised voice on financial literacy and is a passionate advocate for the power of investor education. She was recently named in Time Magazine’s 2015 ‘Time 100’ list of the most influential people in the world.
She first visited Australia last August and met with various superannuation industry representatives, prompting her to look at this market as Ariel’s first foray into international expansion. Apart from Chicago, its only other office is New York.
In her spare time, Hobson is also chair of DreamWorks Animation SKG, Inc., a director of The Estée Lauder Companies Inc. and a director of Starbucks Corporation. She is also active in other outreach programs to do with education.
Webber said Ariel’s diversity, its commitment to giving back and its distinct approach to achieving long-term investment outcomes would form key planks of his drive to build its reputation in the region.
“I am excited to introduce Ariel’s very distinct investment process to institutional investors throughout the region,” he said. “The process is truly unique – it’s exciting and different and most importantly has delivered strong results for investors across various market cycles, in both absolute and relative terms.”
The global fund returned 16.36 per cent in the three years to April 2015, against 12.84 per cent for the MSCI All Countries Index. One-year performance was 10.14 per cent against the benchmark’s 8.02 per cent.
Prior to joining Ariel, Webber was Australian country head of Artio Global Investors and before that had senior sales and marketing roles at AXA Rosenberg, the former Salomon Smith Barney/Citigroup and JP Morgan Investment Management.
Webber opens Sydney office for Ariel Investments