Slow and steady: Ariel Investments' John Rogers anticipates a strong year for value managers

After a tough 2022 for value managers, Ariel Investments‘ John W. Rogers Jr. is forecasting a value comeback, saying the asset manager is focused on sectors that are poised to do well as the economy recovers.

“We had a hard 2022, but 2023 has been great,” said Mr. Rogers, who is founder, chairman, co-CEO and CIO at the Chicago-based manager, the first Black-owned mutual fund company in the U.S. He spoke at a luncheon Tuesday hosted by the CFA Society Chicago as part of its Distinguished Speakers Series.

There’s not been a new generation of value managers to emerge, he said, noting there’s more interest in hot areas such as venture capital and growth.

“Everyone thinks this area is broken. After being in the wilderness for 10 years … our day is coming and this is just the beginning,” Mr. Rogers stressed.

Year to date through Jan. 31, an investment report from Ariel’s website showed that the firm’s flagship Ariel Fund mutual fund (institutional class) returned 13.6% compared with 10% for the Russell 2500 Value index.

For the year ended Jan. 31, the Ariel Fund returned -3.1% vs. 0.7% for the Russell index; while over the five-year period ended Jan. 31, the Ariel Fund’s annualized return was up 6.3% and the Russell index return was 6.5%; over 10 years it notched 10.8% vs. 9.3%.

Ariel managed $16.2 billion as of Dec. 31.

Mr. Rogers said that he is not worried if “we end up in a recession … I’m not afraid of short-term market actions” because Ariel is exposed to “traditional companies as opposed to hot tech stocks.”

Among the value-friendly sectors that are interesting are housing and real estate; leisure, including cruise line companies; entertainment; and banking and financial services.

“These are the type of contrarian investment ideas we are excited about,” he said.

Mr. Rogers also said he’s been pushing corporate boards to include more people with diverse backgrounds, noting that a diverse board “makes companies stronger.”

Ariel also is working on ways to close the wealth gap and to broadly build wealth equality.

Ariel Investments recently announced that its affiliate, Ariel Alternatives, closed its private equity fund Project Black with $1.45 billion of commitments for investment in diverse middle-market companies that seek to supply Fortune 500 firms.

“We see ourselves as a socially responsible money manager and are truly long-term investors, with an ESG focus,” he said.

“ESG will get stronger and stronger, which will be a win-win for companies,” he said.

When asked what he is most proud of regarding the 40-year-old company he founded, Mr. Rogers said “the quality of the team, the people who work with us,” and added that he’s also proud of the people who left Ariel “to go on to do great things.”