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‘Black people are locked out’: $10B fund manager on race inequality

"If you can’t have enough wealth to take care of your family, you don’t have the kind of job to provide for retirement ⁠— it’s really extraordinarily painful," says Ariel Investments co-CEO John Rogers.
"If you can’t have enough wealth to take care of your family, you don’t have the kind of job to provide for retirement ⁠— it’s really extraordinarily painful," says Ariel Investments co-CEO John Rogers.
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John Rogers wants to be clear: Corporate America is missing its moment to act on racial inequity.

It’s not just rhetoric and donations that will make the difference, said the co-CEO of $10 billion fund manager Ariel Investments, which focuses on value stocks. Businesses need to hire more African Americans into senior roles ⁠— including board seats and executive suites ⁠— and work with other companies that have diverse leadership, he said.

Rogers, 62, is one of the fund industry’s leading African-American figures after founding Ariel Investments nearly four decades ago. Its Ariel Fund has returned an average of about 10% a year since its inception in 1986, outpacing the Russell 2500 Value Index. He also sits on the boards of McDonald’s, Nike and The New York Times, and is a trustee of the University of Chicago.

Rogers spoke with Bloomberg News about everything from protests over racism to COVID-19 and investing in today’s market. His comments have been edited for length.

On corporate responses to protests
“The wealth gap in our country has gotten so much larger than we ever could have dreamed or anticipated 40 or 50 years ago.

We’re a capitalist democracy. If you have one group of people that’s in a substantially worse financial position, that builds a lot of multi-generational resentment over time.

If you can’t have enough wealth to take care of your family, you don’t have the kind of job to provide for retirement ⁠— it’s really extraordinarily painful.

Corporations talk a good game. But most of the time it’s just talk.

The idea is economic fairness, economic justice, economic inclusion. Not just making donations ⁠— which is important. You can donate to a historically black college, but then you want those students to graduate and have great careers, and build great businesses. And a lot of well-meaning companies don’t think about it like that.”

On asset management making racial wealth inequality worse
“It goes without saying that the investment management industry is one of the most profitable businesses ever invented. Private equity, hedge funds, venture capital ⁠— particularly, some of the wealthiest people in the world now work in private equity.

Hedge funds and private equity do a lot of charitable work, for instance through the Robin Hood Foundation. But if you do a deep dive, the biggest private equity firms have never had an African American partner. Most of them have never had an African American executive.

It’s a huge problem in our society that black people are locked out of parts of the economy like financial services and technology.”

Investing in the time of COVID-19
“It’s been a tough few years for value managers. The wind has not been at our backs for a long, long time. But there is enormous value in the space. The markets were so volatile after this crisis, if you’re an active manager you can take advantage of the volatility. There are some once-in-a-lifetime bargains.

The decade’s top performers also outpaced broader markets over the short term.
June 3

Media was an area that was controversial. One of our positions is ViacomCBS. It’s had an enormous rebound: It was down to about $11 a share, now it’s up more than $22 a share.

The other area that we’d often talk about too is the health care field ⁠— a lot of those stocks got really hurt hard. Envista Holdings, a dental products company, got hurt when all dental offices closed. The stock dropped enormously.

Those are just some broader examples of bargains.”

On lasting change to prepare for post-COVID-19
“People are going to be downsizing and reconfiguring their offices. I think it’s pretty clear people are not going back to work in a normal way. There will be changes in the whole travel area, hotel companies too. A reduction in travel will go right to the bottom line. If there’s even 10% fewer people on the plane or your hotel, you’ll be hit drastically.”

Bloomberg News