Mr. Rogers was one of the first African-Americans in the U.S. to run a money management firm. In recent years the firm has gained notoriety not just for its money management capabilities, but also for Mr. Rogers' ties to President Barack Obama. Ariel President Mellody Hobson also has become a celebrity of sorts because she is engaged to film director George Lucas.
Mr. Rogers advocates a value buy-and-hold philosophy that worked particularly well in 2002 through 2004, when Ariel's assets reached their high point. But the firm's largest institutional strategy — small-cap value — lagged its benchmark in 2005 and 2006. Assets in the strategy stood at $5.8 billion at the end of 2004 but by the end of 2006 had declined by almost $2 billion through a combination of underperformance and outflows.
The slide in assets continued through 2007, and then the big hit happened in 2008. The small-cap value strategy returned -45.07% that year, more than 1,600 basis points below its benchmark, the Russell 2000 Value index, according to eVestment LLC, Marietta, Ga.
At the end of 2008, less than $1 billion was invested in the strategy.
Other Ariel strategies and mutual funds suffered similar performance issues. And in just one year, 2008, Ariel's assets under management fell more than two-thirds, to $4.3 billion.
“It was a hard time,” said Mr. Rogers, noting the money management industry is cyclical. “Back in 2002, 2003, 2004, we were knocking the cover off, we were at the top of the charts,” he added.
He said new research procedures put into place since the financial crisis give each company Ariel buys a proprietary debt rating. Companies whose ratings are too low and might be unable to withstand another financial collapse are sold, he said.
“It was arguably the worst financial crisis since the Great Depression,” said Mr. Rogers of 2008. “It was a very unique time. In case another unique downturn comes, we will perform better.”
Recent performance for Ariel already has improved. One-year results for the small-cap strategy as of March 31 show a gain of 20.27%, compared with the Russell 2000 Value index at 18.09%. On a three-year basis, Ariel is also outperforming the benchmark, with an annualized 13.9% vs. the benchmark's 12.12%, according to eVestment data.
Ariel's microcap strategy has become a star. Ariel launched the strategy when portfolio manager David Maley joined Ariel as a senior vice president in April 2009. Mr. Maley previously had managed the strategy at Maple Hill Capital Management.
The strategy, which had only $137 million as of Dec. 31, gained $382 million during the quarter, ending March with $505 million. It will be closed before it hits the $600 million mark.
For the 12 months through March 31, Ariel's microcap value strategy returned 24.61%, vs. 19.14% for its benchmark, the Russell Microcap Value index, according to eVestment data.
Ariel's microcap value strategy ranked first in a universe of 46 for the year ended March 31, according to eVestment.