Ariel Investments' global equities strategy will be the firm’s first foot forward in a push overseas that saw the Chicago-based value equity manager plant its flag in Sydney three months ago.
After a bumpy start in 2012, the strategy has rebounded, picking up institutional mandates in the U.S. and Canada along the way.
Now the firm is laying the groundwork to attract institutional clients in Australia and the broader Asia-Pacific region.
In an Aug. 3 interview, Rupal J. Bhansali, who joined Ariel in late 2011 as chief investment officer, international and global equities, noted she personally seeded the strategy, putting in the first million. By the end of 2012, assets under management had only grown to $20 million.
Momentum has picked up considerably since then, as the strategy posted annualized gains of 17% for the three years through June 30, 3.37 percentage points better than its MSCI All Country World index benchmark.
As of July 31, Ariel’s global equity strategy had assets under management of $1.8 billion, said Ian M. Webber, who joined Ariel in May as a senior vice president and Sydney-based head of Asia Pacific institutional marketing and client services, in the same interview. Ms. Bhansali’s New York-based team oversees another $800 million combined in two international equity strategies, he said.
Separate accounts for institutional investors make up all but a sliver of that global equity AUM, said Ms. Bhansali. Strong support from some leading investment consulting firms helped facilitate that reception, she said.
Momentum has continued to grow this year. “We have seen good growth in 2015,” said Mr. Webber, who confirmed eVestment LLC data that showed net inflows for the global strategy in the first half of 2015 at $505 million, picking up from $800 million for all of 2014 and $478 million in 2013.
The two Ariel executives declined to name clients. However, Pensions & Investments’ data show public pension funds that have announced allocations to Ariel in the past two years include the $65.2 billion Virginia Retirement System, Richmond, which extended a $250 million mandate for the global equity strategy in mid-2014, as well as the $14 billion Illinois State Board of Investment and the $9.1 billion Cook County Annuity & Benefit Fund, which hired Ariel to manage $105 million and $50 million, respectively, in active international equities.
According to eVestment, 10 U.S. clients and one Canadian client account for almost all of the global strategy’s $1.8 billion in AUM. Mutual fund assets account for less than $20 million of the total, said Ms. Bhansali.
Now, with the opening of its first overseas office in Sydney, Ariel is looking to expand its “distribution footprint,” said Ms. Bhansali, calling the move to Asia “a huge new initiative for us.”
The executives declined to discuss near-term goals for the region. In line with Ariel’s culture, the strategy is to take a “slow and steady” approach, laying the groundwork for long-term success, said Ms. Bhansali.
Still, both executives said they see potential for Ariel’s contrarian investment approach to win favor among sophisticated institutional investors in the region.
And Mr. Webber said Australia’s superannuation fund industry, where intense competition has often led major funds to be “early adopters” of new or differentiated strategies, could be a corner of the institutional market in Asia that “appreciates our difference.”