Ariel’s John Rogers Defends Active Management

Before becoming the founder and chairman of Chicago-based Ariel Investments, John Rogers Jr. was a varsity basketball player at Princeton University and a winner at both Wheel of Fortune and Warren Buffett’s NetJets Poker Invitational in Las Vegas. This according to a recent Barrons article.

During a recent interview with Barrons, Rogers said, “I worry that our industry hasn’t done an effective job of defending itself and showing the value that is added by active management.”

Here are some interview highlights:

  • Rogers gravitates toward businesses with strong recurring revenue, such as real estate management companies. “These are businesses that fit the Warren Buffett model,” he says, explaining, “They are going to be around 20 years from now doing the same thing. There is a moat around the business.”
  • In Rogers’ opinion, it makes sense for large-cap investors to rely on index funds but to use active managers in the smaller-cap space. He says, “There is also research from the academic world that shows concentrated portfolios do well…you want to invest in what you know and in those sectors and industries that you understand well.”
  • With regard to the Trump presidency and its effect on Ariel’s investment strategies, Rogers says, “It has altered our research and portfolio-management meetings only in that we are spending an enormous amount of time now trying to figure out which companies will be the most impacted by the changes in the tax code in particular and the changes in the regulatory environment.”

He asserts, “I think President Trump will just build on what President Obama has already created and will just continue the recovery. Also, as Warren Buffett often says, this country always finds a way to overcome its obstacles and get back on the growth track.”