MEMORANDUM

TO: Clients and Friends of Ariel Investments, LLC
FROM: John W. Rogers, Jr., Founder, Chairman, Co-CEO & CIO, Mellody Hobson, Co-CEO & President
DATE: January 24, 2023
RE: Company Update

This month marks Ariel’s 40th year in business. It is hard to believe four decades ago, an investment company was born from a childhood hobby that turned into a life-long passion. Now, jumping ahead five market cycles, nine separate account strategies, five proprietary mutual funds, a private equity subsidiary, 123 teammates and $16.2 billion in assets*—and it feels as if time has moved at breakneck speed. This is in direct contrast to our “slow and steady” motto. Not to mention, a four decades-long record with the same portfolio manager on our flagship small cap value strategy places us in the rarest of air when it comes to manager tenure. When we searched 657,444 open-end mutual funds of all share and asset classes, only 26 had a manager tenure of 35 years or more. That’s just 0.004%** of all managers.

As we mark this extraordinary milestone, instead of looking backward, we are looking to the future. While it is often gratifying to reminisce about the “good old days,” we have much to do as we build for the next 40 years. With that in mind, we have a bit more news to share than normal as we lay out recent developments and preview some upcoming plans.

Our Re-Brand

While much has changed, we remain devoted to the same patient style that both guides our investment decisions and also influences how we continue to build the firm. And yet, despite this continuity, 40 years in business seemed like an appropriate time to re-examine, re-affirm and refine our brand and its promise. More specifically, we have updated our logo, modernized our beloved tortoise and enhanced the mission statement that serves as the foundation of our work. Our 40-year-old blue has been replaced by a bright new orange—which just happens to be both of our favorite color. The orange is paired with black as a nod to our Princeton bond.

Our four-pronged mission statement is more nuanced now. We are emphasizing Active Patience℠ since we have found that patience can be confused with inaction. As someone once said, “Patience is not the ability to wait—it’s how we behave while waiting.” We would posit that being actively patient is significantly harder than any other working state because of the laborious effort, painstaking restraint and demanding emotional control that must be summoned day-in and day-out. Introducing the word “active” is an intentional double entendre that also allows us to underscore our core belief that concentrated actively managed portfolios with longer time horizons can outperform passive strategies over a market cycle.

Our commitment to Independent Thinking remains unchanged. We believe this key tenet continues to strike the perfect note. Focused Expertise goes further than expertise on its own—underscoring our desire to continually hone our craft in our core competencies. And we are now emphasizing Bold Teamwork—encouraging our colleagues to be courageous when engaging with each other since silence can be dangerous and acquiescence can breed mediocrity.

Coming Soon… Dedicated Emerging Markets and a Long/Short Strategy

As we have methodically grown the firm, our goal has always been to patiently (every decade or so) and opportunistically (when talent arises) expand our capabilities with complementary strategies. When an accomplished leader expressed an interest in working with us, a dedicated emerging markets strategy became our next natural product extension. In mid-April, we will be delighted to welcome a deeply experienced EM team led by Henry Mallari-D’Auria, CFA—whose near 22-year track record is exceedingly rare in the asset class. Henry spent the last two decades as the Chief Investment Officer of Emerging Markets Value Equities at AB (formerly Alliance-Bernstein) where he has worked for 31 years. Prior to his CIO role, this Trinity College graduate was one of the lead architects of AB’s global research department, which he managed from 1998 through 2002.

Henry will immediately be joined by four long-time colleagues:

• Vlad Byalik is a Portfolio Manager and Senior Research Analyst for EM Value and Frontier EM Equities. He has spent 18 years at AB where he was a founding member of the firm’s frontier markets strategy. Vlad has 23 years of industry experience, having started his career as a business analyst at A.T. Kearney. Ukrainian born, he has a BA in Economics from Wesleyan University and an MBA from the Wharton School of Business.
• Christine Phillpotts, CFA is a Portfolio Manager and Senior Research Analyst, Emerging and Frontier Markets who has 16 years of investment experience—the last 10 years at AB. Christine is one of the few African American women portfolio managers in the EM arena. She obtained her BA in Economics from Columbia University and an MBA from Harvard Business School.
• Slava Breusov is a Senior Research Analyst who has worked at AB for the last 10 years but has 22 years of experience. Born in Russia, Slava received his Diploma in Economics from the Siberian Academy of Public Administration and his MBA from the Wharton School of Business.
• Ted Mann, CFA is a Senior Research Analyst who joined AB early in his career. He spent 15 years at the firm and has 18 years of industry experience. Ted is a graduate of Duke University where he received a BS in Economics with a minor in Mathematics.

In addition to this diverse and deeply experienced team, Henry expects to hire one additional research analyst and two or three associates after he arrives. For the time being, his New York-based team will co-habitate with our Ariel Alternatives colleagues who have extra room in their new offices until we can build out more space on an adjoining floor.

Beyond our enthusiasm for the new colleagues set to join us, we are excited to soon leverage Micky Jagirdar’s prior hedge fund expertise with the launch of a global long/short strategy. As Senior Vice President and Head of Investments, Micky has been a critical member of the International/Global team since the strategies were incepted over a decade ago. His contributions to the success of the portfolios are vast—including his exceptional research capabilities and stock picking abilities. Micky has been co-managing the Ariel Global Concentrated portfolio since its inception three years ago. As Rupal Bhansali’s designated successor, we have great confidence in his investing abilities as he embarks on managing his own portfolio starting this summer. This new strategy provides an opportunity for Ariel to offer our investors an exciting new dimension on global investing.

We will be the first to acknowledge that launching a dedicated new asset class and a product extension in the same year is indeed unusual for us. That said, we decided to take advantage of a rare opportunity to bring a skilled team on board while also capitalizing on a colleague’s expertise and experience to collectively advance Ariel’s global investing platform.

New Teammates and our Co-Leadership

We are pleased to announce Emma Rodriguez-Ayala has joined Ariel as our new General Counsel in advance of Mareilé Cusack’s retirement in March. Emma comes to us from LGIM America where she served as General Counsel, Chief Compliance Officer, Board Secretary and a member of the Executive Committee for the $200 billion asset manager. Born and raised in Puerto Rico, Emma graduated summa cum laude from Saint Louis University and then received a J.D. from the University of Chicago Law School. She serves as an independent director of First Bank Chicago and sits on the boards of Chicago television station, WTTW, as well as Angeles Investors. While we are sad to bid farewell to Mareilé—a beloved 15-year colleague—we are delighted to have someone of Emma’s stature take over the GC chair.

We are also pleased to announce Nancy Power will be joining the firm on February 13th as our new Chief Human Resources Officer, replacing Marlo Gaal who has decided to move on. Nancy is a proven HR professional who has spent the last 17 years as the Managing Director and Head of Human Resources at Andersen Tax. Born in Seoul, Korea, Nancy was raised in Chicago where she attended the University of Illinois. She later attended the Haas Business School at the University of California. Nancy’s intellect, charm, attention to detail and excellent management skills will serve our culture well. We are thrilled to welcome her aboard and will benefit from exceptional background and leadership.

As we close out this letter, we want to underscore our own commitment to our leadership roles at Ariel for many years to come. We have a magical partnership—one that has strengthened with time. We are joined in our devotion to each other, our colleagues, our clients and our broader society. Ours is an uncommon co-leadership model that works. One that allows us to individually do what we do best while supporting and learning from each other. Our shared work ethic and values have created a level of alignment that keeps our firm on track and moving forward. In our most difficult periods, it has been reassuring and reaffirming to have each other’s wise counsel and unwavering trust. In short, we view our friendship, partnership and combined learnings from the past decades to be a great foundation for Ariel’s future.

As always, we appreciate the opportunity to serve you and welcome any questions or comments you might have.

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*123 teammates and $16.2 billion include employees and assets, respectively, of Ariel Alternatives, a subsidiary of Ariel Investments.
**Data Source: Morningstar. Calculated by Ariel Investments as of January 8, 2023.