Facing Down Financial Inequity

Ariel community academy looks like any public school, but walk through its halls during morning announcements and you will hear, just after the Pledge of Allegiance, a market report on the previous day’s performance of the Dow Jones and the Nasdaq. On a recent morning in an eighth grade classroom, a discussion with a visiting alumna about her career in marketing quickly veered to the topic of personal finance.

“Ask her which investment vehicles she has,” a teacher told the class.

“401k!” several students yell. “High-yield savings account!” another yelled.

The school was founded in 1996 in a unique partnership with Ariel Investments, a company started by John W. Rogers Jr. ’80. The school’s mission is to incorporate financial literacy into the curriculum from prekindergarten through eighth grade. Located on Chicago’s South Side, Ariel Academy has a student body that is 99% Black; most students are eligible for subsidized lunch.

In kindergarten, students discuss the financial implications of going to a movie and buying popcorn compared to watching a movie at home and making popcorn. Second graders create figures out of pipe cleaners to sell, but not before analyzing what they can earn against the cost of materials and labor. Beginning in sixth grade, students decide which stocks to buy in a real portfolio started with $20,000 from funds that Ariel originally contributed.

The school is just one example of several ambitious initiatives created by Rogers and his co-CEO, Mellody Hobson ’91, to address the dramatic gulf between people of color and white people when it comes to financial prosperity and the world of investing.

“The facts are brutal,” Hobson says. Between 1992 and 2016, Black college graduates saw their net worth decline by 10%, while the net worth of white college grads rose by 96%, according to a study by the St. Louis Federal Reserve Bank. Adds Rogers, “Black Americans relative to white Americans today are worse off than their grandparents were.”

Having less wealth translates into less participation in financial vehicles that grow wealth. People of color have less saved for retirement and are less likely to have money in the stock market.

As two of the most prominent Black people in finance — a field still dominated by white men — Hobson and Rogers are using their clout to open the door for other minority groups. And they are pushing corporate America — from the inside — to make concrete progress in diversity and inclusion.

Their childhoods laid the foundation for their involvement in the financial world. Rogers’ father started buying him stocks when he was 12. Three years after graduating from Princeton, he founded Ariel Investments, the first Black-owned mutual fund company in the United States, even though a friend cautioned him that white people might not trust a Black investment adviser with their money. He credits Princeton basketball coach Pete Carril, for whom he played, with instilling in him many of the values that have guided his company and his life. 

Hobson was raised by a single mother who struggled to pay the bills. The family would heat water for baths on a hot plate when the gas was turned off. Hobson’s upbringing created an intense need to understand money. As the head of Chicago’s schools committee, Rogers encouraged Hobson to choose Princeton and later hired her as a summer intern. She returned to Ariel after graduation, became its president at age 31, and was made co-CEO in 2019.

In 2020, Hobson and her family’s foundation made the lead gift to establish a new residential college at Princeton, currently being built on the site of what was formerly known as Wilson College. When Hobson College opens in 2027, it will be the University’s first residential college named for a Black woman. She hopes that when students of color see her name, they will think, “I belong here.”

As they strive to provide greater access to the financial world for people of color, Rogers and Hobson run the oldest Black-owned investment firm in the country, which manages $14.8 billion in assets.

Members of the Ariel Investments team gather for a 40th anniversary celebration, including Mellody Hobson ’91, John W. Rogers Jr. ’80, Stephen Mills ’81, a board member, and Arielle Patrick ’12, the chief communications officer.

Photograph: Stephen Voss

Rogers helped recruit a 17-year-old Hobson to come to Princeton — they are both native Chicagoans — but she almost didn’t choose the school. After she announced at an event for new admits that she was planning to go to Harvard, Richard Missner ’65 called her every day to change her mind and then invited her to breakfast with Bill Bradley ’65, who sealed the deal. (Bradley walked her down the aisle at her 2013 wedding to George Lucas, the creator of Star Wars.)

Hobson is one of many Black students who Rogers has helped recruit to Princeton and then hired to work at Ariel, which celebrated its 40th anniversary last year. There are currently five alumni among its more than 120 employees, and the board of directors includes Anthony Romero ’87, who is executive director and CEO of the ACLU.

Especially in the beginning of her career, Hobson was often underestimated or ignored as a Black woman. “So many times when I sat in rooms, people wouldn’t make eye contact with me. They only talked to the white colleagues I was sitting next to, and I was more senior than them,” Hobson says. “I have used that to my advantage.”

The firm’s philosophy is, in a word, contrarian. Ariel likes to buy “value stocks,” or what Rogers calls “unloved stocks” — ones it believes are undervalued by the U.S. market — and hold on to them, typically for five years, while the average mutual fund’s holding period is much shorter. The company’s tagline is “Active Patience.”

“We’re searching for something inefficiently priced because it’s just too small to be followed by the big brokerage firms and big money-management firms,” Rogers says. “I’m always looking for stocks that are down the most. I’m never going to buy the ones going up the most.” Ariel’s flagship fund — Ariel Fund — has earned a 10.5% average annual return since 1986. Rogers is the chief stock picker at Ariel; Hobson is in charge of everything else.

“I’m always looking for stocks that are down the most. I’m never going to buy the ones going up the most.”

— John W. Rogers Jr. ’80

To decide what to buy, Rogers likes to read newspapers, reports, and books in their physical format, not on a screen. He does not use a computer or email. “I want to be able to read and think during the day and not have someone else control my agenda,” he says. “Reading emails all day is constantly taking you away from your concentration.” (He did concede to texting after pleas from his daughter.)

Ariel’s investing philosophy comes from Rogers’ days on the Princeton basketball team: “Coach Carril taught us if you took your time, eventually the great opportunity would show up,” he has said. There are tortoise figurines throughout Ariel’s 29th-floor offices in downtown Chicago in tribute to its motto: “Slow and steady wins the race.”

Devotion to Princeton is also in evidence at Ariel’s offices, where the official colors are orange and black and meetings take place in the Pete Carril conference room, which is filled with Princeton memorabilia. Hanging next to each other on the wall are two Woodrow Wilson Awards — Princeton’s highest honor, presented each year to an alum whose career embodies a commitment to national service. Rogers, who was recognized in 2008, was the first Black person to receive the prize. Hobson, the 2019 recipient, was the second.

Rogers and Hobson have long pushed for other people from minority groups to have a seat at the table — and they have done it from inside corporate America. Both have served on the boards of directors of some of the nation’s largest and most prominent companies, Rogers at McDonald’s, Nike, and The New York Times, and Hobson at JPMorgan Chase, Estée Lauder, and DreamWorks Animation SKG. In 2020, when Hobson was named chair of the board of directors at Starbucks, she became only the second Black woman to ever serve as board chair of an S&P 500 company.

Ariel Investments’ headquarters in Chicago include a conference room named for Pete Carril and featuring Princeton memorabilia.

Courtesy Ariel Investments

What’s critical for people of color who make it to the boardroom is to speak up, Hobson says: “One of the reasons I am in that room is they were looking for diversity. They wanted a Black woman, so I’m going to make sure I represent the perspectives and ideas that might be unique to me and that will help the company be better.”

Bradley suggested her for the Starbucks board and served alongside her. “Mellody is going to tell you what she thinks,” he says. “She has a remarkable candor that she does not shy away from using. She’s willing to have the courage of her convictions.”

Hobson presses on diversity with CEOs, asking, “‘Can you be a superstar at this company and fail on diversity goals? Can you get your full bonus?’ If you can, it’s not important,”
she explained on a 2020 podcast. “In business, you get what you incent.”

More than 55 companies in Ariel’s portfolio have added people of color to their boards of directors following Ariel’s involvement, according to Ariel.

“They wanted a Black woman, so I’m going to make sure I represent the perspectives and ideas that might be unique to me and that will help the company be better.”

— Mellody Hobson ’91

But just having diversity on a corporate board is not enough, Rogers says. “So often we get into these leadership roles both in executive ranks and in boardrooms, and then we get quiet,” Rogers told an interviewer in 2012. “And we get shy, and we don’t ask the tough questions, and the white CEO says, ‘Well, I’ve got my Black board member or my Black executive, and they’re not complaining. Things must be great.’”

To address that, Ariel created the annual Black Corporate Directors Conference in 2002. Each year, more than 200 Black, Latino, and Latina members of corporate boards attend with the goal of “learning from each other the importance of speaking up,” Rogers says. That includes pressing the companies for which they are board members to track diversity — not just among the companies’ employees, but also among the vendors they hire.

Rogers pushes companies to address another issue: Some hit their diversity goals by hiring minority vendors in fields such as janitorial services and construction, but when it comes to hiring lawyers, accountants, and investment bankers, they usually fall back on hiring white people, he says.

“John will challenge the inertia of a system when it comes to diversity and ask what might be difficult questions,” says Aaron Diaz Bianco ’06, who was a summer intern at Ariel and worked there as a research analyst for several years before starting his own investment firm. When Rogers sits on a corporate board, according to Bianco, Rogers asks, “What percentage are you spending with diverse firms? What type of spending? Is it just janitorial services?”

Read More: John W. Rogers Jr. ’80: A Gift of Stocks at Age 12

Corporate spending with minority-owned vendors is shockingly low for the majority of large companies: just 5%, according to Ariel. Large companies complain that they can’t find enough diverse firms to do business with. Part of that difficulty stems from the fact that there are only five Black-owned businesses in the United States with more than $1 billion in revenue, while most are categorized as small businesses, according to Ariel.

In 2021, Hobson came up with a way to tackle that problem by helping to create Ariel Alternatives, a private equity firm that seeks to invest in middle-market companies of scale that are Black- and Latino-owned. It also invests in companies that are not currently minority-owned, aiming to transform them into certified minority business enterprises. Ariel Alternatives provides the capital and connections for the companies to become suppliers to Fortune 500 companies. Ariel Alternatives’ first fund is called Project Black.

Hobson decided to swing for the fences: She established a minimum investment of $100 million for Project Black. “Everyone thought I was a little crazy,” she says, but
she was looking for “corporate balance-sheet money,” a number that would require board approval. “If it was a significant number, we had the mind share we needed from the company for the duration. I never want it to be thought of, two or three CFOs later, as some kind of a charity effort.”

“Some were taken aback by the ask,” recalls Charles Corpening ’87, the senior managing director of Ariel Alternatives. He says the effort addresses another stubborn problem: Executives tend to feel most comfortable doing business with people who look like them. He cites a 2021 study of the film and TV industry by McKinsey that found that if a film had only non-Black producers, there was less than a 1% chance that a Black writer would be hired, while having at least one Black producer gave the film a 73% chance of bringing on a Black writer. When Ariel Alternatives invests in a company and establishes minority ownership, it means “there is a much higher probability that future management hires and job growth will go to communities of color,” Corpening says.

Hobson got results: Project Black closed its funding round in 2023 with major companies such as Walmart and Merck as investors, and JPMorgan Chase as a co-investor. The fund raised $1.45 billion.

Read More: Mellody Hobson ’91: Lessons From a Financially Precarious Childhood

Another goal Hobson and Rogers feel passionately about is getting more people of color in the financial services field, a lucrative, fast-growing industry in which people of color are underrepresented.

To that end, they spend a lot of time personally mentoring young people. When Ryan Jenkins ’24 was a summer intern at Ariel in 2022, she was invited to accompany Hobson on a two-day trip to watch the Denver Broncos announce that Hobson had become the first Black woman with an equity stake in an NFL team. “I sat with Mellody on every plane ride. She explained everything to me,” Jenkins says. Last summer, she was an intern at Princo, which manages Princeton’s endowment.

Interns regularly attend Ariel board meetings. “I’m on three corporate boards, and this is the only one where interns attend board meetings,” says Stephen Mills ’81, who sits on Ariel’s Mutual Fund Board of Trustees and is a former president of the New York Knicks. “It’s not window dressing for Ariel.”

Those they mentor carry the lessons they learn far beyond Ariel. Jason Tyler ’93 grew up in Chicago and was recruited to go to Princeton by Rogers. As a summer intern at Ariel, he accompanied Rogers to board meetings for the National Urban League, a civil rights organization. “He was the youngest person on the board but was also willing to take a 17-year-old, to show me the importance of giving back,” Tyler says.

He also took note of Rogers’ meticulous preparation. “Watching John read so much made me a better student when I went back to Princeton,” Tyler says. “Sophomore year, I promised myself that I was going to be the one that was the most prepared going into class.”

Tyler returned to Ariel and spent eight years there, serving as a senior vice president. Today, he is chief financial officer of Northern Trust Corp., a Chicago-based financial services company that manages $1.4 trillion in assets. He continues to emulate Rogers by bringing young people to board meetings.

Nicholas Antoine ’12 served as Rogers’ chief of staff at Ariel and met his current business partner in Ariel’s hallways. In 2015, the pair launched Red Arts Capital, a supply-chain-focused private equity firm, with financial support from Rogers. Red Arts Capital is a rarity: a private equity firm entirely owned and led by Black investors. The firm promotes career development for people of color at its yearly Supply Chain Executive Conference, which 150 people attended in 2023.

Rogers also draws young people of color into the financial services industry with an internship program he funds at the University of Chicago. More than 130 students have worked at nonprofit endowment and foundations’ investment offices through the Rogers Internship Program in Finance.

Hobson and Rogers are also focused on promoting financial literacy and access to investing in the Black community. Ariel addressed that issue early on by instituting a low minimum to open an account. “We wanted people to be able to invest $50 a month,” Hobson says. At the time, many mutual-fund companies had minimums of $5,000 or $10,000, she says. “We thought those barriers were particularly problematic for people of color.”

They have discovered that educating Ariel Community Academy students about investing has a secondary benefit: reaching their parents. “Most of the time, adults — no matter who — don’t want to admit what they don’t know about money. There’s a lot of shame around that,” Hobson says. “One of the on-ramps to investing that we see is teaching kids, because we indirectly teach their parents.”

When students graduate from Ariel Community Academy and head to high school, the stocks purchased with the original $20,000 that their grade received are sold. The first $20,000 goes to the new first grade class, so the system is self-sustaining, and the rest is split among the graduates. Students have the option to invest their share in a college savings account, to which Ariel contributes an additional $500, or take the amount in cash.

Ariel employees often spend time at the school. When Bianco was a research analyst at Ariel, he visited a third grade class to teach the youngsters about the difference between a stock and a bond, with Rogers sitting in the classroom beside him. “I’m from a poor neighborhood myself, so I was one of those kids growing up,” says Bianco, who is Mexican American and the first member of his family to go to college.

He has seen how Ariel Academy helps students envision a bright future. “I asked them, ‘What do you want to be when you grow up?’” Bianco recalls. “Everyone had their hands up. One wanted to be a hedge fund manager and another wanted to be an accountant.”

Jennifer Altmann is a freelance writer.