Ariel Investments Portfolio Manager Charlie Bobrinskoy details his year end review and 2019 outlook as Portfolio Manager for Ariel Focus Fund.
Ariel Focus Fund is a non-diversified fund and therefore may be subject to greater volatility than a more diversified investment. Investing in equity stocks is risky and subject to the volatility of the markets. Investing in small- and mid-cap stocks is more risky and volatile than investing in large-cap stocks. The intrinsic value of the stocks in which Ariel Focus Fund invests may never be recognized by the broader market. For a current summary prospectus or full prospectus click here.
Performance data quoted represents past performance. Past performance does not guarantee future results.
Question: As we head into 2019, what do you feel is the biggest threat facing the markets?
Answer: A downturn in the economy. The market generally rallied on the prospect of higher corporate earnings coming from tax cuts, less regulation, lower unemployment and higher wages. A recession would require cuts in earnings estimates, which is never helpful to markets.
Question: As an investor, what keeps you awake at night?
Answer: Our country's inability to deal with exploding entitlements, which produce ever expanding government debt.
Question: With the heightened volatility in the markets and recent sharp selloff, how do you maintain a long-term perspective?
Answer: I retain a long-term perspective by periodically looking at long-term graphs of the Dow Jones Industrial Average and the S&P 500 which point persistently up and to the right and on which the current down-turn appears as a minor blip.
Question: Have you made any significant changes to your investment strategy in the final quarter of the year?
Question: Given your outlook for 2019, in general, what sectors are you most bullish about? What sectors will you seek to avoid?
Answer: I am very bullish on the outlook for the alternative asset management sector. Institutions will continue to increase their allocations to this asset class and the leading players (for example, Blackstone and KKR) will continue to take larger share of market. In addition, these companies’ stocks are trading at very attractive prices given there non-inclusion in index funds.
Question: Are there any particular sectors in which you are currently overweight, versus your benchmark?
Answer: I am overweight in alternative asset managers and industrials. Both sectors have been hit hard given fears of a recession.
Question: Are there any particular sectors in which you are currently underweight?
Answer: I am underweight in bond-substitute stocks such as REITs and MLPs which will trade purely in an inflationary environment.
Question: When you consider investment opportunities that have been overvalued this year—for example, the FANG stocks, what do you consider to be overlooked opportunities?
Answer: Industrials, alternative asset managers and materials stocks are the most overlooked opportunities.
Question: What advice is foremost in your mind at present that you would give to investors?
Answer: Be greedy when others are fearful and fearful when others are greedy. People are fearful now. Maintain enough discipline in your spending habits so you have sufficient capital to invest when opportunities present themselves.
The information contained in these investment perspectives is not guaranteed as to its accuracy or completeness. The opinions expressed were current at the time of publication but are subject to change. The information provided in this reprint does not provide information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security.
Mr. Bobrinskoy candidly discusses his viewpoints of market conditions and certain specific companies. Mr. Bobrinskoy discusses a number of stocks held in Ariel Focus Fund at the time the perspectives were written. These stocks do not represent all of the holdings in the Fund. Portfolio holdings are subject to change. The performance of any single portfolio holding is no indication of the performance of the other holdings of the Fund or of the Fund itself. See current holdings information for Ariel Focus Fund by clicking here.
The various asset classes discussed by Mr. Bobrinskoy have different risks and benefits. Bonds are fixed income securities in that at the time of the purchase of a bond, the amount and timing of income payments are known. Bonds are subject to credit risk and interest rate risk, both of which may affect a bond’s investment value by resulting in lower bond prices or an eventual decrease in income.
Investors should consider carefully the investment objectives, risks, and charges and expenses before investing. For a current summary prospectus or full prospectus which contains this and other information about the funds offered by Ariel Investment Trust, call us at 800-292-7435 or click here. Please read the summary prospectus or full prospectus carefully before investing. Distributed by Ariel Distributors, LLC, a wholly-owned subsidiary of Ariel Investments, LLC. Ariel Distributors, LLC is a member of the Securities Investor Protection Corporation.
by Charlie Bobrinskoy: