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John Rogers Ariel Investments July 2015 Commentary: short-term vs long-term

John Rogers' Ariel Investments commentary for the month ended July 31, 2015.


Recently, we were pleased to read a Morningstar, Inc. (NASDAQ:MORN) FundInvestor article entitled, “Risk Off,” written by Director of Fund Research and Editor Russel Kinnel. The piece discusses funds with betas and standard deviations that have fallen the last few years. Kinnel dedicates a paragraph each to six mutual funds with volatility that improved dramatically over the past three years, including our flagship Ariel Fund. He describes Ariel Fund as long having “the profile of being a bit to the cautious side, with fairly stable but low P/E stocks,” and we agree. He then notes that volatility spiked in the Great Recession of 2008-2009 and summarizes the aftermath in positive terms:

Manager John Rogers dialed up the firm’s work on balance sheets in an attempt to manage that risk better. The fund’s performance has recovered, but even with this decline in volatility, standard deviation remains on the high side.

We took this opportunity to examine Ariel Fund’s standard deviation history, which we discuss below.

John Rogers - Ariel Fund returns measurement over the short-term vs long-term

As you know, standard deviation is the classic measurement of volatility. Specifically, it measures how much a fund’s returns differ over...