OSW - Ariel Investments Small Cap Value Q1 2024 Commentary

2024-06-21 07:25:00 ET

Summary

• Ariel Investments, LLC is a global value-based asset management firm founded four decades ago in 1983. Ariel serves individual and institutional investors through five no-load mutual funds and eleven separate account strategies.
• Ariel Small Cap Value Tax-Exempt Composite increased +3.97% gross of fees (+3.71% net of fees) in the quarter.
• Near term, management reiterated its cautiously optimistic long-term guidance for the mergers & acquisitions segment given an improving macroeconomic outlook, although LAZ expects geopolitical uncertainty to remain a headwind.
• As rates begin to subside in 2024 and beyond, we think the gap between mega-cap stocks and their small to mid-cap counterparts will narrow, fortified by consumer confidence, sticky wages, as well as slowing, yet steady long-term economic growth.

U.S. indices continued to exceed expectations in the first quarter. Investor enthusiasm around artificial intelligence ((AI)), resilient corporate earnings growth, falling inflation and expectations for interest rate cuts this year drove a broad-based rally. While momentum was the largest driver of performance across size and style, all sectors in the S&P 500, except real estate, posted gains. Fears of a recession have been replaced with optimism and bullish market sentiment. Such turns in market psychology and economic forecasts highlight the challenges of market timing and the importance of taking a long-term view. Although exuberance, particularly for AI- themed mega-cap stocks may eventually prove to be excessive, the patient investor knows stock prices trade on fundamentals. Against this backdrop, the Ariel Small Cap Value Tax-Exempt Composite increased +3.97% gross of fees (+3.71% net of fees) in the quarter, ahead of the +2.90% return posted by the Russell 2000 Value Index but short of the +5.18% gain of the growthier Russell 2000 Index....

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