Cheryl Cargie, head trader at Ariel Capi tal Management in Chicago, the largest black-owned fund management firm in the country, never imagined that she would become a buyside trader.
Born and raised in the Chicago suburbs, Cargie graduated in 1986 from Illinois State University in Normal, Il., with a degree in business and finance. Her first job out of college was with the large insurance company, Aon Corporation. Cargie worked in the company's investment management department, mostly handling back office and account reconciliation chores.
After working only a few months at Aon, she was promoted to a buyside trader. One of the firm's two traders had left to join a sellside firm. The greenhorn trader was introduced for the first time to a quote machine and the differences between a bid and an offer. Cargie was a quick study. She spent four years at Aon.
In 1990, Cargie joined the buyside firm, Fiduciary Management Associates, also in Chicago, as its head trader. Again, she was one half of a two-person trading desk. Four years later, she moved to Ariel Capital Management.
Founded in 1983 by John W. Rogers, Jr. at the age of 24, Ariel is the first institutional firm to be owned by an African-American.
The firm has some $5 billion under management and it is widely known for favoring a conservative investment strategy. The firm, which takes the tortoise as its logo, specializes in trading mostly listed undervalued small and mid-cap value stocks with strong growth potential. The firm manages three no-load mutual funds, including the Ariel Growth Fund (a small-cap fund), Ariel Appreciation Fund (a mid-cap fund) and Ariel Premier Bond Fund.
Although Ariel is a minority-owned firm, Cargie stressed that it steers clear from promoting this aspect. "You will not find in any of our brochures that we are minority-owned," Cargie said. "We want you to hire us because we are good money managers."
While Ariel does not tout its minority ownership status, it does make a concerted effort to
educate African-Americans about the financial
marketplace. For example, it has co-sponsored with Charles Schwab several surveys that cover the investing habits of African-Americans.
Cargie's three-person desk only places a handful of trades each day. That's because its mutual funds typically hold about 35 stocks. But Ariel is generally the largest shareholder of each issue.
"It's not unusual for us to own 15 to 20 percent of the outstanding shares of each stock," Cargie said. "I may only have three or four tickets on my desk, but those tickets may account for millions of shares. I am always faced with finding liquidity."
Cargie pointed out that Ariel, as a small firm, does not have an abundant amount of commission dollars to purchase the kind of technology found in many large firms. "It would be nice to have all of the latest technology," she said, "but, unfortunately I don't. So I have to work twice as hard."
Despite the lack of advanced technology, Ariel is credited with quality performance. So how does Cargie compensate for her firm's lack of advanced trading and order management systems? "I run my brokers to death," she joked.
Cargie noted that the bigger firms are in most cases getting the first calls when it comes to order flow. "They demand it," she said. "They pay the most commission dollars. They are always going to get the first call on the order flow."
Most of Ariel's listed trades are executed through the New York Stock Exchange. "We go where the stock trades," Cargie said. The regional exchanges, Cargie noted, are used only to cross stock.
The recent transition to decimals is giving Cargie a splitting headache. "It's driving me nuts," she said. "What used to be an order of nineteen and a teenie is now $19.01. The volatility has really increased. There are so many more price points. The specialist is always pennying me for one cent. He's offering it at a penny above me. The specialist always knows the direction that the stock is going to trade."
Cargie is married and the mother of two small children – Ryan, an eight-month-old girl and a two-year-old boy, Zack. Her two toddlers, she said, keep her busy and contented when she is away from the trading desk. "It's [sometimes] a lot easier to come to work than to be around two kids," Cargie quipped.
