Black Owned Investment Firms

William Huston, CCO, AIF®
by in Published on July 14, 2021

What Is an Investment Fund

An investment fund is a pool of capital that belongs to numerous different investors who have come together as part of a group in order to purchase securities while each individual investor retains ownership and control of their own shares.

Black owned banks

Some of the advantages that an investment fund accords its investors are:

  • Availability of investment managers who are well acquainted with risk management.
  • Economies of scale benefits whereby investors benefit in terms of lower transaction fees and higher interest
  • Increase in the diversification of the asset investments in order to reduce the risks involved

When it comes to investment funds, the investors who choose to put in their capital have no say as to how the funds' assets should be invested in the market. What they do is simply choose a fund that suits their financial needs, the fees involved, risk factor as well as their financial goals. A fund manager is usually the person in charge of managing the investments by determining what securities should be held in and the ones that should be bought and sold.

Types Of Investment Funds

When it comes to the investment types, here are some of the types of investment funds:

  • Open-end fund
  • Closed-end fund
  • Exchange-traded fund

Open-end fund

Black owned banks

For this type of fund, a major part of the investment funds belongs to the open-end mutual funds. An open-end fund is usually divided into equitable shares in which the price varies in direct proportion to the net value of the assets. Therefore, each time money is invested, new shares which match the prevailing price are created. Also, each time shares are redeemed, the sold asset directly match the prevailing share price.

Closed-end fund

A closed-end fund is a pool of collective assets that raises a fixed amount of capital through an IPO - initial public offering and then issues a limited number of shares or units for trading on a stock exchange market. Investors may receive higher or lower prices for their shares. The price can be premium or at a discount of their net asset value.

Exchange-traded funds (EFTs)

Exchange-traded funds are more like an in-between of the open-end funds and closed-end funds as they combine characteristics of both funds. EFTs are usually traded all through the day on a stock exchange. The advantage that comes with EFTs is that of slightly lower expense ratios as compared to their equals when it comes to mutual funds.

The first ETF launched in 1993 in the United States.

Unit Investment Trusts

Unit Investment Trusts are those that are issued to the public only once when they are created. The investors who’ve put in their resources can redeem their shares in two ways: either directly with the fund at any time or upon termination of the trust. Usually, this type of investment doesn’t have a professional investment manager as the securities of the portfolio are usually established during creation of the fund.

At the end of 2018, there were about 4917 united investment trusts.

Investment Funds: Hedge Funds

A hedge fund is a type of investment fund with very distinct characteristics from EFTs or mutual funds. The fund is an active fund that is made available to certified investors who can invest the assets in multiple ways as the fund faces less federal scrutiny due to the regulations set in place.

Investment funds have been around for quite a number of years now and generally, the Massachusetts Investors Trust Fund is considered as the first open-end mutual fund within the investment industry.

Black Owned Venture Capital, Private Equity & Investment Firms

Black owned banks

  1. Impact America Fund is a black-owned investment firm that finances businesses within the technology space that help to make a positive impact within marginalized communities.

  2. GenNx360 Capital Partners is a private equity firm that invests in companies within the industrial and business services space.

  3. Authentic Ventures is a black-owned venture capital firm that invests in early-stage companies that are out to solve major problems.

  4. Harlem Capital Partners is a venture capital firm that is focused on changing things up within the entrepreneurship space by investing in diverse founders.

  5. Bay Street Capital Holdings is an independent investment advisory, wealth management, and financial planning firm headquartered in Palo Alto, CA. They manage portfolios with the goal of maintaining and increasing total assets and income with a high priority on managing total risk and volatility. Although many advisors may focus on maximizing returns, they place a higher priority on managing total risk and volatility.

  6. KICVentures is an investment holding company within the healthcare space that’s aimed at developing efficient technological solutions within the healthcare space.

  7. Precursor Ventures is a capital firm that invests in entrepreneurs in order to help them get started and scale.

  8. The Bronze Venture Fund is one that focuses on making and managing innovative investments that align strong financial returns with positive social impact; economically, socially as well as environmentally.

  9. Cross Culture Ventures is an investment firm that funds entrepreneurs that dive into technology that’s focused on shifts in cultural trends in order to create more diversity in the workplace.

  10. Reach Capital is a company that invests in education as they believe that it’s among the most valuable resources as it contributes to the creation of equal opportunities as well as strengthening the community.

Ariel Investments - The Largest Black-Owned Mutual Fund In The U.S.

Ariel Investments is the largest operating Black-owned mutual fund in the U.S. that was founded in 1983 by John W. Rogers Jr. It currently claims to be the largest minority-owned investment fund. The major focus of the investment fund is to fund and enable minority-owned businesses to set up their operations and scale as well as improve financial literacy among people of color.

John W. Rogers, Jr. is a co-founder of Ariel Investments and he's also the Chairman, Co-CEO & Chief Investment Officer. Mellody Hobson is the woman responsible for the management and overall growth within Ariel Investments. She is currently the Co-CEO & President.

With a strong focus on cultivating a learning culture that helps to improve internal processes, Ariel Investments also puts a lot of emphasis on diversity, equity and inclusion in order to empower minority communities and promote fairness across the board.

Pros & Cons of Investment Funds

Pros

Among the advantages of investing in a managed fund as opposed to saving yourself include:

  • Investment firms usually hire qualified and specialized fund managers to manage the investments. They do bring in their expertise on investment management as well as proper research that helps them make informed decisions when weighing their options on how best to manage the funds.
  • Managed funds are controlled by experienced investment specialists (fund managers) who make investment decisions on behalf of the investors after undertaking thorough research and weighing all the available options.
  • The maintenance cost of investment funds is on the lower side and so you won't be required to put in a lot of effort and resources towards this.

Cons

Some of the cons include:

  • In a case where there is market underperformance, the return on investment may be very low. This is not profitable to the investors.
  • Investment funds that are active usually charge higher management fees as the return on investment tends to be higher. Therefore, for the investors to et a good return on investment, it is important that the active funds perform well in the market.

Investments funds are a good way to invest your resources in order to get ROI at low maintenance costs. Black Investments firms are continuing to emerge in order to serve marginalized communities in order to promote equity and inclusion as well as promote financial literacy.

Our founder, William Huston founded Bay Street after 13 years of supporting the United States' largest retirement plan ($650B) Thrift Savings Plan. He is recognized as Investopedia’s Top 100 Financial Advisors for 2021. In California, only two black-owned firms out of nineteen firms received this recognition. In Scottsdale Arizona, Ekenna Anya-Gafu CFP, AAMS is recognized among the Best Financial Advisors for his responsiveness, friendliness, helpfulness, and detail. Bay Street was founded to advocate for diverse and emerging fund managers and entrepreneurs. In 2021, Bay Street was selected as a finalist out of over 900 firms across the US in the category of Asset Manager for Corporate Social Responsibility (CSR).

References

https://www.investopedia.com/articles/personal-finance/011515/worlds-top-10-hedge-fund-firms.asp

http://blog.shopkatika.com/2018/11/18-black-owned-venture-capital-private-equity-angel-investment-firms/

https://www.arielinvestments.com/

https://www.investopedia.com/articles/personal-finance/011515/worlds-top-10-hedge-fund-firms.asp

https://finance.yahoo.com/news/wall-street-oldest-black-owned-123009089.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAAbfr--frmk7S3onhlOzb-JdwOQcugZFimL6lj9aeZuWvjfi5egMyR3d2jYQAF75xsxnIUkVN3rGUE2NO8lPQpMub_RxDmFH9OQiAgPT4N2l53KYVum9ZCpm9zo-6V_5cMpNWWLzTjXI5DIBvnRit4JcNLWAmgX-mxbbcdWdUnct


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