This Black-Owned Private Equity Firm Wants To Turn Supply Chains Into Cash Cows

Some kids grow up wanting to be a rockstar. Some want to be a pro athlete. Nicholas Antoine always wanted to be an investor. When he was a student at Princeton studying history in the early 2010s, it was a difficult fact for his friends to miss.

“I was investing in my dorm room for years,” says Antoine, now 33, “and constantly talking about Warren Buffett and Benjamin Graham and Charlie Munger.”

So Antoine’s ears perked up when, at the start of his senior year, he learned a friend had just returned from a summer internship in Chicago at Ariel Investments, the oldest Black-owned mutual fund firm in the country. The friend offered an introduction to John W. Rogers Jr., Ariel’s founder, a value investor in the mold of Buffett and Graham. Antoine sent off a letter—Rogers isn’t an email guy—and wondered if he’d ever hear back.

Eventually, the phone rang. It was Rogers, calling from Nebraska, where he was en route to a meeting with the Oracle of Omaha himself.

“He called me, and we chatted for 45 minutes or an hour,” Antoine recalls. “And he’s like ‘Alright, well I have to go, I’m going to meet Warren. But why don’t you come out to Chicago?’”

Thus began Antoine’s journey into private equity. At age 23, Antoine went out to Chicago, where he spent a year working as Rogers’ chief of staff, accompanying the contrarian value investor to meetings and events and receiving a one-of-a-kind crash course in operating an investment firm. Mellody Hobson, the chairwoman of Starbucks

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who now works alongside Rogers as Ariel’s co-CEO, filled a similar role in the 1990s in her first job out of Princeton.

While at Ariel, a colleague introduced Antoine to Chad Strader, a young investor working in the supply chain sector at Chicago-based private equity firm Woodlawn Partners who had recently earned an M.B.A. at the University of Chicago. They hit it off, exchanging book recommendations, investing strategies and dreams of starting their own firm. Before long, they decided to stop waiting. “If not us, then who?” Antoine says. “If not now, then when?” The two teamed up in 2015 to start Red Arts Capital, presciently identifying supply chains as an overlooked niche of the market that also overlapped with their areas of expertise. Both were 26 years old.

After seven years of steady growth—they’ve done about $200 million worth of deals to date backed by funding from Rogers and other deep-pocketed friends and advisors—Antoine and Strader are raising their first institutional fund targeting the red-hot logistics sector. According to PitchBook, private equity investment in logistics reached an all-time high in 2021, topping $50 billion. Last December, Red Arts recorded its first exit, selling a Midwestern shipping business called Midwest Motor Express to Knight-Swift Transportation for $150 million—good for a nearly 8x return. With that early track record to take to LPs, the firm is now raising $225 million.

Previously, Red Arts raised capital on a deal-by-deal basis from its network of benefactors. Along with Rogers, other Red Arts backers include billionaire value investor Mario Gabelli and John Canning, founder of Chicago-based private equity firm Madison Dearborn Partners. In addition to providing capital and guidance, those investors offer an imprimatur that Antoine and Strader say can go a long way when pitching Red Arts to prospective portfolio companies.

“We’ve surrounded ourselves with the smartest people,” Strader says. “I think that’s part of our secret sauce.”

For Rogers, investing in the upstart firm was an easy decision. When Antoine was Rogers’ precocious chief of staff, he quickly emerged as a strategic sounding board. “He’s got great, great judgment,” Rogers says. He was also drawn by the fact that Antoine and Strader were trying to build something that is entirely too rare in the world of private equity: A firm entirely owned and led by Black investors. Seeing Antoine and Strader reminded him of his own days as a mutual fund pioneer.

“So many people were supportive of me when I started Ariel at 24, so many of the Black business leaders in Chicago, the giants of prior years,” Rogers says. “So when I saw a young entrepreneur who was sincerely committed to excellence and committed to performance, it was just natural to pay it forward.”

Antoine and Strader say their ownership of Midwest Motor Express—a century-old North Dakota business that specializes in shipping smaller packages and freight to rural markets—is a perfect example of what they hope to establish as the Red Arts model. They bought the company in 2019 from its founding family and over the next two years used it as a platform to roll up three other regional shippers, eventually building a network stretching from Chicago to Seattle and from Utah to the Canadian border.

After growing MME and modernizing its operations by introducing new sales software and better analytics, they lined up the sale to Knight-Swift. Red Arts’ other portfolio companies include Sunset Pacific Transportation, another less-than-truckload shipper, and Radius Logistics, which provides freight, warehousing and other supply-chain services.

“We’re out here investing in what the everyday consumer needs to have a happy life,” says Strader, 33. “Trust me, there would probably be anarchy if we had to go back to three-day shipments.”

Both Antoine and Strader have entrepreneurism in their blood. Antoine’s father is an immigrant from Trinidad & Tobago who owned a French-Caribbean restaurant in New York. Strader’s father owned an auto maintenance and repair shop in Augusta, Georgia. Strader takes lessons from that body shop into private equity. For instance: Every time he and Antoine visit a company’s offices, Strader makes sure to sneak away and check out the bathrooms for cleanliness.

“Every day, I had to mop the bathrooms of, like, mechanics,” he recalls with a laugh. “That’s not the most fun experience. But it taught me a great sense of not just values, but the small things that matter in business—how you treat employees, how you treat customers.”

Just as Rogers is “paying it forward” by backing Antoine and Strader, the young founders believe in the importance of fostering diversity as their firm grows. Red Arts made seven new hires last year, expanding its total team to 11.

“He picked me out,” says Antoine, referring to his mentor, Rogers. “He said, ‘I see this person’s ambition, I see this person’s hunger, I’m gonna give them a shot.’ The only way to continue to show gratitude for that is to do it for other people. We can hire people, we can train them, and hopefully they go out and start things of their own.”