Download Report

®
DRIEHAUS CAPITAL MANAGEMENT LLC
DRIEHAUS MICRO CAP GROWTH FUND OVERVIEW
Fund Assets Under Management
$122 million
(as of 3/31/2015)
Firm Assets Under Management
$10.8 billion
Investment Style
Growth equity
Ticker
DMCRX
Portfolio Managers
Jeff James
Portfolio Manager
24 years of industry experience
Michael Buck
Assistant Portfolio Manager
14 years of industry experience
Inception Date
11/18/2013. The Fund’s predecessor
limited partnership has a performance
inception date of 1/1/2003.
April 2015
Key Features:
•
A growth equity approach to US micro cap equities
•
Time-tested investment philosophy and research process
•
High active share
•
Experienced portfolio management: PM Jeff James has managed the strategy since 1998 and
the fund since its inception in 2013
•
Portfolio Manager Jeff James and Assistant Portfolio Manager Michael Buck have worked
together for the past 13 years
•
Experienced five-person team of research analysts averaging seven years on the fund
•
Exposure to companies with differentiated earnings growth and superior fundamentals
•
Strong absolute and benchmark-relative historical returns
The Driehaus Equity Investment Philosophy
The Driehaus equity investment philosophy is predicated on the belief that corporate earnings drive stock prices over time
and that markets tend to misprice stocks
undergoing positive change. In our experience, these companies often surprise investors with the magnitude, acceleration and/
or duration of their future earnings growth,
as well as with the subsequent price-toearnings multiple expansion that may
follow. We believe these inefficiencies can be
exploited through a combination of fundamental, macro and behavioral analyses.
The application of our earnings growth
philosophy and research process has allowed
us to consistently construct micro cap equity portfolios with differentiated exposures
relative to other micro cap passive, core and
value investment approaches. This time-
tested philosophy has been in place since
the firm’s founding more than 30 years ago.
The Driehaus Micro Cap Equity Team
The Driehaus Micro Cap Growth Fund has
been managed by Jeff James since the fund’s
inception in 2013. Mr. James has more than
17 years of experience as a Driehaus portfolio
manager and has managed the Driehaus Micro
Cap Growth strategy since 1998. He oversees
a five-analyst team with an average of seven
years on the strategy and is supported by a
dedicated risk manager. His team also draws
on the expertise of more than 30 investment
professionals who cover all sectors, market
caps and geographies around the world.
These investment professionals comprise our
US, global and international equity teams,
as well as our long/short credit and event
driven teams.
1
EXHIBIT 1: DRIEHAUS MICRO CAP GROWTH FUND CHARACTERISTICS (12/31/10 - 3/31/15)
Driehaus Micro Cap Growth Fund
Russell Microcap Growth Index
Active Share
3 yr Tracking Error
vs. Russell Microcap Growth Index
100%
12%
10%
8%
6%
4%
2%
0%
80%
60%
40%
20%
0%
12/31/10
12/31/11
12/31/12
12/31/13
12/31/14
3/31/15
vs. Russell Microcap Growth Index
12/31/10
12/31/11
12/31/11
12/31/12
12/31/13
12/31/14
12/31/14
3/31/15
2.0
1.5
1.0
0.5
0.0
12/31/10
12/31/13
Medium-term Momentum
Standard Deviations
3-5 Year Earnings-per-Share (EPS) Growth Rates
30%
25%
20%
15%
10%
5%
0%
12/31/12
3/31/15
12/31/10
12/31/11
12/31/12
12/31/13
12/31/14
3/31/15
Source: Factset Research Systems, Inc., Axioma, Inc. A definition of key terms can be found on page 5.
Differentiated Exposures
Performance Review
The Driehaus Micro Cap Growth Fund provides exposure to high growth US micro cap
companies. Its investment approach constructs a portfolio that looks significantly
different from the Russell Microcap Growth
Index, as illustrated by the fund’s high active share and above-average tracking error (Exhibit 1). The focus on high growth
companies is evident in two additional
factors that highlight the character of the
portfolio. First, expected EPS growth rates
are consistently higher for the portfolio than
for the index. Secondly, the portfolio maintains a significantly higher exposure to
medium-term momentum, a diversifying risk
factor that has been a positive contributor
to returns.
For all standard time periods, the Driehaus
Micro Cap Growth Fund has outperformed
its benchmarks (Exhibit 2). The strong performance is evident in the cumulative return
chart in Exhibit 3. Since inception, the fund
has a cumulative return of 715% versus the
Russell Microcap Growth Index’s cumulative
return of 259%. On a calendar-year basis, the
fund has outperformed in 8 out of 10 years
(Exhibit 4).
EXHIBIT 2: PERFORMANCE
Russell 2000
Driehaus Micro Cap Growth Fund
25%
16.3%
15%
5%
0%
Russell Microcap Growth
24.0%
20%
10%
Russell Microcap
17.4% 18.6%
17.5%
14.6% 14.7%
13.7%
8.8%
8.6% 8.2%
3.8%
1-Year
5.1%
3-Year
5-Year
Management fee: 1.25%
18.7%
16.7%
7.1% 8.0%
10-Year
Annual Fund
Operating Expenses2
11.6% 10.8% 11.0%
Other expenses: 0.24%
Total Annual Fund
Operating Expenses: 1.49%
Since Inception1
Source: Driehaus Capital Management, eVestment Alliance As of March 31, 2015 Indices are defined on page 5.
1
The average annual total returns of the Driehaus Micro Cap Growth Fund include the performance of one of the Fund’s predecessor limited partnerships, which is calculated from January 1,
2003, before the Fund commenced operations and succeeded to the assets of its predecessors on November 18, 2013. The Fund’s predecessors are the Driehaus Micro Cap Fund, L.P. (1996
inception) and the Driehaus Institutional Micro Cap Fund, L.P. (2011 inception). The performance of the Driehaus Micro Cap Fund, L.P., which was selected because it has the longer track record
of the two predecessor partnerships, has been restated to reflect estimated expenses of the Fund. The predecessor limited partnerships were not registered under the Investment Company Act
of 1940, as amended (“1940 Act”) and thus were not subject to certain investment and operational restrictions that are imposed by the 1940 Act. If the predecessors had been registered under
the 1940 Act, their performance may have been adversely affected. After-tax performance returns are not included for the Driehaus Micro Cap Fund, L.P. The predecessors were not regulated
investment companies and therefore did not distribute current or accumulated earnings. 2Represents the estimated Annual Fund Operating Expenses as disclosed in the current prospectus dated
April 30, 2014. It is important to understand that a decline in the Fund’s average net assets due to unprecedented market volatility or other factors could cause the Fund’s expense ratio for the
current fiscal year to be higher than the expense information presented. “Other Expenses” are estimated for the current fiscal year.
The performance data shown represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Principal
value and investment returns will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. The Fund will charge a redemption fee of 2.00% on
shares held less than 60 days. Performance data represents the rate that an investor would have earned (or lost) on an investment in the Funds (assuming reinvestment of all dividends and
distributions). Average annual total return reflects annualized change. Since Fund performance is subject to change after the month-end, please call (800) 560-6111 or view our daily NAVs at
www.driehaus.com for more current performance information.
2
A look at rolling five-year returns shows
that this outperformance is fairly consistent
through the fund’s history. The scatter plot
in Exhibit 5 provides the rolling five-year
returns for the fund and the Russell Microcap® Growth Index since the fund’s inception. The Micro Cap Growth Fund’s five-year
annualized return is plotted along the y-axis
and the index’s return for the corresponding
period is plotted along the x-axis. Periods in
which the fund outperformed the index appear above the bold diagonal line and periods
of underperformance are shown below it. The
fund has outperformed in 93% of the rolling
five-year periods. As the chart shows, periods
of outperformance are often significant. The
average outperformance is 664 basis points
annualized, while underperforming periods
trail the benchmark by an average 93 basis
points annualized.
EXHIBIT 3: CUMULATIVE RETURNS, SINCE INCEPTION1
715%
700%
600%
500%
400%
300%
259%
200%
100%
0%
-100%
2003
2004
2005
2006 2007
2008
2009
2010
2011
2012
2013
2014 2015
Source: Driehaus Capital Management, eVestment Alliance As of March 31, 2015
EXHIBIT 4: CALENDAR YEAR RETURNS, 10-YEAR PERIOD1
Driehaus Micro Cap Growth Fund
80%
70%
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
The fund outperformance on a rolling basis is
reflected in its up and down market captures
(Exhibit 6). A look at standard time period up
and down market captures shows consistently
strong up market captures ranging from 120%
to 134%. Down market captures are slightly
above the benchmark, ranging from 115% to
a low of 105%. The spread between up and
down market captures for each respective time
period range from a low of 5 percentage points
to a high of 29 percentage points, the latter of
which is for the since inception time period.
2005
2006
2007
2008
Russell Microcap Growth
2009
2010
2011
2012
2013
2014
Source: Driehaus Capital Management, eVestment Alliance As of March 31, 2015
EXHIBIT 5: ROLLING 5-YEAR RETURNS, SINCE INCEPTION1,2
40%
Driehaus Micro Cap Growth Fund Returns
The calendar year returns, cumulative returns and rolling
5-year returns of the Driehaus Micro Cap Growth Fund
include the performance of one of the Fund’s predecessor
limited partnerships, which is calculated from January 1,
2003, before the Fund commenced operations and succeeded
to the assets of its predecessors on November 18, 2013. The
Fund’s predecessors are the Driehaus Micro Cap Fund, L.P.
(1996 inception) and the Driehaus Institutional Micro Cap
Fund, L.P. (2011 inception). The performance of the Driehaus
Micro Cap Fund, L.P., which was selected because it has the
longer track record of the two predecessor partnerships, has
been restated to reflect estimated expenses of the Fund. The
predecessor limited partnerships were not registered
under the Investment Company Act of 1940, as amended
(“1940 Act”) and thus were not subject to certain investment and operational restrictions that are imposed by the
1940 Act. If the predecessors had been registered under
the 1940 Act, their performance may have been adversely
affected. After-tax performance returns are not included for
the Driehaus Micro Cap Fund, L.P. The predecessors were
not regulated investment companies and therefore did not
distribute current or accumulated earnings.
Russell Microcap Growth
Driehaus Micro Cap Growth Fund
800%
1
35%
30%
25%
20%
Outperformance
Outperformed 93% of its 5-year rolling periods
Average outperformance: 664 bps
Average underperformance: 93 bps
15%
10%
5%
Underperformance
0%
-5%
-10%
-15%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Russell Microcap Growth Index Returns
Source: Driehaus Capital Management, eVestment Alliance As of March 31, 2015
Net of fee returns. Russell Microcap® Growth Index. Returns are calculated from monthly returns and shown for every quarter interval
since the fund’s inception. Data as of March 31, 2015.
2
The performance data shown above represents past performance and does not guarantee future results.
Current performance may be lower or higher than the performance data quoted. Please see the notes section for other
important information.
3
EXHIBIT 6: UP AND DOWN MARKET CAPTURE
150
Since Inception
Ten-Year
One-Year
Three-Year
Five-Year
Up Market Capture
125
100
75
50
50
75
100
125
Upside
Downside
One-Year
129
109
Three-Year
123
106
Five-Year
120
115
Ten-Year
132
107
Since Inception
134
105
150
Down Market Capture
Source: Driehaus Capital Management
Benchmark: Russell Microcap Growth Index As of March 31, 2015 Net of fee data.
EXHIBIT 7: PEER RANKINGS
eVestment Alliance US Micro Cap Growth Equity universe
Three-Year
Sharpe
Ratio
Information
Ratio
Annualized
Alpha
Three-Year
18
9
17
Five-Year
76
39
70
Ten-Year
24
24
21
Since Inception
18
15
11
Five-Year
0
Ten-Year
Since Inception
PERCENTILE
25
Median
75
100
Source: eVestment Alliance. Peer group: eVestment US Micro Cap Growth Equity. Data based on monthly returns of 18, 17, 11 and 9 investment portfolios for the three-, five-, ten-year and since
inception periods, respectively. Data as of March 31, 2015. Net of fee performance. Past performance is no guarantee of future results.
Finally, the fund’s performance must be
viewed on a risk-adjusted and peer-relative
basis. Within the context of risk, the fund
strives to take on risk only when we believe
the investment will provide adequate compensation for the risk taken. Across multiple
risk measures, such as volatility, active risk
and beta, the fund has provided positive
risk-adjusted returns that are competitive
within the micro cap growth equity universe.
Exhibit 7 provides peer rankings of the Driehaus Micro Cap Growth Fund within the
eVestment Alliance micro cap growth equity
universe for the three-, five-, ten-year and
since inception time periods. On a risk-adjusted basis, the Sharpe ratio, which measures return per unit of risk taken, is also
generally within the top quartile. Similar
rankings are shown for the fund’s information
ratio, which measures excess returns relative
to the amount of active risk taken, and its
annualized alpha, which takes the portfolio’s
beta (market exposure) into consideration.
4
Disclosures
Performance Disclosure
The performance data shown represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance data
quoted. Principal value and investment returns will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. The Fund will
charge a redemption fee of 2.00% on shares held less than 60 days.
Performance data represents the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions).
Average annual total return reflects annualized change.
Since fund performance is subject to change after the month-end, please call (800) 560-6111 or view our daily NAVs at www.driehaus.com for more current performance
information.
At times, a significant portion of the fund’s return may be attributable to investments in initial public offerings (IPOs) or concentrations in certain strong performing sectors, such as technology. Returns from IPOs or sector concentrations may not be repeated or consistently achieved in the future. In addition, participating in IPOs and other
investments during favorable market conditions may enhance the performance of a fund with a smaller asset base, and this fund may not experience similar performance
results as its assets grow. The securities of micro-cap companies may be more volatile in price, have wider spreads between their bid and ask prices, and have significantly
lower trading volumes than the securities of larger capitalization companies. As a result, the purchase and sale of more than a limited number of shares of the securities of
a smaller company may affect its market price. Growth stocks may involve special risks and their prices may be more volatile than the overall market. It is anticipated that
the fund will experience high rates of portfolio turnover, which may result in payment by the fund of above-average transaction costs. This is a nondiversified fund compared
to other funds, the fund may invest a greater percentage of assets in a particular issuer or a small number of issuers. As a consequence, the fund may be subject to greater
risks and larger losses than diversified funds. These and other risk considerations are discussed in the fund’s prospectus.
INDICES
The Russell Microcap® Growth Index measures the performance of those Russell Microcap® companies with higher price-to-book ratios and higher forecasted growth
values.
The Russell Microcap® Index is represented by the smallest 1,000 securities in the small cap Russell 2000® Index plus the next 1,000 securities.
The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index.
The Russell Indices are a trademark/service mark of the Frank Russell Company. Russell is a trademark of the Frank Russell® Company.
TERMS
Active share represents the share of portfolio holdings that differ from the benchmark index holdings. Alpha is the measure of performance on a risk-adjusted basis.
Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the
return of the benchmark index is a fund’s alpha. Beta is a measure of a portfolio’s volatility. A beta of 1.00 implies perfect historical correlation of movement with the
market. A higher beta manager will rise and fall more rapidly than the market, whereas a lower beta manager will rise and fall slower. Down Market Capture is measure of
the manager’s performance in down markets relative to the market itself. Information Ratio (IR) measures a portfolio manager’s ability to generate excess returns relative
to a benchmark, but also attempts to identify the consistency of the investor. This ratio will identify if a manager has beaten the benchmark by a lot in a few months or
a little every month. The higher the IR the more consistent a manager is and consistency is an ideal trait. Medium-term Momentum is measured by a stock’s cumulative
return over the last 250 trading days, excluding the last 20 trading days. R-Squared is a statistical measure that represents the percentage of a fund or security’s movements that can be explained by movements in a benchmark index. For fixed-income securities, the benchmark is the T-bill. For equities, the benchmark is the S&P 500.
Sharpe Ratio is calculated by finding the portfolio’s excess return and then dividing by the portfolio’s standard deviation. Standard Deviation is a measure of the average
deviations of a return series from its mean; often used as a measure of portfolio volatility. A large standard deviation implies that there have been large swings or volatility
in the manager’s return series. Tracking Error is a divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark. This is often
in the context of a hedge or mutual fund that did not work as effectively as intended, creating an unexpected profit or loss instead. Up Market Capture is a measure of the
manager’s performance in up markets relative to the market itself.
Please consider the investment objectives, risks, fees and expenses of the Fund carefully prior to investing. The prospectus and summary prospectus contain this and
other important information about the Fund. To obtain a copy of the prospectus and/or summary prospectus, please call us at (800) 560-6111 or visit www.driehaus.
com. Please read the prospectus carefully before investing.
Driehaus Securities LLC, Distributor
®
DRIEHAUS CAPITAL MANAGEMENT LLC
25 East Erie Street Chicago, IL 60611 (312) 587-3800 www.driehaus.com
5