JULY 2016 // TICKER: DRESX
Driehaus Emerging Markets Small Cap Growth Fund Commentary In this month’s commentary, we share a number of charts that are relevant to emerging market investors.
We continue to be of the view that emerging and frontier markets are underrepresented relative to the size of their respective economies (Exhibit 1). As these markets grow and evolve, we expect them to become bigger allocations for many investors, and for the relative size to grow in proportion to global equity markets.
Exhibit 1: Frontier markets a small piece of global equity market cap, relative to their GDP weighting MSCI indices’ construction, $bn as of May 2016
$3,907
Note: Free float market capitalisations shown. Source: MSCI, Bloomberg, Renaissance Capital
2015 global GDP split by MSCI index membership, as of April 2016
Note: Extended frontier covers all countries not in MSCI DM, EM and FM indices. Source: IMF, MSCI, Renaissance Capital
Page 1 of 17
While emerging market ETFs are dominated by large cap state-owned enterprises (SOEs), which have mostly generated lower return on equity (ROE) in recent years relative to private sector companies, a different story is found when analyzing the median company in emerging markets. As shown in the Dupont decomposition in Exhibit 2, courtesy of UBS, the median EM company generates a higher ROE than its developed market counterpart, while doing so with much higher profit margins, better asset turnover, and far less leverage. One reason SOEs have seen their ROEs come under pressure is that their primary mandate is largely to fulfill national service obligations, not increase shareholder value. China serves as an instructive example. In the first half of 2016, China SOEs were used to prop up an otherwise deteriorating economy by accelerating their rate of fixed asset investment (FAI), even while the private sector was posting slowing FAI growth (Exhibit 3). Unsurprisingly, this resulted in a further contraction of profitability out of the SOE industrial sector, while private sector industrial enterprises saw an increase in profits (Exhibit 4).
Exhibit 2: Snapshot of the median company in developed versus emerging markets DM: 35th-65th percentile 2013-2015 Average Net Margin
Asset Turnover
Leverage
ROE
8.6%
100.5%
138.6%
11.9%
EM: 35th-65th percentile 2013-2015 Average Net Margin
Asset Turnover
Leverage
ROE
11.8%
102.0%
109.3%
13.1%
Source: UBS
Exhibit 3: China using SOEs to fulfill national service
Source: CEIC, Credit Suisse, WTO-OEDCD
Exhibit 4: China industrial profit growth
Source: Wind, CEIC Data, CITIC Securities
Page 2 of 17
While China has stemmed the pressure on capital outflows thus far in 2016, there remains a desire to move money offshore, as shown in Exhibits 5 and 6. Exhibit 5 shows Chinese imports from Hong Kong, a likely product of manipulated trade invoices. Exhibit 6 shows Vancouver property prices, where the
National Bank of Canada estimates that Chinese buyers represented nearly a third of the value of 2015 property purchases, and Vancouverhousingblog.com estimates that the median multiple for housing prices relative to income is now 12.3x, higher than any US market at the peak of the bubble.
Exhibit 5: China imports from Hong Kong (USD terms, YoY % change) 242.6
Source: Bloomberg
Exhibit 6: Vancouver residential real estate sales Residential Average Sale Prices - January 1977 to April 2016
Source: Real Estate Board of Greater Vancouver NOTE: From 1977 - 1984 condominium averages were not separated into attached & apartment
Page 3 of 17
Exhibit 7: Increasing oil supply and slowing demand OECD inventories, oil & oil products (mmbbl)
Elsewhere in emerging markets, commodity prices have played a meaningful role in the year-to-date rebound in asset prices. At the least, tail risks related to an unwind of credit and commodities have been forestalled by a stabilization in the price of oil and metals. As a longer-term adjustment unfolds in the oil market, there are some creeping signs of near-term concern (Exhibit 7). While the longer-term supply/demand picture is gradually improving, it entails a race against technology. With the world moving toward more fuel-efficient vehicles, shared mobility and autonomous cars, and enhanced drilling technology, these factors will weigh heavily on the supply/demand outlook longer-term, with more than half of the world’s oil consumption coming from the transportation sector (Exhibit 8).
Gasoline demand growth
Diesel demand growth
Source: WB, IEA, BofA Merrill Lynch Global Commodity Research
Exhibit 8: Vehicles per capita (left) and world oil consumption by sector, 2011 (right)
Source: WB, IEA, BofA Merrill Lynch Global Commodity Research
Page 4 of 17
Supply disruptions have played a meaningful role in the relative performance of oil and copper year to date (Exhibit 9), with oil being hampered by fires in Canada, geopolitical strife in Nigeria, and an ongoing deterioration in the Venezuelan economy. Meanwhile, copper has seen delivery of new projects proceed in an abnormally smooth manner, with a level of supply disruption that has not been seen in the last 10 years.
Exhibit 9: Supply disruptions in oil and copper Disruptions responsible for average annual loss of >1 mn tons of copper supply, or about 6% of budgeted production Copper supply disruptions 2005-16 ytd
Source: Wood Mackenzie
Oil production disruptions are at multi-year highs, mmbbl per day 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16
0.0
Unplanned crude oil production outages Source: EIA
Page 5 of 17
The rise of populism in the developed world has been a growing theme in our discussions, as it has significant implications for countries and sectors in EM that have benefited from globalization over the past two decades. Underlying these trends is the significant amount of liquidity that has been injected by developed market central banks since the global financial crisis (Exhibit 10), enriching owners of financial
assets. With both stock and bond markets at all-time highs (Exhibit 11), while manufacturing jobs and wage share of GDP continue to decline (Exhibit 12), a growing discord has been sown between labor and capital, manifesting itself in political discourse and trade barriers, while carrying implications for the future direction of policy.
Exhibit 10: Global central bank liquidity rose to the highest level since 2013
Source: Citi Research. *EM number based on 3M change in foreign exchange reserves (FX-adjusted)
Exhibit 11: Equity and bond markets reaching record highs as wages as a share of GDP near record lows
*Equal-weighted return index of US equities (DJIA) and 10-year UST & AAA corporate bonds Source: BofA Merrill Lynch Global Investment Strategy, Federal Reserve, Global Financial Data
Page 6 of 17
Exhibit 12: Automation increasing, driving much of the loss of US manufacturing jobs
Source: BofA Merrill Lynch Global Investment Strategy, IFR Statistical Department
Several emerging market economies have been in an adjustment phase for the past several years as a result of an extended credit cycle that was then followed by a downturn in global growth. While developed economies engaged in multiple rounds of monetary stimulus, emerging markets were largely unable to do so without jeopardizing their currencies. Brazil epitomizes the hard adjustment faced by numerous emerging markets (Exhibit 13). As credit growth, industrial production, and retail sales decelerated over the course of 2011-2015, Brazilian fiscal policy largely took on a populist bent, attempting to soothe the pain of the adjustment, rather than allow it to unfold through market forces. This led to sticky inflation and created an environment of rising interest rates. Rising unemployment and the trade balance moving into surplus were two indicators that the adjustment process was finally unfolding. With early glimmers of more orthodox policy, there is the potential for a massive improvement in the “second derivative” of growth rates in Brazil, and ultimately for interest rates to potentially come down materially. When contrasted with the developed world, whose equity markets are arguably richly valued (certainly relative to EM) and whose policies are moving toward populism and protectionism, it is intriguing to see cheaply valued emerging markets such as Brazil moving toward more orthodox policy.
Page 7 of 17
Exhibit 13: Brazil is emblematic of the EM economic adjustment phase
Source: Bloomberg
Page 8 of 17
Performance Review and Portfolio Positioning The Driehaus Emerging Markets Small Cap Growth Fund advanced 3.90% in July, compared to the MSCI Emerging Markets Small Cap Index gain of 4.35%, and the MSCI Emerging Markets Index return of 5.09%.1
Exhibit 14: The Philippines should benefit from strong growth in its working age population
At the sector level, the most significant contributors to returns were consumer discretionary and health care. Energy and utilities detracted the most value. At the country level, South Korea, India and China added value for the month. Indonesia, Argentina and Turkey were notable detractors from returns. From a positioning perspective, the fund ended the month overweight the consumer discretionary and industrial sectors as well as Thailand, the Philippines, India and Argentina. The fund was underweight the technology and materials sectors as well as South Korea, China, Hong Kong and South Africa. The Philippines remains among our favorite macro stories within emerging markets, with supportive demographics featuring a young and growing population that is likely to increasingly urbanize in the coming years (Exhibit 14). In turn, this will require significant infrastructure spending.
Source: United Nations
With a low system-wide loan-to-deposit ratio of 67%, and public-debt-to-GDP of 47%, the country is in good shape to fund this growth. The Philippines is an overweight position within the portfolio, with a heavy focus on banks, property, and infrastructure investments (Exhibit 15).
Exhibit 15: Required infrastructure spending by country through 2030
Source: CEIC, HSBC 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 1
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, while cumulative total return reflects aggregate change. Since Fund performance is subject to change after the month-end, please call (800) 560-6111 or visit www.driehaus.com for more current performance information. Sources: Driehaus Capital Management LLC, Factset, Reuters and MSCI Indices
Page 9 of 17
While Turkey is grabbing an increasing amount of headlines due to geopolitical risk, most notably from the recent failed coup attempt, there has been an ongoing deterioration on the credit front that has made us cautious on the market. In fact, our biggest hedge position year to date has been in Turkish CDS.
Exhibit 16: Turkey’s credit profile becoming increasingly risky
The Turkish private sector levered up significantly over the past 10 years and the country’s private sector debt/GDP is now almost twice that of the median EM economy (Exhibit 16). Turkey’s external debt represents nearly 60% of GDP, and 40% of it must be rolled over within a year. With foreign investors growing more wary of the political environment and the debt profile, it will become increasingly difficult to meet these funding requirements. Until next month, Source: BIS
Chad Cleaver, Lead Portfolio Manager Driehaus Emerging Markets Small Cap Growth Fund
Disclosures This material is not intended to be relied upon as a forecast or research. The opinions expressed are those of Driehaus Capital Management LLC (“Driehaus”) as of August 10, 2016 and are subject to change at any time due to changes in market or economic conditions. The commentary has not been updated since August 10, 2016 and may not reflect recent market activity. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by Driehaus to be reliable and are not necessarily all inclusive. Driehaus does not guarantee the accuracy or completeness of this information. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.
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 (877) 779-0079. Please read the prospectus and summary prospectus carefully before investing. Driehaus Securities LLC, Distributor
Page 10 of 17
JULY 31, 2016 // DRIEHAUS EMERGING MARKETS SMALL CAP GROWTH FUND
DRESX Performance Review Month-end Performance as of 7/31/16 Average Annual Total Return
Fund/Index
MTD
YTD
1 Year
3 Year
5 Year
Since Inception1
Driehaus Emerging Markets Small Cap Growth Fund2
3.90%
1.18%
-11.63%
0.28%
2.00%
12.79%
MSCI Emerging Markets Small Cap Index
4.35%
5.88%
-1.09%
1.50%
-1.54%
14.39%
MSCI Emerging Markets Index
5.09%
12.02%
-0.38%
0.07%
-2.41%
9.81%
3
4
Calendar Quarter-end Performance as of 6/30/16 Average Annual Total Return
Fund/Index
QTR
YTD
1 Year
3 Year
5 Year
Since Inception1
Driehaus Emerging Markets Small Cap Growth Fund2
2.21%
-2.61%
-18.55%
MSCI Emerging Markets Small Cap Index3
0.47%
1.47%
-12.50%
-1.26%
1.55%
12.38%
0.28%
-1.99%
13.92%
MSCI Emerging Markets Index4
0.80%
6.60%
-11.71%
-1.21%
-3.44%
9.21%
Annual Fund Operating Expenses5 Management Fee
1.50%
Other Expenses
0.19%
Total Annual Fund Operating Expenses
1.69%
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. 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, while cumulative total return reflects aggregate change. Contractual fee waivers were in effect from inception to 8/21/2014. Without such fee waivers, performance numbers would have been reduced. Since Fund performance is subject to change after the month-end, please call (800) 560-6111 or visit www.driehaus.com for more current performance information. Inception Date: 12/1/2008. “Since Inception” is calculated to include performance from the Fund’s predecessor limited partnership. 2 The average annual total returns of the Driehaus Emerging Markets Small Cap Growth Fund include the performance of the Fund’s predecessor limited partnership, which is calculated from December 1, 2008 before the Fund commenced operations and succeeded to the assets of its predecessor on August 22, 2011. The predecessor limited partnership was not registered under the Investment Company Act of 1940, as amended (“1940 Act”) and thus was not subject to certain investment and operational restrictions that are imposed by the 1940 Act. If the predecessor had been registered under the 1940 Act, its performance may have been adversely affected. The Fund’s predecessor performance has been restated to reflect estimated expenses of the Fund. After-tax performance returns are not included for the predecessor limited partnership. The predecessor was not a regulated investment company and therefore did not distribute current or accumulated earnings. 3The Morgan Stanley Capital International Emerging Markets Small Cap Index (MSCI Emerging Markets Small Cap Index) is a market capitalization-weighted index designed to measure equity market performance of small cap stocks in 22 global emerging markets. 4The Morgan Stanley Capital International Emerging Markets Index (MSCI Emerging Markets Index) is a market capitalization-weighted index designed to measure equity market performance in 25 global emerging markets. 5Represents the Annual Fund Operating Expenses as disclosed in the current prospectus dated April 30, 2016. 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. 1
The Fund invests in foreign securities, including small and mid cap stocks, which may be subject to greater volatility than other investments. During certain periods, the Fund has benefited from unusually strong market conditions. At times, a significant portion of a 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 the Fund may not experience similar performance results as its assets grow. Investments in overseas markets can pose more risks than U.S. investments, and the Fund’s share prices are expected to be more volatile than that of a U.S.-only fund. In addition, the Fund’s returns will fluctuate with changes in stock market conditions, currency values, interest rates, foreign government regulations, and economic and political conditions in countries in which the Fund invests. These risks are generally greater when investing in emerging markets. These and other risk considerations are discussed in the Fund’s prospectus. 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. Sources: Morgan Stanley Capital International Inc., eVestment Alliance, LLC, SS&C Inc. Copyright MSCI 2016. All Rights Reserved. Without prior written permission of MSCI, this information and any other MSCI intellectual property may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used to create any financial instruments or products or any indices. This information is provided on an “as is” basis, and the user of this information assumes the entire risk of any use made of this information. Neither MSCI, each of its affiliates nor any third party involved in or related to the computing, compiling or creating of any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages relating to any use of this information. Driehaus Securities LLC, Distributor
Page 11 of 17
DRESX Portfolio Characteristics Portfolio Characteristics
Portfolio Snapshot
Fund
Benchmark
Number of Equity Holdings
147
1,906
excluding cash
Assets Under Management (AUM)
$415,776,015
Long Exposure
$486,006,833
$447,541,197
Active Share (3-year avg.)
96.46
n/a
Short Exposure
($140,394,811)
($140,394,811)
Est. 3-5 Year EPS Growth
19.3%
13.8%
$345,612,022
$307,146,385
Weighted Avg. Market Cap ($M)
$2,628
$1,069
83.12%
73.87%
Median Market Cap ($M)
$1,803
$574
$626,401,644
$587,936,008
< $5 billion
87.3%
100.0%
1.51x
1.41x
> $5 billion
12.8%
0.0%
Net Exposure/AUM Gross Exposure Gross Exposure/AUM
Mkt. Cap Breakout
Net Exposure
1
Risk & Return Characteristics (Trailing 5-years) Fund
MSCI EM Small Cap
Fund
MSCI Emerging Markets
Annualized Return
2.00
-1.54
2.00
-2.41
Standard Deviation
14.11
18.36
14.11
18.98
Upside Capture
61.53
100.00
58.29
100.00
Downside Capture
60.46
100.00
56.96
100.00
Beta
0.66
1.00
0.58
1.00
Alpha
2.93
n/a
3.42
n/a
Sharpe Ratio
0.14
-0.09
0.14
-0.13
R-squared
0.73
1.00
0.61
1.00
Tracking Error
9.70
0.00
11.90
0.00
Information Ratio
0.37
n/a
0.37
n/a
# Negative Monthly Returns
23
27
23
31
# Positive Monthly Returns
37
33
37
29
5%
Annualized Return
3%
Driehaus Emerging Markets Small Cap Growth Fund
1%
-1%
MSCI EM Small Cap MSCI Emerging Markets
-3%
-5% 12%
16%
14%
18%
20%
Annualized Standard Deviation
FUND’S EXCESS RETURNS2 (%pts) vs. MSCI EM Small Cap Index — Months with Negative Index Returns (Since Inception on 12/1/08) 8%
6.31
6% 4% 0.47
0.12
2.74 2.78 2.52 1.43 1.09
0.81
2.87
4.05
3.81
2.44
1.60
0.36 -0.14
-2%
3.01
3.46
2.80 1.54
1.54
1.05
0.47 0.83
-0.44
Outperformed in 32 of 37 down months
-1.91
-4%
-3.34
Source: FactSet Research Systems LLC and Driehaus Capital Management. Data calculated with monthly returns. Data as of 6/30/16. 1Data is calculated monthly. 2This chart depicts Driehaus Emerging Markets Small Cap Growth Fund’s (DRESX) outperformance (or underperformance) versus the MSCI Emerging Markets Small Cap Index in all instances where the MSCI Emerging Markets Small Cap Index had a negative monthly return since DRESX’s inception on 12/1/2008. Net of fee performance is used. MSCI Emerging Markets Small Cap Index. Data as of 7/31/16. Performance for the Driehaus Emerging Markets Small Cap Growth Fund (DRESX) is used. The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment
May-16
Jan-16
Feb-16
Nov-15
Jul-15
Aug-15
Jun-15
Dec-14
Mar-15
Oct-14
Nov-14
Jan-14
Sep-14
Nov-13
Dec-13
Jun-13
Jul-12
Oct-12
Apr-12
May-12
Dec-11
Mar-12
Sep-11
Nov-11
Jun-11
Aug-11
May-11
Jan-11
Feb-11
Nov-10
May-10
Jun-09
Jan-10
Jan-09
Feb-09
-4.74
Aug-13
0%
3.29
5.50
3.46 3.94
May-13
2%
5.84
4.65
3.63 4.04 4.02
will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling (800) 560-6111 or visiting our website at www.driehaus.com. Fund returns shown include the reinvestment of all dividends and capital gains. Contractual fee waivers were in effect from inception to 8/21/2014. Without such fee waivers, performance numbers would have been reduced. The total annual fund operating expense for DRESX is 1.69% as disclosed in the 4/30/16 prospectus. Please see notes at end of presentation for more information on indices used. A definition of key terms can be found on page 17.
Page 12 of 17
JULY 31, 2016 // DRIEHAUS EMERGING MARKETS SMALL CAP GROWTH FUND
Country Exposures1 Equity Weights
Long Hedges3
Short Hedges3
Net Exposure
Benchmark Weight
Net Exposure Over-/Underweight
Argentina
1.94
--
--
1.94
--
1.94
Brazil
5.28
--
-1.32
3.96
3.53
0.43
Chile
--
--
--
--
1.03
-1.03
China
13.93
--
-3.34
10.59
21.55
-10.96
--
--
--
--
0.13
-0.13
Czech Republic
1.00
--
--
1.00
0.04
0.96
Egypt
2.08
--
--
2.08
0.58
1.50
Greece
--
--
--
--
0.60
-0.60
Hungary
--
--
--
--
0.12
-0.12
India
14.88
--
-3.63
11.25
11.82
-0.57
Indonesia
3.91
--
--
3.91
2.48
1.43
Kenya
0.78
--
--
0.78
--
0.78
Malaysia
0.74
--
--
0.74
3.25
-2.51
Mexico
4.13
--
--
4.13
3.15
0.98
Pakistan
1.78
--
--
1.78
--
1.78
Panama
--
--
--
--
0.04
-0.04
5.24
--
--
5.24
1.17
4.07
Poland
--
--
--
--
0.87
-0.87
Qatar
--
--
--
--
0.47
-0.47
Russia
0.95
--
--
0.95
0.72
0.23
South Africa
2.34
--
--
2.34
5.36
-3.02
South Korea
7.32
--
--
7.32
19.94
-12.62
Taiwan
14.56
--
--
14.56
16.49
-1.92
Thailand
8.86
--
--
8.86
3.92
4.93
Turkey
2.09
--
-4.14
-2.05
1.18
-3.24
--
--
--
--
0.87
-0.87
3.08
--
--
3.08
0.68
2.40
EM Index Equity Hedges
--
--
-6.33
-6.33
--
-6.33
US Index Equity Hedges
--
--
--
--
--
--
Other - Sector/Currency/Volatility Hedges
--
12.74
-15.00
-2.26
--
-2.26
94.90
12.74
-33.77
73.87
100.00
-26.13
Colombia
Philippines
United Arab Emirates Other Countries2
Total Exposure (ex-cash)
Data is on a trade date basis and has not been reconciled. Exposures reflect hedged positions. Other represents companies with significant emerging markets related exposures that are not
1 2
domiciled within an emerging market. 3Delta-adjusted and underlying exposures include ETFs that may be domiciled in the U.S. but provide specific sector, country or market related exposure.
Page 13 of 17
JULY 31, 2016 // DRIEHAUS EMERGING MARKETS SMALL CAP GROWTH FUND
Sector Exposures1 Long Hedges2
Short Hedges2
Net Exposure
Benchmark Weight
Net Exposure Over-/Underweight
22.78
--
--
22.78
16.58
6.20
Consumer Staples
3.88
--
--
3.88
6.81
-2.93
Energy
2.74
0.89
-2.64
0.99
1.70
-0.71
Financials
20.21
--
--
20.21
17.76
2.46
Health Care
6.75
--
--
6.75
9.50
-2.75
Industrials
18.80
--
--
18.80
15.23
3.57
Information Technology
9.49
--
--
9.49
17.49
-8.00
Materials
4.96
--
--
4.96
10.74
-5.78
Telecom. Services
0.78
--
--
0.78
0.90
-0.11
Utilities
4.49
--
--
4.49
3.30
1.19
--
11.86
-31.13
-19.27
12.74
-33.77
73.87
Equity Weights Consumer Discretionary
Other - Sector/Currency/Volatility Hedges Total Exposure (ex-cash)
94.90
-100.00
-19.27 -26.13
Portfolio Weights (Net Expsoure) Frontier Market: 4.51%
Emerging Market: 66.29%
Sector Attribution 6/30/16 to 7/31/16
(US Dollar Denominated)
Driehaus Emerging Markets Small Cap Growth Fund (%)
Attribution Analysis (%)
Port Contrib To Return
Bench Avg.Weight
Bench Contrib To Return
Total Effect4
Consumer Discretionary
23.09
1.80
16.54
0.66
0.84
Consumer Staples
3.78
-0.01
6.96
0.12
0.02
Energy
2.86
-0.20
1.64
0.08
-0.33
Financials
19.58
1.57
17.60
1.02
0.45
Health Care
6.87
0.52
9.63
0.18
0.47
Industrials
17.39
1.03
15.43
0.49
0.46
Information Technology
9.84
0.72
17.42
0.87
0.19
Materials
4.87
0.50
10.55
0.76
-0.02
Telecom. Services
0.74
0.05
0.91
0.00
0.06
Utilities
4.96
0.12
3.30
0.16
-0.11
Cash
9.46
0.00
--
--
-0.41
Other5
-3.45
-2.05
--
--
-1.90
Total
100.00
4.05
100.00
4.35
-0.30
Data is on a trade date basis and has not been reconciled. Exposures reflect hedged positions. Delta-adjusted and underlying exposures include ETFs that may be domiciled in the U.S. but provide specific sector, country or market related exposure. 3 The Morgan Stanley Capital International Emerging Markets Small Cap Index (MSCI Emerg2
MSCI Emerging Markets Small Cap Index3 (%)
Port Avg. Weight
MSCI/GICS Sector
1
Other Countries: 3.08%
ing Markets Small Cap Index) is a market capitalization-weighted index designed to measure equity market performance of small cap stocks in 22 global emerging markets. 4 Total Effect - The Total Effect for each MSCI/GICS Sector is equal to the sum of the individual Attribution Effects for that MSCI/GICS Sector. 5Includes derivative securities and fees.
Page 14 of 17
JULY 31, 2016 // DRIEHAUS EMERGING MARKETS SMALL CAP GROWTH FUND
Country Attribution 6/30/16 to 7/31/16
(US Dollar Denominated)
Driehaus Emerging Markets Small Cap Growth Fund (%) Port Avg. Weight
Port Contrib To Return
Argentina
2.29
-0.03
Bermuda
--
--
Brazil
5.54
0.78
Canada
1.61
0.14
--
--
Country of Domicile
Cayman Islands
MSCI Emerging Markets Small Cap Index1 (%)
Attribution Analysis (%)
Bench Contrib To Return
Total Effect2
--
--
-0.13
0.12
0.00
0.01
3.33
0.43
0.24
--
--
0.07
0.08
0.00
0.00
Bench Avg.Weight
Chile
--
--
1.01
0.10
-0.05
China
7.72
0.24
12.10
0.05
0.38
Colombia
--
--
0.14
-0.01
0.01
Czech Republic
0.69
0.02
0.04
0.00
-0.00
Egypt
1.94
0.30
0.56
0.08
0.17
Greece Hong Kong Hungary
--
--
0.59
0.03
-0.01
6.95
0.50
10.02
0.14
0.49
--
--
0.12
0.00
0.00
India
14.06
1.26
11.65
0.70
0.46
Indonesia
3.64
0.05
2.44
0.16
-0.17
Kenya
0.74
0.05
--
--
0.02
Luxembourg
0.14
-0.00
0.04
0.00
-0.00
Malaysia
0.87
-0.05
3.33
0.05
0.02
Mexico
4.31
0.03
3.21
0.02
-0.05
Pakistan
1.97
0.08
--
--
-0.00
Panama
--
--
0.04
-0.00
0.00
4.85
0.38
1.20
0.00
0.22
Poland
--
--
0.83
0.10
-0.06
Qatar
--
--
0.47
0.02
-0.00
Russia
1.00
-0.02
0.75
0.01
-0.04
Philippines
Singapore
--
--
0.09
-0.00
0.01
South Africa
2.26
0.35
5.11
0.58
-0.11
South Korea
7.38
0.65
19.91
0.72
0.46
Spain
--
--
0.11
-0.01
0.01
Taiwan
14.34
0.98
16.49
0.90
0.18
Thailand
8.17
0.60
3.86
0.26
0.16
Turkey
2.14
-0.13
1.23
-0.05
-0.12
United Arab Emirates
--
--
0.88
0.03
0.01
United Kingdom
0.86
-0.10
--
--
-0.14
United States
-3.24
-1.29
0.26
0.01
-1.15
Cash
9.46
0.00
--
--
-0.41
Other3
0.30
-0.75
--
--
-0.77
Total
100.00
4.05
100.00
4.35
-0.30
Sources: FactSet Research Systems Inc. and Driehaus Capital Management. Per FactSet Research Systems Inc., the Attribution Report provides an in-depth analysis of relative performance. With this report one can research whether a portfolio outperformed a benchmark, and how each group contributed to performance. The performance data shown above is estimated and represents past performance and does not guarantee future results.
Current performance may be lower or higher than the performance data quoted. The information presented is intended for informational purposes only. Attribution data is on a trade date basis and is estimated and unreconciled. 1A definition of this index can be found on page 11. 2 A definition of this term can be found on page 14. 3Includes derivative securities and fees.
Page 15 of 17
JULY 31, 2016 // DRIEHAUS EMERGING MARKETS SMALL CAP GROWTH FUND
Top 5 Holdings1 as of 6/30/16 Company
Country
Description
Lojas Renner S.A.
Brazil
Brazil-based company primarily engaged in the retailing of apparel and fashion accessories
2.9%
Bharat Financial Inclusion Limited
India
Microfinance company
2.6%
Petronet Lng Limited
India
Energy company, which is engaged in the import and sale of regasified liquefied natural gas
2.2%
Ennoconn Corp.
Taiwan
Taiwan-based company mainly engaged in the manufacture and sale of embedded systems and boards
1.9%
China Lodging Group Ltd. Sponsored ADR
China
Multi-brand hotel group
1.6%
Holdings subject to change.
1
Sources: FactSet Research Systems Inc. and Driehaus Capital Management LLC. The information presented is intended for informational purposes only. Attribution data is on a trade date basis and is estimated and unreconciled.
Page 16 of 17
% of Fund
JULY 31, 2016 // DRIEHAUS EMERGING MARKETS SMALL CAP GROWTH FUND
Notes The Fund invests in foreign securities, including small and mid cap stocks, which may be subject to greater volatility than other investments. During certain periods, the Fund has benefited from unusually strong market conditions. At times, a significant portion of a 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 the Fund may not experience similar performance results as its assets grow. Investments in overseas markets can pose more risks than U.S. investments, and the Fund’s share prices are expected to be more volatile than that of a U.S.-only fund. In addition, the Fund’s returns will fluctuate with changes in stock market conditions, currency values, interest rates, foreign government regulations, and economic and political conditions in countries in which the Fund invests. These risks are generally greater when investing in emerging markets. These and other risk considerations are discussed in the Fund’s prospectus. 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. TERMS: 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. 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. 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. Sharpe ratio is calculated by finding the portfolio’s excess return and then dividing by the portfolio’s standard deviation. Downside/Upside capture is a measure of performance in up markets (upside) and down markets (downside) relative to the Index. Active share represents the share of portfolio holdings that differ from the benchmark index holdings. Average drawdown is the arithmetic average of declines in value during a given period of time. Downside risk is a measure of the average deviations of a negative return series. A large downside risk implies that there have been large swings or volatility in the manager’s return series. Tracking error measures of the amount of active risk that is being taken by a manager. Tracking error accounts for the deviation away from the benchmark and does not indicate in which direction it occurred, either positive or negative. Information ratio is a measure of the value added per unit of active risk by a manager over the index. A positive ratio indicates “efficient” use of risk by the manager. R-Squared is a statistical measure that represents the percentage of a fund’s movements that can be explained by movements in a benchmark index. At-the-money is a term used to describe a situation where an option’s strike price is identical to the price of the underlying security. Out-of-the-money is a term used to describe an option that has no intrinsic value, such as when a call option has a strike price that is higher than the market price of the underlying asset, or a put option with a strike price that is lower than the market price of the underlying asset. Moneyness is a description of a derivative relating its strike price to the price of its underlying asset. It describes the intrinsic value of an option in its current state. Skew is the difference in implied volatility between out-of-the-money, at-the-money and in-the-money options. Volatility skew, which is affected by sentiment and the supply/demand relationship, provides information on whether fund managers prefer to write calls or puts.
@DriehausCapital Page 17 of 17
