Large Cap Growth Commentary

December 31, 2009

The Driehaus Large Cap Growth Composite (the “Strategy”) underperformed its benchmark, the Russell 1000 Growth Index (the “Index”), by 339 basis points for the quarter.

At quarter end, the Strategy’s two largest underweightings versus the Benchmark were in the Consumer Staples and Industrials sectors. The Strategy’s underweight allocation in both the Consumer Staples and Industrials sectors contributed to return; however, stock selection in both sectors detracted from Strategy performance.

As a result of accelerating sales and increased earnings growth rates, the Strategy’s two largest overweightings versus the Benchmark were in the Consumer Discretionary and Materials sectors. A combination of the Strategy’s overweight allocation and stock selection in both the Consumer Discretionary and Materials sectors detracted from return.

Key detractors from return over the quarter included holdings in the Consumer Discretionary, Health Care and Materials sectors.  Contributing to return over the quarter were holdings in the Energy and Telecommunication Services sectors.

Driehaus Capital Management LLC’s primary focus continues to be analyzing stocks from a bottom-up approach and investing in what we view are the companies with the strongest, most sustainable earnings and revenue growth. Recently there has been a rally in the oversold condition of the U.S. Dollar, as the U.S Federal Reserve Board has reaffirmed their stance to begin removing shadow stimulus. The rally in the U.S. Dollar also seems to have occurred in response to some recent encouraging economic data in the U.S. relative to the European Union. The improved conditions should help base metals and other commodities (better economic growth), even though commodities are priced in U.S. Dollars. Gold, however, seems to be a slightly different story (also is priced in U.S. dollars), where price is based off investment demand and the risk of loss in confidence in governments and their currencies.  Government balance sheets remain high and at risk, but if global economic conditions continue to improve, albeit at a slow pace, it can be argued that Information Technology holdings will continue to benefit and select commodities may become more attractive than precious metals (e.g., gold).  

NOTES

Sources: Driehaus Capital Management LLC, FactSet, Morgan Stanley Capital International and Standard & Poor’s Global Industry Classification Standard, Russell Indices, and the Wall Street Journal.

The performance numbers represent a composite of large cap growth accounts managed by Driehaus Capital Management LLC.  These numbers are estimated for the period as all underlying accounts have not yet been reconciled. All rates of return include reinvested dividends and other earnings and are net of fees and brokerage commissions. 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.

The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index.