Mid Cap Recovery Growth Commentary

December 31, 2009

The Driehaus Mid Cap Recovery Growth Composite (the “Strategy”) outperformed its benchmark, the Russell Midcap Growth Index (the “Index”), by 233 basis points for the quarter.

The performance of the Strategy was aided by stock selection in the Materials and Industrials sectors. Performance of the Strategy was constrained by holdings in the Consumer Discretionary and Health Care sectors. 

During the quarter, the Strategy reduced its weighting in the Energy and Consumer Staples sectors due to more attractive growth investment opportunities in other sectors.  As the quarter ended, the Strategy increased its commitment to holdings in the Information Technology and Materials sectors relative to the previous quarter. 

At quarter end, the Strategy was overweighted to the Materials and Consumer Discretionary sectors and underweighted to the Health Care and Information Technology sectors versus the Index.

The Strategy continues to emphasize recovery growth opportunities as we enter first quarter earnings reporting season. During the quarter, the Strategy identified many interesting themes including: technology companies levered to the growth in applications utilizing light emitting diodes (LED) technology including LED televisions; weight loss companies which saw reinvigorated growth via new distribution channels; an improvement in the U.S. advertising outlook causing many media stocks to rise from depressed levels; and materials companies levered to improved global growth (especially in China) driving appreciation in industrial metal price and related companies.

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 mid cap recovery 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 Midcap Growth Index measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values.  The performance data includes reinvested dividends. The performance data includes reinvested dividends. The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 30% of the total market capitalization of the Russell 1000 Index.