The portfolio construction process is inseparable from the risk management process and centers on a conviction-based daily optimization of the overall portfolio and the avoidance of unintended exposures.

Two Key Objectives:

   1. Optimize stock selection and weightings to generate Alpha relative to benchmark
   2. Avoid non-value added portfolio risk

When we sell:

1. to take profits (trims and outright sales of positions).
2. as a result of a negative change to the investment thesis (fundamental or technical).
3. for other risk management (aggregate) portfolio construction considerations; and  
4. to make room for a more attractive idea.

Portfolio Construction

• Highly liquid portfolio of a diversified basket of fixed-income securities
• Rapid allocation of capital
• Efficient risk management with limited leverage
• Bottom-up security selection factoring in “micro” risk considerations (liquidity, pricing, capacity, volatility) and  “macro” risk considerations (correlations, margin, concentration)
• Active short-side as a value add
• Protection against rising interest rates (Driehaus Active Income Fund and Driehaus Select Credit Fund)

Risk Management

The portfolio management team implements a variety of measures to manage the Funds’ volatility, limit the Funds’ drawdowns and mitigate operational risk.

Additional Controls

• The Funds target a volatility level, as opposed to a stated return objective
• Jun Leng, the Funds’ risk manager, works with the Portfolio Management Team but reports directly to the Assistant Director of Research
• Emphasis on liquid credits enables the Portfolio Management Team to adjust during market crises
• Independent oversight provided by the Driehaus Compliance Department
• Monthly portfolio snapshot provides shareholders with high level of transparency