The Driehaus Emerging Markets team focuses on investing in emerging markets securities of all capitalizations, through the Driehaus Emerging Markets Growth, Driehaus Emerging Markets Opportunities and Driehaus Emerging Markets Small Cap Equity strategies. The strategies provide investors with exposure to companies experiencing growth inflections in addition to positive earnings revisions and medium-term (price) momentum, two factors that are positively correlated to alpha generation. The team is led by portfolio managers Howard Schwab, Chad Cleaver and Richard Thies.
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The strategy seeks to outperform the MSCI Emerging Markets Index over full market cycles.
The strategy aims to outperform MSCI Emerging Markets Small Cap Index.
The strategy seeks to provide superior risk-adjusted returns and higher total return than the MSCI Emerging Markets Index over a full market cycle.
The team employs a growth-oriented investment philosophy focusing on identifying company-specific growth inflection points and exploiting associated marketplace inefficiencies. Our philosophy hinges on a belief that market expectations tend to be ‘anchored’ to historical information and that points of inflection therefore introduce dislocations between market expectations and fundamentals which generate significant alpha capture opportunities. The team combines fundamental, macro and behavioral analysis with a nimble/active investment approach to quickly identify inefficiencies and generate a portfolio which uniquely seeks to achieve superior aggregate growth rates as well as superior risk characteristics.
This month’s commentary examines recent macro drivers in emerging markets and updated thoughts on the strategy’s positioning.
We have written in the past about our belief that Chinese Government Bonds (CGBs) are an essential holding for the Driehaus Emerging Markets Opportunities Fund. When we initially made this argument a few years ago, it was met with some skepticism, but given the incredible inflows the market has seen of late, that view is becoming more widely appreciated. In short, the CGB market offers real yield, a rarity in major sovereigns currently, and exposure to a strong currency. Most importantly, it’s an effective hedge to other market risks.