The curated database of hedge funds that publish investor letters. Research by geography, strategy, and schools of thought.
| # | Fund | Strategy | Style | Geography | AUM | Latest Letter |
|---|---|---|---|---|---|---|
As of Oct 20, 2026
During the third quarter of 2026, the Driehaus Small/Mid Cap Growth strategy faced severe style headwinds, declining 16.80% net of fees compared to a 10.35% drop for the Russell 2500 Growth Index and a 2.3% gain for the resilient S&P 500 Index. Year-to-date, the strategy remains up 2.63% net of fees. Factor rotations triggered historic drawdowns in medium-term momentum and market sensitivity, prompting tactical shifts across sectors. The team significantly reduced industrials from an overweight to an underweight position, while rotating selectively into software, cybersecurity, financials, and healthcare, ending the period with a 4.1% cash position. The macroeconomic landscape was pressured by a sharp surge in Treasury yields, with both 10-year and 30-year yields topping 5% due to robust nominal GDP growth exceeding 6%, expanding fiscal budget deficits, and the unwind of the Japanese yen carry trade. Concurrently, investor sentiment deteriorated amid elevated geopolitical tensions and pre-election anxiety. Despite these macro headwinds and intense debate over AI capital expenditure returns, the manager views hyperscaler infrastructure spending as durable, underpinned by acute compute shortages and the exponential growth of enterprise and consumer AI agents. From an attribution standpoint, healthcare served as the sole positive contributor (+4.3%), buoyed by commercial drug launches and clinical milestones, with top holdings including Guardant Health (2.5%), Praxis Precision Medicines (2.2%), and Natera (2.1%). Detractors were led by industrials (-26.4%) and technology (-18.4%), where holdings suffered dramatic multiple compression despite upward earnings revisions. The manager actively pared hardware and semiconductor exposure to lean into agentic AI and cybersecurity software, arguing that small-cap growth valuations now sit at historically depressed levels while corporate earnings continue to hit record highs.
The strategy identifies high-growth small- and mid-cap companies exhibiting improving fundamentals, durable earnings growth, and strong operational tailwinds trading at attractive historical valuations.
We believe US economic growth and corporate earnings will remain strong as valuations have pulled back, and we are constructive on the market's near-term outlook. We continue to focus on companies with improving fundamentals, durable growth prospects, robust earnings and the potential to outperform as market breadth stabilizes.
Neutral / Balanced
Market Conviction
Growth Outlook
Risk Appetite
Capital Deployment
Forward Guidance
Language Signal
Perceived Risk
Opportunity Density
Time Horizon
Top Conviction Themes
Key Catalysts
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