Equity Composite Presentation: Small-Cap

Daruma Capital Management, LLC (“Daruma”) is an independent investment adviser registered under the Investment Advisers Act of 1940 as amended. In April 2012 Daruma succeeded to the business of Daruma Asset Management, Inc., which was established in April 1995 by Mariko O. Gordon, CFA, Founder, CEO and CIO, and until March 1998 was known as CastleRock Capital Management, Inc. Daruma is located in New York City and provides investment management services to public and corporate pension funds, endowments, foundations and other nonprofit organizations, family offices, and individuals.

The investment strategy of Daruma’s Small-Cap Equity composite emphasizes long-term growth by buying companies at a value price with accelerating earnings. Daruma manages a concentrated portfolio of typically no less than 25 and no more than 35 stocks, and primarily invests in companies with a market capitalization of up to $2 billion at purchase. The benchmark that best reflects the composite’s investment style is the Russell 2000 Index (the “Index”). The Index represents the bottom two-thirds of the largest 3000 publicly traded companies domiciled in the United States. It is rebalanced annually in June. The Index performance is provided directly to Daruma by the Russell Investment Group each month and reflects the reinvestment of dividends, but does not reflect fees, brokerage commissions or other investment expenses.

The gross performance results of Daruma’s Small-Cap Equity composite are presented after all trading commissions but before management and custodial fees. Net-of-fees composite results are calculated by subtracting the management fees paid (and performance based fees paid, if applicable), but do not include custodial fees paid by clients. A client’s return will be reduced by all expenses incurred in managing the account. The fee schedule for separately managed accounts is 1.00% per annum of the assets under management, payable quarterly in arrears. Fees may be negotiable for certain larger or strategic investors. The fee schedule for the commingled fund is typically 1% per annum of the assets under management, payable monthly in advance. Alternatively, investors in the commingled fund can pay a reduced fixed fee of 75 basis points of assets under management, payable monthly in advance, plus 10% of the excess return over the Index, payable annually.

Past performance does not guarantee future results, and there is the possibility of loss of value. Changes in markets, interest and exchange rates, economic and/or political conditions, as well as other factors, may influence future performance. Investment results are time-weighted performance calculations representing monthly total return. In other words, the performance period is monthly. All realized and unrealized gains and losses as well as all dividends and interest from investments and cash balances are included. Investment transactions are accounted for on a trade date basis. Composite valuations and returns are calculated and stated in U.S. dollars. The dispersion of annual returns is measured by the standard deviation across asset weighted portfolio returns represented within the composite for the full year. In 2010, if a significant cash flow, equal to an amount greater than 10% of the portfolio, occurred and the cash was retained for a period greater than 30 days, Daruma considered the cash nondiscretionary and transferred the cash to a separate portfolio, which was not included in the composite. Additional information regarding Daruma’s policies for calculating and reporting returns, valuing portfolios, calculating performance, and preparing compliant presentations is available upon request.

On 08/01/10, Daruma implemented a $400,000 minimum account size for an account to be included in this composite. Prior to 08/01/10, there was no minimum account size requirement. All of the firm’s discretionary, fee paying clients using its Small-Cap Equity strategy are included in the composite, except for any new accounts that have not yet entered the composite. Daruma’s Small-Cap Equity composite was created in July 1995. A list of composite descriptions is available upon request.

Small-Cap Equity Composite

Since Inception through December 31, 2016

Period Total Gross Return
(%)
Total Net Return
(%)
Russell 2000 Return
(%)
Number of Portfolios Dispersion
(%)
Small-Cap Composite 3‑Year Annualized Standard Deviation Russell 2000 3‑Year Annualized Standard Deviation Total Composite Assets
($ millions)
Total Firm Assets
($ millions)
2016 14.15 13.45 21.31 16 0.20 17.3 15.8 1,702 1,799
2015 -5.17 -5.78 -4.41 21 0.27 15.2 14.0 1,661 1,782
2014 -1.27 -1.94 4.89 27 0.04 13.6 13.1 2,225 2,442
2013 44.08 43.09 38.82 36 0.39 18.8 16.5 1,975 2,556
2012 19.89 19.12 16.35 34 0.15 21.6 20.2 1,343 1,752
2011 -10.32 -10.96 -4.18 40 0.21 25.2 25.0 1,265 1,626
2010 32.12 31.33 26.86 61 0.55 1,504 1,805
2009 43.93 43.04 27.17 53 0.87 1,206 1,340
2008 -36.63 -37.06 -33.79 53 0.69 738 848
2007 13.06 12.35 -1.57 54 0.38 1,185 1,185
2006 13.55 12.81 18.37 58 0.45 1,085 1,090
2005 10.93 10.17 4.55 53 0.40 985 993
2004 23.48 22.66 18.33 53 0.54 929 933
2003 36.74 35.84 47.25 64 1.35 902 902
2002 -21.83 -22.41 -20.48 68 0.77 660 673
2001 16.57 15.79 2.49 58 0.74 799 818
2000 19.26 18.55 -3.02 50 1.24 572 708
1999 4.22 3.62 21.26 32 0.53 293 388
1998 16.32 15.64 -2.55 13 0.49 109 221
1997 42.52 41.89 22.36 ≤ 5 N/A 20 57
1996 23.99 22.87 16.49 ≤ 5 N/A 8 30
1995* 12.23 12.04 6.31 ≤ 5 N/A 2 2

* Since Inception July 28, 1995 through December 31, 1995

Daruma Capital Management, LLC claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Daruma Capital Management, LLC has been independently verified for the period of July 28, 1995 to December 31, 2016. The verification report is available upon request.

Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.