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Baron Capital Group·

Baron First Principles ETF | Q3 2026

FIGSSHOPMORNTSLAH

Summary

  • The Baron First Principles ETF™ declined 3.99% (NAV) in the third quarter of 2026, underperforming the Russell 3000 Growth Index which gained 0.45%.
  • Top contributors to performance were FIGS, Inc., Shopify Inc., and Morningstar, Inc.
  • Top detractors were Space Exploration Technologies Corp., Tesla, Inc., and Hyatt Hotels Corporation.
  • At quarter end, the Fund held 56.2% of net assets in disruptive growth companies, 18.8% in financials, 13.5% in core growth investments, and 10.4% in real/irreplaceable assets.
  • The decline was driven by concerns regarding capital spending on AI chips, higher interest rates, inflation, and their impact on consumer spending.
  • Space Exploration Technologies Corp. and Tesla, Inc. saw share declines due to concerns about AI investment returns.
  • Consumer stocks including Birkenstock Holding plc, On Holding AG, Red Rock Resorts, Inc., and Hyatt Hotels Corporation declined due to concerns about higher interest rates and inflation.
  • Software companies such as Guidewire Software, Inc., Morningstar, Inc., and FactSet Research Systems Inc. showed strength despite AI concerns.
  • Guidewire Software reported churn rates below historical trough levels and subscription gross margin expansion of 600 bps.
  • FactSet Research Systems Inc. increased 17.8% as AI fears subsided and the company benefited from revenue enhancements and pricing uptakes.
  • FIGS, Inc. reported net revenue growth of 28.8% year-over-year and raised its full-year revenue growth outlook to approximately 20%.
  • Shopify Inc. reported gross merchandise volume rising 32% year-over-year to $116 billion and revenue increasing 34%.
  • Birkenstock Holding plc declined 24.7% despite fiscal third-quarter revenue rising 15% year-over-year in constant currency.
  • On Holding AG fell 16.4% due to an increased promotional environment, though its direct-to-consumer business grew by almost 35%.
  • Red Rock Resorts, Inc. decreased 23.5% as investors worried about higher interest rates, inflation, and oil prices slowing market growth.
  • The total annual fund operating expense ratio as of April 30, 2026, was 1.00%.
  • BAMCO, Inc. pays all expenses of the Fund except for portfolio transaction costs, interest, dividend expense, acquired fund fees, foreign tax reclaim fees, line of credit expenses, and extraordinary expenses.
  • The Fund views the portfolio as having a favorable risk/reward profile with strong recurring revenue growth, well-positioned balance sheets, and attractive valuations.
  • The Fund expects inflation to remain at or below its historical range of 3% to 4% annualized with interest rates approximating the rate of inflation.
  • High-growth disruptive investments represent 56% of net assets with potential revenue growth of 20% to 30%.
  • Financials businesses represent 19% of net assets and include data-driven providers of financial information with recurring revenue.
  • Core double-digit revenue growers represent 13% of net assets and tend to generate earnings growth while using excess cash for dividends, buybacks, and investment.
  • Real, irreplaceable assets represent 10% of net assets and trade at significant discounts to replacement cost.
  • The Russell 3000 Growth Index gained 0.45% for the quarter, 6.36% year-to-date, and 6.77% since inception on December 12, 2025.
  • The Russell 3000 Index gained 1.40% for the quarter, 12.42% year-to-date, and 12.49% since inception on December 12, 2025.