Baron Focused Growth Fund | Q3 2026

Summary

• The Baron Focused Growth Fund Institutional Shares declined 2.34% in the third quarter of 2026, outperforming the Russell 2500 Growth Index which fell 10.35%.
• Shopify Inc., Gartner Inc., and FIGS Inc. were the largest contributors to the Fund's performance.
• Space Exploration Technologies Corp., Tesla Inc., and Birkenstock Holding plc were the largest detractors from performance.
• Concerns regarding increased capital spending on AI chips, higher interest rates, inflation, and their impact on consumer spending negatively affected shares of SpaceX, Tesla, Birkenstock, On Holding AG, Red Rock Resorts Inc., and Hyatt Hotels Corporation.
• Software companies including Guidewire Software Inc., Samsara Inc., and FactSet Research Systems Inc. posted strong quarterly stock performance due to strong fundamentals, high switching costs, and AI-driven innovation.
• The Fund increased its position in On Holding AG based on growth prospects, attractive valuation, a $1 billion buyback program, and significant stock purchases by co-CEOs.
• Annualized performance for the Fund Institutional Shares was 5.09% year-to-date, 18.06% for one year, 22.34% for three years, 11.17% for five years, 21.38% for ten years, 17.89% for 15 years, and 14.33% since conversion on June 30, 2008.
• The annual expense ratio for Institutional Shares was 1.05% as of April 30, 2026.
• The Fund has outperformed its Benchmark over 3-, 5-, and 10-year periods with annualized outperformance of 742, 771, and 1,079 basis points respectively.
• On Holding AG declined 16.5% due to an increased promotional environment hurting wholesale sales, though its direct-to-consumer business grew almost 35%.
• Red Rock Resorts Inc. decreased 23.5% amid investor concerns about interest rates, inflation, and oil prices, despite gaining market share through property renovations.
• Hyatt Hotels Corporation declined 18.2% due to concerns about oil prices, interest rates, and inflation, while maintaining mid-single-digit unit growth and accelerating revenue per available room.
• Guidewire Software Inc. increased 15.8% as churn rates fell below historical trough levels and subscription gross margins improved by 600 basis points.
• Samsara Inc. increased 17.5% driven by strong demand for sensor-based tools, though increased inventory to meet demand temporarily impacted cash flow.
• The Fund maintains a concentrated portfolio with strong balance sheets, low leverage levels, and a focus on companies with recurring revenue growth and attractive valuations.
• Management expects inflation to remain between 3% and 4% annualized with interest rates approximating the rate of inflation.
• Since inception on May 31, 1996, the Fund has increased 13.98% annually compared to an 8.34% annualized return for the Benchmark.