Baron SMID Cap ETF | Q3 2026

Summary

• The Baron SMID Cap ETF returned -2.87% (NAV) in the third quarter of 2026, outperforming the Russell 2500 Growth Index which returned -10.35%.
• Year-to-date performance through September 30, 2026, showed the Fund up 0.44% while the Benchmark gained 7.28%.
• Top contributors to the quarter's performance were Rubrik, Inc., Tempus AI, Inc., and Netskope, Inc.
• Top detractors for the quarter included Axon Enterprise, Inc., Forgent Power Solutions, Inc., and Mercury Systems, Inc.
• New holdings added during the quarter included Madison Air Solutions Corporation, Spotify Technology S.A., and Jersey Mike's Subs Inc.
• The Fund's software holdings rose nearly 28%, contributing 3.85% to the return, while the Benchmark software sector returned 3.8%.
• Health Care holdings increased approximately 16%, adding 2.68% to the Fund's return compared to a negative 0.67% contribution from the Benchmark.
• Consumer Discretionary detracted 1.18% from returns due to higher fuel prices and interest rates weighing on consumer spending.
• Industrials was the worst-performing sector, detracting 6.17% from performance, driven primarily by aerospace & defense weakness.
• The semiconductor sub-industry in the Benchmark fell 17.9% in the quarter, while semiconductor materials & equipment fell 23.4%.
• The Fund maintained an overweight position in software, including companies generating deterministic data, vertical software providers, and those combining physical products with software.
• Defense budget expectations remain positive regardless of congressional composition, with growth anticipated in missile defense, space, unmanned vehicles, and hypersonics.
• The aerospace aftermarket outlook remains healthy due to a backlog of over 18,000 aircraft on order books and the necessity of maintenance for existing aircraft.
• Rubrik, Inc. saw net new subscription annual recurring revenue reaccelerate to 35% year-over-year growth with expanded contribution margins.
• Tempus AI, Inc. acquired Personalis, Inc., a company specializing in minimal residual disease testing, to expand its oncology data portfolio.
• Netskope, Inc. reported 27% year-over-year ARR growth with revenue growth accelerating to 29% year-over-year.
• Axon Enterprise, Inc. shares declined due to investor concerns regarding free cash flow guidance weighting and convertible debt issuance.
• Forgent Power Solutions, Inc. reported bookings of $1.5 billion in the quarter, significantly exceeding its current revenue run-rate.
• Mercury Systems, Inc. holds exposure to key national defense programs including Patriot missile defense systems and electronic warfare systems.
• The top 10 holdings represented 30.4% of net assets at the end of the quarter.
• The total annual fund operating expense ratio as of April 30, 2026, was 0.75%.