The information contained on this site is intended for institutional investors only, and is published strictly for informational purposes only without regard to the investment objective, financial situation or specific needs of any particular investor. The information is not intended for use by institutional investors in a jurisdiction where distribution or purchase is not authorized.
An institutional investor is one that falls within one or more of the following categories:
If you do not fall within at least one of the above categories you should not access the information contained in the site.
Baron Capital Management, Inc. makes reasonable efforts to ensure the material on the site is as accurate and timely as possible and that disruptions of service are minimal, Baron Capital Management, Inc. makes no warranty or guarantee concerning the availability of this site or the services or the accuracy of the information on it. In addition, the information contained on the site is in no way intended to constitute investment advice, an offer to sell, or a recommendation of any security or investment product. In fact, the products described herein may not be available to, or suitable for, all investors. You should consider, if appropriate, obtaining independent professional advice before making an investment decision. Please consider the charges, risks, expenses and investment objectives carefully before investing. Nothing on this site is intended to constitute legal or tax advice.
Please keep in mind that the opinions and views expressed through the content and commentaries published on the site are just that - opinions and views - and that they are published on the site for informational purposes only. In addition, views and opinions are based on the information available at the time and may not necessarily be shared by Baron Capital Management, Inc., or its employees, in general. As the investing environment changes, so could this information, and Baron Capital Management, Inc. has no responsibility to update it.
Past performance is not a guarantee of future performance. Investment results and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Investors should be aware of the additional risks associated with investments in non-diversification, undervalued or overlooked companies and investments in specific industries. Additional risks may include those associated with investing in foreign securities, emerging markets, and companies with relatively small market capitalizations.
By selecting “I Agree” below, you confirm that you are an institutional investor or consultant to an institutional investor.
Baron offers accredited non-U.S. investors and qualified tax-exempt U.S. investors a range of options for investing in the equity market. Our investment vehicles include SICAV funds, separate accounts, collective investment trusts, and Baron USA Partners Fund.
This website may not be suitable for everyone, and if you are at all unsure whether an investment product referenced on this website will meet your individual needs, please seek professional advice before proceeding further with such product. Nothing on this website is, or is intended to be, an offer, advice, or an invitation to buy or sell any investments, in any jurisdiction where, or to anyone whom it would be unlawful to do so. By clicking “I Agree” below you acknowledge that you have read and understood this important information. Information on this website is issued by Baron Capital, Inc.
If you are a non-U.S. investor or qualified tax-exempt U.S. investor interested in our non-U.S. investment products, please contact Stephen Millar, VP, Head of EMEA, Institutional Sales | +44(0)7769 958822 | firstname.lastname@example.org
By selecting “I Agree” below, you confirm that you are an accredited non-U.S. investor or a qualified tax-exempt U.S. investor.
The link you have selected is not available within the Institution user experience. You will be switched to view this website as a Financial Advisor.
When you wish to view strategies again, click an 'Institution' link within the 'View As' menu or 'Strategies' in the footer.
By selecting “I Agree” below, you confirm that you are aware that you are leaving baronfunds.com website.
The website expresses the viewpoints and opinions of third parties and not necessarily those of Baron Capital, Inc. Baron Capital does not guarantee its accuracy, completeness, or fairness.
Thank you for your email. We will respond as soon as possible.
as of 03/31/23
U.S. equities posted gains to start the year, but the path higher remained turbulent as investors grappled with tightening financial conditions and concerns of a recession. Stocks rose in January as moderating inflation and weakening economic indicators raised investor hopes that the current cycle of interest rate hikes might be ending. The rally was supported by easing supply chain constraints, falling energy prices, and the reopening of the Chinese economy from pandemic lockdowns. The rebound stalled in February as resilient economic data and persistently high inflation left investors concerned that the Federal Reserve would keep rates higher for longer. The sudden failures of Silicon Valley Bank and Signature Bank exacerbated the market sell-off in early March, but federal regulators quickly intervened to prevent contagion from spreading throughout the banking sector. The episode ignited a market rebound in late March given investor expectations that the banking turmoil would cause the Fed to potentially pivot on rate hikes and resume its balance sheet expansion.
Baron FinTech Fund increased in the quarter. Investments within the Financials, Information Technology (IT), and Consumer Discretionary sectors contributed the most. No sector detracted. Second largest contributor MSCI Inc. led advances within the Financials sector. Tradeweb Markets, Inc. was another noteworthy contributor after shares of this operator of electronic marketplaces for trading bonds, derivatives, and other financial instruments rose on robust trading activity and market share gains. Top contributor MercadoLibre, Inc. drove appreciation within Consumer Discretionary. Guidewire Software, Inc. led gains within IT. Shares of this P&C insurance software vendor contributed on more consistent recurring revenue growth and durable gross margin expansion after the company crossed the midpoint of its cloud transition.
While we are certainly aware of the macroeconomic environment, we don’t invest based on predictions of GDP growth, inflation, interest rates, or foreign currencies. We take an agnostic approach to short-term market and economic forecasts because nobody really knows. We do know economies tend to grow and equity markets tend to appreciate over time. We also know fintech includes a plethora of companies with long runways for growth and sustainable competitive advantages that we expect will outperform the broader equity market over the long run.
We have curated a diversified portfolio of fintech businesses to reduce the exposure to any single economic outcome. The portfolio is balanced across seven themes, each of which is influenced by idiosyncratic factors. We include a mix of Leaders and Challengers, with the relative mix driven by top-down risk considerations and bottom-up opportunities. We believe fintech remains in the early innings of growth as incumbent financial institutions still have a long digitization journey ahead and younger consumers continue favoring digital solutions.
as of 03/31/23
as of 03/31/23
When reviewing performance attribution on our portfolio, please be aware that we construct the portfolio from the bottom up, one stock at a time. Each stock is included in the portfolio if it meets our rigorous investment criteria. To help manage risk, we are aware of our sector and security weights, but we do not include a holding to achieve a target sector allocation or to approximate an index. Our exposure to any given sector is purely a result of our stock selection process.
as of 03/31/23
Baron FinTech Fund (Institutional Shares) trailed the broader market as well as the more comparable FactSet Global FinTech Index during the first quarter principally due to stock selection.
Disappointing stock selection in Tech-Enabled Financials, Information Services, and Enterprise Software coupled with unique exposure to Digital IT Services accounted for most of the underperformance in the period. Weakness in Tech-Enabled Financials was driven by declines from online brokerage firm The Charles Schwab Corp. and independent broker-dealer LPL Financial Holdings Inc., as stress to the banking system resulting from the bankruptcies of Silicon Valley Bank (SVB) and Signature Bank caused investors to sour on financial stocks in general due to fears of contagion. We do not believe Schwab is at any risk of a potential solvency issue. Despite running a much different business than SVB, Schwab is facing near-term deposit pressure through cash sorting in the wake of the collapse. As interest rates rose, Schwab customers continued to move their uninvested cash balances into higher-yielding money market funds. As cash balances at Schwab decrease, the company may need to raise short-term external funding, which is more costly than the customer cash balances being depleted. This trend has pressured earnings estimates and contributed to the recent share price weakness. Nevertheless, we retain long-term conviction in the value of Schwab’s franchise. Despite dislocation in the financial system, Schwab saw accelerating net inflows year-to-date, gathering over $75 billion in new assets in just the first two months of 2023. We remain encouraged by the firm’s exceptional client loyalty levels, robust organic growth, and industry-leading operating expense per client assets. Schwab remains well positioned to retain client assets and increase long-term earnings growth, in our view. Regarding LPL, the banking crisis has caused investors to take a more dovish view on the path of interest rates, which is a headwind to LPL's earnings as the economics on a large portion of client cash is tied to floating rates. However, we believe the company has a strong long-term earnings profile even in a lower interest rate environment, and stock weakness is being influenced by the short-term narrative. We retain long-term conviction.
Real estate data and marketing platform CoStar Group, Inc. and rating agency and data provider S&P Global Inc. were mostly responsible for the relative shortfall in Information Services. CoStar was a top detractor after earnings and guidance fell short of Street expectations due to aggressive investment in the company’s residential real estate segment. We estimate CoStar invested around $230 million to build out its residential marketing platform in 2022, and its initial 2023 guidance implies a total investment approaching $500 million. While this is a significant upfront commitment, we believe the residential market represents a transformative opportunity. The company’s proprietary data, broker-oriented approach, and best-in-class management position it to succeed in this endeavor, in our view. S&P Global’s shares underperformed as debt issuance trends softened in March when banking-related concerns led to a risk-off environment. We retain conviction given our belief that S&P Global will continue to benefit from the secular growth of rated bond issuance, the ongoing shift from active to passive investing, and growing demand for data and analytics. The company operates in oligopoly markets, where it enjoys formidable competitive advantages. Negative stock selection in Enterprise Software was largely due to the underperformance of data processing company Jack Henry & Associates, Inc., whose core business is providing the software that runs a bank’s everyday operations. The company’s shares were pressured by worries about structural concerns for smaller banks following the failures of SVB and Signature Bank. We believe Jack Henry will continue gaining share as financial institutions invest more in technology. Similar to last quarter, the Fund’s unique exposure to Digital IT Services proved costly, as outsourced software development providers Endava plc, Globant, S.A., and CI&T, Inc. continued to be negatively impacted by concerns about macroeconomic uncertainty weighing on client demand. We retain conviction given our belief that these companies will continue growing rapidly in a large global market for IT services.
These adverse impacts were somewhat offset by favorable stock selection in Capital Markets and E-Commerce along with higher exposure to the top performing E-Commerce segment and meaningfully lower exposure to the lagging Payments group. Strength in Capital Markets was attributable to double-digit gains from market operators MarketAxess Holdings Inc., Tradeweb Markets Inc., and CME Group, Inc., as these businesses benefited from a pickup in trading activity. Latin American commerce and payments leader MercadoLibre, Inc. bolstered performance in the E-Commerce category after reporting a significant quarterly earnings beat, driven by strong performance on essentially all key drivers of operating margins across both the commerce and fintech segments. Management suggested these drivers will continue to generate sequential margin expansion in the coming quarters and years, and we believe retrenchment by some top e-commerce competitors could lead to a possible acceleration of MercadoLibre's market share growth, especially in Brazil.