Review and Outlook

as of 12/31/20

Equity markets rose during the quarter as investors looked past the continued spread of the virus and instead focused on the successful development of COVID-19 vaccines and the resolution of the U.S. Presidential election. Other factors in play for the last nine months also contributed to market strength late in the year, including the ongoing tailwind from central bank liquidity measures, additional monetary policy accommodation, and economic and corporate earnings data that exceeded market forecasts. Investors shifted from growth and momentum stocks towards value and cyclical stocks that benefit from the reopening narrative. Small-cap stocks, which were out of favor for much of the year, outpaced their large-cap peers in the fourth quarter.

Baron FinTech Fund rose in the quarter. Information Technology (IT), Financials, and Industrials holdings were the top contributors. No sector detracted in the quarter. With all three top contributors within the sector, IT had a strong quarter. Financials appreciated on the strength of share price gains in 9 out of 11 holdings, led by MSCI, Inc. Shares of this leading provider of investment decision support tools rose on solid third quarter earnings despite the challenging COVID-19 backdrop. Management is continuing to manage its costs base and the company’s asset-based fee revenue has also contributed, driven by strong underlying market conditions and inflows. Industrials advanced on share price increases in all four holdings within the sector.

We start the new year saddened by the suffering from the ongoing pandemic but hopeful that vaccinations will soon bring a return to normal. Different parts of the economy are at varying stages of recovery with technology beneficiaries booming and travel and hospitality companies still struggling. We have a new President and Democratic control of Congress, and with a shift in political leadership comes the possibility of changing regulations and tax policy. After bottoming in August, long-term interest rates have risen steadily, signaling expectations for higher economic growth.

We believe the FinTech sector continues to offers attractive investment opportunities. The events of 2020 have vividly demonstrated the need for every business to better incorporate technology to operate in any environment. Many of the companies in the Fund are providing the necessary tools for businesses and consumers to thrive in the digital economy. These tools include business management software, electronic payment services, digital banking, e-commerce marketplaces, trading platforms, data, and analytics. We believe demand for these tools has only been accelerated by the pandemic and will continue growing for many years. A plethora of privately held FinTech companies are also benefiting from these same trends. After following these companies for years, we expect many of them to go public in the months ahead, further expanding our investment opportunity set.

Top Contributors/Detractors to Performance

as of 12/31/20


  • Square, Inc. provides point-of-sale technology to small businesses and operates the Cash App ecosystem of financial services for individuals. The stock increased after the company reported strong financial results for the most recent quarter. Cash App gross profit increased 212%, driven by record new users and engagement while the Seller business was resilient despite headwinds from COVID-19.  We continue to own the stock due to, in our view, Square’s long runway for growth, sustainable competitive advantages, and unique corporate culture.
  • Adyen N.V. enables merchants to accept electronic payments.  The company has been less impacted by pandemic lockdowns than other payment companies due to its high e-commerce exposure.  Shares increased after the company reported accelerating growth in payment volume and revenue as economies reopened. The company also restated earnings higher after mistakenly double-counting certain costs, driving an upward revision in earnings estimates. We believe Adyen will be a prime beneficiary of the secular growth of e-commerce and will continue to gain share over time.
  • Nuvei Technologies Corp. is a Canadian-based payment processor that serves online merchants around the world.  The stock increased after the company reported strong financial results for the recent quarter with 36% payment volume, a meaningful acceleration from the prior quarter.  As a recent IPO, shares likely benefited from increasing investor awareness as well as optimism about the growth potential for online gambling in the U.S.  We continue to own the stock due to Nuvei’s numerous growth opportunities and founder-led management team.


  • Alibaba Group Holding Limited is the largest retailer and e-commerce company in China. Alibaba operates shopping platforms Taobao and Tmall and owns 33% of Ant Group, which operates Alipay, China's largest third-party online payment provider. Shares were down on the news that Chinese regulators had launched an investigation into Alibaba for suspected monopolistic behavior. We continue to believe Alibaba's core business remains highly profitable, complemented by rapid growth in the cloud business and inflection in the Cainiao logistics and New Retail segments.
  • S&P Global Inc. provides credit ratings, indices, data, and analytics to the financial and commodities markets. The company reported strong financial results due to continued growth in debt issuance. The stock declined on investor expectations that issuance will moderate next year due to tough comparisons. The company’s announced acquisition of IHS Markit received a mixed reaction, perhaps due to the size and complexity of the combined company. We continue to own the stock as we see a long runway for growth and significant competitive advantages for the company.
  • Duck Creek Technologies, Inc. is a leading provider of core systems software for the property & casualty insurance industry. Despite reporting results that beat analyst forecasts, with subscription revenue up 54% and SaaS annual recurring revenue up 85%, the stock price fell, possibly due to a rotation away from high-growth stocks. We retain conviction. Insurers are increasingly recognizing the need for modern, cloud-based software, and we like the company’s strong product set and long runway for growth.

Quarterly Attribution Analysis

as of 12/31/20

Yearly Attribution Analysis (for year ended 12/31/2020)