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Dear Baron Real Estate Fund Shareholder:
In the first quarter of 2025, numerous stocks were sold, in some cases indiscriminately without regard to value, largely because of concerns about a slowdown in economic growth, still somewhat elevated inflation, and policymaking that is keeping businesses and consumers off balance. Baron Real Estate Fund® (the Fund) was not immune.
The Fund’s non-REIT cyclically oriented real estate-related holdings – travel-related companies, homebuilders, building products/services companies, and real asset alternative asset managers – in addition to select REIT categories (data centers, office, and malls) weighed on performance during this period. For the three months ended March 31, 2025, the Fund declined 6.69% (Institutional Shares), underperforming the MSCI USA IMI Extended Real Estate Index (the MSCI Real Estate Index), which fell 3.11%, and the MSCI US REIT Index (the REIT Index), which increased 0.76%.
Table I.
Performance
Annualized for periods ended March 31, 2025
| Baron Real Estate Fund Retail Shares1,2 | Baron Real Estate Fund Institutional Shares1,2 | MSCI USA IMI Extended Real Estate Index1 | MSCI US REIT Index1 | S&P 500 Index1 | |
|---|---|---|---|---|---|
| Three Months3 | (6.76)% | (6.69)% | (3.11)% | 0.76% | (4.27)% |
| One Year | (3.36)% | (3.09)% | 2.45% | 8.98% | 8.25% |
| Three Years | 1.44% | 1.71% | 4.79% | (1.77)% | 9.06% |
| Five Years | 15.72% | 16.02% | 15.39% | 10.04% | 18.59% |
| Ten Years | 8.11% | 8.40% | 7.73% | 4.01% | 12.50% |
| Fifteen Years | 12.35% | 12.64% | 10.31% | 7.41% | 13.15% |
| Since Inception (12/31/2009) (Annualized) | 12.64% | 12.92% | 10.76% | 7.94% | 13.31% |
| Since Inception (12/31/2009) (Cumulative)3 | 514.02% | 538.31% | 374.88% | 220.83% | 572.66% |
|
Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares and Institutional Shares as of April 26, 2024 was 1.31% and 1.06%, respectively. The performance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate; an investor’s shares, when redeemed, may be worth more or less than their original cost. The Adviser may waive or reimburse certain Fund expenses pursuant to a contract expiring on August 29, 2035, unless renewed for another 11-year term and the Fund’s transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent month end, visit BaronCapitalGroup.com or call 1-800-99-BARON. or call 1-800-99-BARON. (1)The MSCI USA IMI Extended Real Estate Index Net (USD) is a custom index calculated by MSCI for, and as requested by, BAMCO, Inc. The index includes real estate and real estate-related GICS classification securities. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI. The MSCI US REIT Index Net (USD) is designed to measure the performance of all equity REITs in the U.S. equity market, except for specialty equity REITs that do not generate a majority of their revenue and income from real estate rental and leasing operations. The S&P 500 Index measures the performance of 500 widely held large-cap U.S. companies. MSCI is the source and owner of the trademarks, service marks and copyrights related to the MSCI Indexes. The MSCI Indexes and the Fund include reinvestment of dividends, net of foreign withholding taxes, while the S&P 500 Index includes reinvestment of dividends before taxes. Reinvestment of dividends positively impacts performance results. The indexes are unmanaged. Index performance is not Fund performance. Investors cannot invest directly in an index.(2)The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.(3)Not annualized. |
So where does that leave us now?
We are cognizant that the economic outlook may deteriorate further in the months ahead, which could result in slower growth, higher inflation, and lower valuation multiples. Our real estate team remains razor focused on monitoring company-level developments and speaking to and meeting with management teams.
We remain steadfast in our view that:
- Investors should have exposure to public real estate.
- Valuations are attractive.
- Baron Real Estate Fund is a compelling real estate option for those seeking exposure to real estate.
For our more complete thoughts on “1” and “2”, please see the following sections later in this letter: “Our current top-of-mind thoughts” and “Examples of best-in-class real estate companies that are attractively valued.” For “3”, we elaborate on the investment case for the Fund in the last section of this letter – “Concluding thoughts on the prospects for real estate and the Fund.”
Despite the challenging first quarter, Baron Real Estate Fund has maintained its strong long-term performance, and we are optimistic we will turn things around as we have done in the past.
As of March 31, 2025, according to Morningstar, the Fund has received special recognition for its achievements as follows:
- #1 real estate fund ranking for each of its 15-, 10-, and 5-year performance periods
- Highest 5-Star Morningstar Rating for each of its 10-, 5-, and 3-year performance periods
- Highest 5-Star Overall Morningstar Rating™
As of 3/31/2025, the Morningstar Real Estate Category consisted of 221, 213, 196, 148, 110, and 157 share classes for the 1-, 3-, 5-, 10-, 15-year, and since inception (12/31/2009) periods. Morningstar ranked Baron Real Estate Fund Institutional Share Class in the 98th, 4th, 1st, 1st, 1st, and 1st percentiles, respectively. On an absolute basis, Morningstar ranked Baron Real Estate Fund Institutional Share Class as the 215th, 7th, 1st, 1st, 1st, and 1st best performing share class in its Category, for the 1-, 3-, 5-, 10-, 15-year, and since inception periods, respectively.
Morningstar calculates the Morningstar Real Estate Category Average performance and rankings using its Fractional Weighting methodology. Morningstar rankings are based on total returns and do not include sales charges. Total returns do account for management, administrative, and 12b-1 fees and other costs automatically deducted from fund assets.
Since inception rankings include all share classes of funds in the Morningstar Real Estate Category. Performance for all share classes date back to the inception date of the oldest share class of each fund based on Morningstar’s performance calculation methodology.
Baron Real Estate Fund Institutional Share Class was rated 5 stars overall, 5 stars for the trailing 3 years, 5 stars for the trailing 5 years, and 5 stars for the trailing 10 years ended 3/31/2025. There were 213 share classes, 196 share classes, and 148 share classes for the 3-, 5-and 10-year periods. These Morningstar Ratings are for the Institutional Share Class only; other classes may have different performance characteristics.
The Morningstar Rating™ for funds, or “star rating”, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
© 2025 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its affiliates or content providers; (2) may not be copied, adapted or distributed; (3) is not warranted to be accurate, complete or timely; and (4) does not constitute advice of any kind, whether investment, tax, legal or otherwise. User is solely responsible for ensuring that any use of this information complies with all laws, regulations and restrictions applicable to it. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
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We will address the following topics in this letter:
- Our current top-of-mind thoughts
- Examples of best-in-class real estate companies that are attractively valued
- Portfolio composition and key investment themes
- Top contributors and detractors to performance
- Recent activity
- Concluding thoughts on the prospects for real estate and the Fund
Our Current Top-of-Mind Thoughts
OUR BOTTOM-LINE VIEW:
Though we are mindful of the reasons to be cautious, we believe return expectations for real estate and the Fund have become attractive. The sharp correction in several REIT and non-REIT real estate companies in the first quarter of 2025 (and early in April) have presented several highly compelling investment opportunities.
We remain convinced that investors should have exposure to public real estate.
The foundation for our constructive real estate outlook is based on the following considerations:
1. Real estate should benefit from the eventual resumption of cyclical tailwinds of economic growth.
Though the sequencing of the new administration’s policies is likely to dampen near-term economic growth (e.g., the implementation of higher tariffs, less immigration, and less fiscal support before the goal of introducing lower taxes, less regulation, lower fiscal deficits, and perhaps lower interest rates), we believe the cyclical tailwinds of economic growth will re-emerge.
As economic growth reaccelerates, we believe the Fund’s portfolio of well-located real estate in supply constrained markets – multi-family, single-family homes for rent and sale, industrial warehouses, senior housing facilities, hotels, offices, malls, and data centers – will benefit as demand, occupancy, rents, cash flow, and real estate values increase.
2. Real estate is benefiting from secular tailwinds that should be enduring for years to come.
- Multi-family, single-family rental homes, and manufactured homes: Affordability advantages versus the for-sale housing market
- Industrial real estate: The move to e-commerce and supply chain logistics
- Senior housing facilities: Aging baby boomers and the 80-plus population which are among the fastest growing aging groups
- Hotels: The increase in spending on travel as a percentage of wallet share
- Data centers: Rising data consumption, cloud computing, IT outsourcing, and AI
- New home sales: The multi-decade structural underinvestment in the construction of residential real estate and other secular tailwinds including flexible work arrangements that favor suburban living, a desire to own newly built homes rather than existing homes which, on average, are more than 40 years old, and the lock-in effect for existing homeowners to remain in their homes due to the move higher in mortgage rates
- Commercial real estate services companies: The outsourcing and institutionalization of commercial real estate, and opportunities to increase market share in a highly fragmented industry structure
3. Investor sentiment is extremely poor.
Investor sentiment appears to have swung from overly optimistic at the beginning of 2025 to overly pessimistic today. In fact, short positioning in the broader equity markets is as high as it has been in years – larger than during COVID and larger than 2022 when the Federal Reserve (the Fed) embarked on an aggressive rate hike cycle. In the cycle of stock market emotions, we believe that the best time to buy stocks to help generate maximum returns occurs when sentiment is poor, although we cannot guarantee this will be the case.
4. Additional reasons to be optimistic.
- Demand conditions are mostly favorable against a backdrop of muted new real estate supply.
- Balance sheets are generally in solid shape.
- Debt capital is widely available.
- Substantial capital (private equity, sovereign wealth funds, pension funds, endowments, and others) is in pursuit of real estate ownership and may step in and capitalize on the opportunity to buy quality real estate at depressed prices. This “embedded put” should limit downside valuation and pricing.
- Much of public real estate has been re-priced for a higher cost of capital.
- There is the possibility that the Fed may lower interest rates in 2025 should economic growth deteriorate, unemployment increase, and/or inflation moderate. Goldman Sachs is now forecasting three consecutive interest rate cuts, beginning in July with the potential increase in the unemployment rate as the key justification for the rate cuts.
5. Valuations are reasonable (and, in some cases, cheap).
We believe the valuations of numerous REITs and non-REIT real estate-related companies are cheap relative to their historical valuations and future growth prospects. Please see “Examples of best-in-class real estate companies that are attractively valued” below.
6. The long-term case for real estate remains firmly in place.
Well-located and competitively advantaged real estate tends to offer partial inflation protection characteristics, diversification benefits versus equities and bonds, and strong long-term returns.
Examples of Best-In-Class Real Estate Companies that are Attractively Valued
The Fund is chock full of best-in-class real estate companies that are on sale relative to history and relative to private real estate alternatives (even when factoring in the possibility of slower growth in 2025 and lower valuation multiples) and offer prospects for strong returns in the years ahead.
In our judgment, characteristics of a “best-in-class” real estate company are:
- Owns unique and well-located real estate assets in markets with high barriers to entry combined with attractive long-term demand demographics
- Enjoys strong long-term growth prospects together with a leading competitive position
- Maintains a conservative and liquid balance sheet
- Employs an intelligent and motivated management team that is an excellent allocator of capital and has interests aligned with shareholders
Examples of the Fund’s best-in-class real estate companies that are attractively valued include:
REITs
Equinix, Inc. (EQIX) is the premier global carrier and cloud-neutral data center operator with 270 data centers in 74 metropolitan areas and 35 countries.
Equinix is currently valued at only 20 times 2025 estimated cash flow versus private market data center transactions that have occurred at 25 to 30 times cash flow. The shares are valued at a small premium to REITs, despite superior and more durable cash flow growth prospects.
American Tower Corporation (AMT) is the leading global mobile tower operator with 150,000 sites globally, with demand underpinned by the increasing secular growth in mobile data.
American Tower currently trades at 20 times cash flow for high single-digit underlying growth, which is a 3 multiple point discount versus history and 1.5 multiple point discount to REITs broadly (which are growing mid-single digit and trading at 21.5 times cash flow) for more durable and secular growth.
Equity Residential (EQR) is one of the largest U.S. apartment REITs with 80,000 high-quality apartment units concentrated in coastal markets with strong barriers to entry, compelling resident income/demographics, and high-cost home ownership. The company maintains a strong and liquid balance sheet.
It is valued at a 6.1% implied capitalization rate representing a discount to private market transactions in the high 4% to 5% capitalization range. At its public market implied valuation of only $410,000 per apartment, the shares are valued at an approximate 20% discount to private market values and a much larger discount to replacement cost.
American Homes 4 Rent (AMH) is the second largest single-family home rental company with a portfolio of 60,000 single-family homes available for rent located across a diverse set of more than 30 markets with attractive renter demographics via above average incomes and employment growth.
It is valued at an implied capitalization rate of 5.9% versus private market transactions in the 5% range. The public market implied valuation of its owned homes is only $315,000 per home versus the average cost of an existing single-family home in the U.S. of approximately $410,000.
Vornado Realty Trust (VNO) owns a portfolio of premier office and street retail properties largely concentrated in New York City.
The company’s implied cap rate for its New York City office portfolio is approximately 10.5% and only $500 per square foot. The company’s real estate portfolio is being valued at a meaningful discount to private market transactions at capitalization rates in the 5% to 6% range and replacement cost well more than $1,000 per square foot.
The Macerich Company (MAC) is a REIT that owns a portfolio of exceptionally high-quality malls in the U.S. Under a new management team, the company is undergoing a business transformation to improve portfolio quality, growth potential, and balance sheet health, which we believe will ultimately translate into an improved valuation multiple for the company.
It is valued at less than 10 times forward earnings (Funds from Operations or FFO), on depressed earnings, which is a discount to its historical norm of 15 to 17 times FFO.
Residential-Related Real Estate Companies
Toll Brothers, Inc. (TOL) is a leading luxury homebuilder in the U.S. with an exceptional management team and a large, valuable owned land real estate portfolio. Toll Brothers is more insulated than its peers from elevated mortgage rates because approximately 25% of Toll Brothers home buyers pay 100% in cash.
The company is valued at only 1.1 times 2025 estimated tangible book value and a P/E multiple of less than 7 times earnings per share. In the past, Toll Brothers’ shares have appreciated to a peak multiple of 2.0 times tangible book value which would represent over 50% upside. We believe a multiple of 1.8 to 2.0 times tangible book value will ultimately be warranted based on the company’s aspirations to generate a consistent return on equity in a range of high teens up to 20% or more.
Taylor Morrison Home Corporation (TMHC) is one of the nation’s leading homebuilders, with a diversified business mix across buyer type and price points. Management aspires to increase the size of the business by over 50% over the next three to four years.
It is valued at only 1.0 times tangible book value and a P/E multiple of less than 7 times earnings per share. We believe the valuation of Taylor Morrison may reach 1.5 to 1.7 times tangible book value, which would represent 50% to 75% upside over time. We believe a multiple of 1.5 to 1.7 times tangible book value will ultimately be warranted based on the company’s aspirations to generate consistent return on equity in the high teens.
Louisiana-Pacific Corporation (LPX) is a rapidly growing U.S. building products company that manufactures engineered wood siding and other wood products. The company benefits from leadership positions, secular material conversion, a rich product innovation pipeline, a strong balance sheet, and an excellent management team.
The company is currently valued at only 8.5 times estimated 2026 cash flow versus a multiple of 12 to 13 times that we believe is warranted relative to its publicly traded peers. A 12 to 13 times multiple would represent more than 35% upside from present levels.
CRH public limited company (CRH) is the largest building materials company in both North America and Europe and supplies products for construction and infrastructure projects such as roads, highways, bridges, and commercial and residential buildings. Its products include materials such as aggregates, cement, asphalt, and concrete, as well as critical utility infrastructure and outdoor living solutions.
CRH is currently trading at 8.7 times 2025 estimated cash flow, while vertically integrated construction materials peers, who are not as big as CRH and do not have the same track record of consistent performance, have traded as high as 13 times cash flow. Aggregates focused peers with similar construction project exposure trade at approximately 16 times cash flow.
Travel-Related Real Estate Companies
Wynn Resorts, Limited (WYNN) is the preeminent luxury global owner and operator of integrated resorts (hotels and casino resorts). We are bullish on the prospects for the company’s development of the Wynn Al Marjan Island in the UAE (expected to open early in 2027). We believe the UAE is the most exciting new market for integrated resort developments in decades.
At its recent price of only $70 per share, the shares are valued at only 7.2 times 2025 estimated cash flow versus a long-term average multiple of 13 to 15 times cash flow. We believe Wynn is trading at an unrealistic discounted multiple with very little value being ascribed to Wynn’s Macau operating assets and its UAE development project. Wynn’s management agrees as they have been buying back shares as has Tilman Fertitta, a highly successful hotel, casino, and entertainment executive, who has acquired more than $1 billion of Wynn shares and is now the largest shareholder of Wynn with a 12% stake in the company.
Las Vegas Sands Corporation (LVS) is a global leader in the development and operation of luxury casino resorts in Macau and Singapore.
At its recent share price of only $33 per share, the company’s shares are valued at only 7.5 times 2025 estimated cash flow (EBITDA), versus a long-term average of 14 to 15 times cash flow.
Real Asset-Focused Alternative Asset Managers
Brookfield Corporation (BN) is a leading global owner and operator of real assets such as real estate and infrastructure. We believe the company’s global reach, capital, and the synergies among its businesses provide significant opportunities for growth.
At its recent price of only $46 per share, we believe the shares are unsustainably cheap. Brookfield’s management team, who in our opinion is credible and conservative, believes the company is worth $100 per share today and believes the shares will reach $176 in five years.
Commercial Real Estate Services Companies
Jones Lang LaSalle Incorporated (JLL) is one of the leading commercial real estate services firms in the world with scale, product breadth, and leadership positions across its diversified real estate business segments.
Its P/E multiple of only 10.8 times 2026 estimated earnings compares favorably versus the high teens multiples that we believe are warranted based on historical trading multiples and the improvement in the company’s business mix.
Property Technology Companies
CoStar Group, Inc. (CSGP) is the global leader in digitizing real estate.
At its recent price of $72, we believe that shares of CoStar are trading at a 25% to 35% discount to the current value of the company’s non-residential businesses, which we believe will be worth almost $200 over the next four to five years. We believe that CoStar’s aggressive expansion into the residential marketplace represents significant upside optionality if it proves successful.
Portfolio Composition and Key Investment Themes
We currently have investments in REITs, plus seven additional non-REIT real estate-related categories. Our percentage allocations to these categories vary, and they are based on our research and assessment of opportunities in each category on a bottom-up basis (See Table II below).
Table II.
Fund investments in real estate-related categories as of March 31, 2025
| Percent of Net Assets (%) | |||
|---|---|---|---|
| REITs | 32.2 | ||
| Non-REITs | 59.3 | ||
| Building Products/Services | 14.8 | ||
| Real Estate Service Companies | 13.7 | ||
| Real Estate Operating Companies | 9.0 | ||
| Homebuilders & Land Developers | 7.7 | ||
| Hotels & Leisure | 6.2 | ||
| Casinos & Gaming Operators | 6.1 | ||
| Data Centers | 1.8 | ||
| Cash and Cash Equivalents | 8.5 | ||
| Total | 100.0* | ||
* Individual weights may not sum to the displayed total due to rounding.
Investment Themes
We continue to prioritize seven long-term high-conviction investment themes or real estate categories:
- REITs
- Residential-related real estate
- Travel-related real estate
- Commercial real estate services companies
- Real asset-focused alternative asset managers
- Property technology companies
- Data center operators
Notable changes to the Fund’s real estate category exposures since December 31, 2024
In the first quarter of 2025, though the Fund’s allocations to various investment themes changed only modestly since the fourth quarter of 2024, we made a number of changes to the Fund “under the hood” with several company-level changes within some of the investment themes. Examples include:
REITs
- Following strong share price performance in the last few years, we decreased the Fund’s large allocation to data center REITs Equinix, Inc. and Digital Realty Trust, Inc. (DLR) (and non-REIT data center company GDS Holdings Limited (GDS)(OTCPK:GDHLF)) due to elevated valuations and evolving concerns for the data center sector (e.g., Microsoft cancelling select leases, press releases announcing tens of billions of dollars earmarked for new development, lower cost AI models like DeepSeek potentially changing capital investment plans or, most recently, the Chairman of Alibaba raising red flags about speculative data center development globally).
- We reallocated the Fund’s data center sale proceeds to REIT categories that have lagged, offer compelling valuations, and present prospects for improving fundamentals. Examples of new additions to the Fund include wireless tower REIT, American Tower Corporation, industrial REIT, Prologis, Inc. (PLD)(OTCQB:PLDGP), single-family rental REIT, American Homes 4 Rent, and self-storage REIT, Extra Space Storage Inc. (EXR).
Residential-related real estate
- We trimmed the Fund’s homebuilder positions in Lennar Corporation (LEN) and D.R. Horton, Inc. (DHI), and reallocated the shares to Taylor Morrison Home Corporation (TMHC), a homebuilder that we believe will grow faster than its larger peers in the next few years and is more attractively valued.
- We are excited about the additions of two new residential-related building product companies. CRH public limited company is the largest building materials company in North America and Europe. We also acquired shares in Advanced Drainage Systems, Inc. (WMS), the leading manufacturer of plastic pipes and related stormwater management products in the U.S.
Travel-related real estate
We trimmed the Fund’s position in Expedia Group, Inc. (EXPE) due to emerging unknown business model risks in a potential agentic AI world. We reallocated the capital to Wynn Resorts, Limited, a preeminent luxury global owner and operator of integrated resorts (hotels and casino resorts). We believe Wynn shares are highly discounted relative to the intrinsic value of the company.
Real asset-focused alternative asset managers
- Following strong share price performance in the last two years, and our expectation that fund raising and monetizations through asset sales and IPOs may not accelerate early in 2025 (capital return being a key element of the flywheel for future fundraising), we reduced the Fund’s allocation to real asset-focused alternative asset managers from 12.8% to 9.0%. We remain long-term bullish on the Fund’s investments in Brookfield Corporation, Brookfield Asset Management Ltd. (BAM), and Blackstone Inc (BX).
We maintained an elevated cash and cash equivalents position of 8.5%. We remain optimistic we will be able to redeploy the capital in compelling investment opportunities in 2025.
REITs
We continue to believe REITs can generate double-digit returns in 2025 through a combination of growth, dividends, and some room for valuations to expand for certain REITs.
Though demand remains tempered for some real estate segments, most REITs enjoy occupancies of more than 90%, and there are several segments of real estate where demand remains strong. Limited new competitive supply is forecasted in the next few years. We expect the transaction market to pick up and several publicly traded REITs now have the “green light” to issue equity for accretive external growth. We expect private equity to look for opportunities to acquire discounted public REITs. Most balance sheets are in good shape. Several REITs benefit from some combination of all or some of the following favorable characteristics: inflation-protection, contracted cash flows, and an ability to increase dividends. We have identified several REITs that are cheap relative to history and private market valuations.
As of March 31, 2025, we had investments in 10 REIT categories representing 32.2% of the Fund’s net assets. Please see Table III below.
Table III.
REITs as of March 31, 2025
| Percent of Net Assets (%) | |
|---|---|
| Health Care REITs | 6.3 |
| Wireless Tower REITs | 5.7 |
| Multi-Family REITs | 5.2 |
| Data Center REITs | 3.7 |
| Office REITs | 3.2 |
| Industrial REITs | 3.0 |
| Single-Family Rental REITs | 2.4 |
| Mall REITs | 1.3 |
| Self-Storage REITs | 1.2 |
| Other REITs | 0.2 |
| Total | 32.2* |
* Individual weights may not sum to the displayed total due to rounding.
Residential-related real estate
We remain near-term cautious, yet long-term bullish on the prospects for non-REIT residential-related real estate.
Stuart Miller, Chairman and Co-CEO of Lennar, summarized some of our near-term concerns when he made the following comments on March 20, 2025:
“Our first quarter was marked by a challenging macroeconomic environment for homebuilding. While demand remains strong, persistently higher interest rates and inflation, combined with a downturn in consumer confidence and a limited supply of affordable homes, made it increasingly difficult for consumers to access homeownership.”
We have also been concerned that a combination of stagnating home prices, elevated homebuilder incentives to entice buyers to purchase a home, new administration policy decisions around tariffs, immigration, and deportation that may increase the cost for labor and materials would collectively lead to pressure on homebuilder gross margins in 2025.
The shares of several homebuilders and residential-related building product/services companies foreshadowed some of these concerns in the fourth quarter of 2024 and the first quarter of 2025. We continue to monitor developments closely as valuations are becoming more compelling.
Importantly, we maintain our long-term optimism for residential real estate. A multi-decade structural underinvestment in the construction of residential real estate relative to the demographic needs of our country bodes well for long- term housing construction activity, sales, rentals, pricing, and repair and remodel activity. A combination of cyclical and secular tailwinds should aid the new home market for several years. Cyclical tailwinds include pent-up demand, low inventory levels, and a still healthy consumer. Secular tailwinds include flexible work arrangements that favor suburban living, a desire to own newly built homes rather than existing homes which, on average, are more than 40 years old, and the lock-in effect for existing homeowners to remain in their homes due to the move higher in mortgage rates. The strategic pivot by several homebuilders to a more land-light business model, the utilization of lower leverage, improved capital allocation, and the prioritization of scale advantages may lead to higher valuations for homebuilders over time.
As of March 31, 2025, residential-related real estate companies represented 22.5% of the Fund’s net assets. Please see Table IV below.
Table IV.
Residential-related real estate companies as of March 31, 2025
| Percent of Net Assets (%) | |
|---|---|
| Building Products/Services | 13.4 |
| Homebuilders | 7.1 |
| Home Centers | 2.0 |
| Total | 22.5* |
* Individual weights may not sum to the displayed total due to rounding.
Travel-related real estate
Though we are cognizant that near-term travel-related business conditions may weaken (perhaps foreshadowed by recent cautionary commentary from the major U.S. airline companies), we believe several factors are likely to contribute to multi-year tailwinds for travel-related real estate companies including a favorable shift in consumer preferences (demand for experiences/services such as travel over goods), a growing middle class, and other encouraging demographic trends (more disposable income for the millennial cohort due to delays in household formation and work-from-home arrangements which allow for an increase in travel bookings). In addition, private equity’s long history of investing in travel-related companies may serve as a catalyst to surface value, which the public market may be overly discounting.
As of March 31, 2025, travel-related real estate companies represented 12.2% of the Fund’s net assets. Please see Table V below.
Table V.
Travel-related real estate as of March 31, 2025
| Percent of Net Assets (%) | |
|---|---|
| Hotels & Leisure | 6.2 |
| Casinos & Gaming Operators | 6.1 |
| Total | 12.2* |
* Individual weights may not sum to the displayed total due to rounding.
Commercial real estate services companies
Leading commercial real estate services companies CBRE Group, Inc. (CBRE) and Jones Lang LaSalle Incorporated (JLL) should benefit from structural and secular tailwinds: the outsourcing of commercial real estate, the institutionalization of commercial real estate, and opportunities to increase market share in a highly fragmented market. Looking forward, we believe we are in the early days of a rebound in commercial real estate sales and leasing activity. We believe CBRE and JLL may generate annual earnings per share growth of more than 20% in the next few years.
Real estate-focused alternative asset managers
Leading real estate-focused asset managers Blackstone Inc. and Brookfield Corporation have an opportunity to increase market share of a growing pie due to impressive investment track records and global scale advantages. They are positioned to benefit from a secular growth opportunity for alternative assets due to long track records of generating attractive relative and absolute returns with what is perceived, in some cases, as less volatility than several other investment options.
Property technology companies
The collision of real estate and technology has led to a new category within real estate–real estate technology, also referred to as proptech. The emergence of proptech and the digitization of real estate is an exciting and promising new development for real estate. We believe we are in the early innings of a technology-driven investment cycle centered on data and digitization that allows real estate-related businesses to drive incremental revenue streams and lower costs.
CoStar Group, Inc., the leading provider of information, analytics, and marketing services to the real estate industry, is positioned to capitalize on this burgeoning secular growth trend.
Data center operators
We believe the shares of data center operator GDS Holdings Limited (GDS)(OTCPK:GDHLF) are attractively valued and offer compelling long-term growth prospects. Please see “Top net sales for the quarter ended March 31, 2025” for more on GDS.
As of March 31, 2025, other real estate-related companies (which includes the four investment themes mentioned directly above) represented 24.6% of the Fund’s net assets. Please see Table VI below.
Table VI.
Other real estate-related companies as of March 31, 2025
| Percent of Net Assets (%) | |
|---|---|
| Commercial Real Estate Services Companies | 10.5 |
| Real Estate-Focused Alternative Asset Managers | 9.0 |
| Property Technology Companies | 3.2 |
| Data Center Operators | 1.8 |
| Total | 24.6* |
* Individual weights may not sum to the displayed total due to rounding.
Top Contributors and Detractors to Performance
Table VII.
Top contributors to performance for the quarter ended March 31, 2025
| Quarter End Market Cap($ billions) | Contribution to Return(%) | |||
|---|---|---|---|---|
| Welltower Inc. (WELL) | 98.3 | 0.96 | ||
| American Tower Corporation | 101.7 | 0.51 | ||
| GDS Holdings Limited | 4.9 | 0.30 | ||
| CoStar Group, Inc. | 33.4 | 0.26 | ||
| Millrose Properties, Inc. (MRP) | 4.4 | 0.19 |
Shares of Welltower Inc. continued to significantly outperform both the REIT and broader equity indices. We believe Welltower offers both “offensive” and “defensive” investment attributes in the current uncertain macroenvironment. Welltower is an operator of senior housing, life science, and medical office real estate properties. Given most of the company’s cash flows are derived from senior housing, “defensive” characteristics are underpinned by a “needs based” service offering. Welltower owns senior housing properties in some of the best micro-markets with substantial pricing power given the company serves a higher net worth demographic.
As we have articulated in the past, we remain optimistic about the prospects for both cyclical growth (a recovery from depressed occupancy levels following COVID-19) and secular growth (seniors are the fastest growing portion of the population and people are living longer) in senior housing demand against a backdrop of muted supply that will lead to many years of compelling organic growth. Several of these characteristics were on display in the most recent quarter as Welltower continued to report above industry rent and occupancy growth. We regard management as highly astute capital allocators and able to go on “offense” at the appropriate time, which was further cemented with the recently announced C$4.6 billion acquisition of Amica, an ultra-luxury irreplaceable portfolio in Canada, which was accretive to existing shareholders, acquired well-below replacement cost, and enhanced the overall quality of the portfolio.
Shares of American Tower Corporation performed well in the quarter due to accelerating carrier bookings activity and management’s solid outlook for underlying 2025 financials. Once the broader market processed the 2025 outlook, which admittedly had several moving pieces, investors concluded that the prospects for the “clean” American Tower post its exit of India and capital allocation prioritization into developed markets would position the company to drive highly predictable and recurring earnings growth with less volatility going forward. We agree – please see our “Top net purchases” section for further thoughts on American Tower.
GDS Holdings Limited was a contributor to performance given improving demand in Mainland China, the company’s continued ramp of its now de-consolidated international business (renamed “DayOne”) and the monetization of select assets at a premium valuation via a REIT transaction anchored by one of the largest life insurance companies in China.
We remain long-term bullish on the company due to undemanding valuation levels, accelerating growth, progress toward reducing debt and demonstrating imbedded value in its international business via private capital raises backed by highly regarded investors at compelling valuation levels to GDS holders. Notwithstanding, we reduced our position in GDS – please see the “Top net sales” section for an explanation of the rationale for the Fund’s sales.
Table VIII.
Top detractors from performance for the quarter ended March 31, 2025
| Quarter End Market Cap($ billions) | Contribution to Return (%) | |||
|---|---|---|---|---|
| Equinix, Inc. | 79.4 | -0.78 | ||
| Hyatt Hotels Corporation (H) | 11.8 | -0.65 | ||
| Las Vegas Sands Corporation | 27.7 | -0.59 | ||
| Blackstone Inc. | 171.6 | -0.54 | ||
| Digital Realty Trust, Inc. | 49.2 | -0.51 |
Over the last few years, we have relayed our optimism for data centers over a multi-year period given secular growth, favorable supply/demand dynamics, continued pricing power driven by low vacancy – in part due to limitations on available power infrastructure and highly attractive returns on capital.
Our views became more tempered in early 2025 as our multi-year investment thesis was pulled forward over a much shorter time horizon, valuation levels of public data center stocks became stretched on an absolute and relative basis, and we were identifying superior risk/reward opportunities in other sectors/companies where valuation was still depressed, and growth was inflecting. We acknowledge there is a lot of “noise” in the market. Not a week went by in the first quarter of 2025 when we didn’t read about evolving concerns for the data center sector broadly – whether it was Microsoft cancelling select leases, press releases announcing tens of billions of dollars earmarked for new development (including the $500 billion Stargate project), lower cost AI models like DeepSeek potentially changing capital investment plans or, most recently, the Chairman of Alibaba raising red flags about speculative data center development globally. While we can debate what is “signal” versus “noise,” the cumulative developments certainly did not help investor sentiment on the sector that was trading at a premium valuation. Most importantly, we do not base any of our investment decisions on headlines, but rather a rigorous assessment of business fundamentals (in addition to forming a mosaic of key learnings from our industry contacts), absolute and relative valuation levels, risk/reward skew, and potential alternative investment opportunities. We are never ostriches with our heads in the sand, nor are we sitting ducks ignorant of the forthcoming rifle shot – we will continue to actively manage the portfolio in the best interests of our shareholders as the investment landscape evolves and facts on the ground change.
In the most recent quarter, shares of Equinix, Inc., the premier global operator of network-dense, carrier-neutral data centers, declined following two years of robust absolute and relative performance. Underperformance was driven by discrete earnings headwinds that dampened reported growth, normalization of valuation levels, evolving concerns of customer bookings trajectory given the uncertain macroenvironment and signs of a “pause” in certain customers’ underlying new business trends (e.g. bookings for enterprise software companies).
Global data center REIT Digital Realty Trust, Inc., also detracted from performance in the quarter due to normalization of valuation from outsized absolute and relative levels, lower new bookings from an elevated high water mark achieved in 2024, and a more tempered outlook for the continued need of outsized capital investment spend from the global cloud providers on the back of the AI wave (i.e., digestion period). In addition, Microsoft, a top customer of Digital Realty’s at over 10% of annualized rent, was rumored to be incrementally cancelling certain leases it had signed globally. While this was not specific to Digital Realty given the company’s iron-clad lease agreements and likely included Microsoft specific considerations (e.g. capacity for Azure cloud versus incremental capacity earmarked for OpenAI), this development surfaced questions about the level of future incremental demand.
The shares of Hyatt Hotels Corporation, a global hospitality company that focused on serving high-end travelers, declined in the first quarter due to slower than expected growth in 2025 combined with the company’s sizable acquisition of Playa Hotels & Resorts, which stipulated a plan to sell more than $2 billion of real estate assets in order to shift its earnings mix back to “asset light.” Both the elongated timeline and scale of asset sales in a market without a deep institutional capital pool was met with investor skepticism. We, however, were encouraged that the company had already engaged into an exclusive agreement with one party for the portfolio in total and had also recently engaged other parties, many of whom were bidders in the Playa transaction process and knew the assets well.
We believe the company should still grow revenue at a high single-digit rate this year with mid-single-digit growth in units and low single-digit growth in Revenue Per Available Room leading to double-digit EBITDA growth. The company generates strong cash flow and maintains a solid balance sheet.
Hyatt’s plan to acquire Playa should be accretive to earnings, especially as management sells all of its underlying real estate while maintaining the long-term management and franchise contracts. Importantly, Hyatt retained its valuable all-inclusive Hyatt Ziva and Zilara brands within the Playa portfolio, which positions the company to further grow this segment in the Caribbean and elsewhere as part of a broader strategic priority to expand its all-inclusive offering (in addition to serving as valuable outlets for loyalty members to redeem their points). Once the sale of the Playa real estate is complete, the company is expected to have over 90% of its revenue coming through fees. This should lead to a narrowing of its three-to four-point multiple discount to peers which combined with the continued EBITDA growth and further capital returns to shareholders through additional real estate sales should lead to strong shareholder returns over the coming years.
The shares of Las Vegas Sands Corporation underperformed in the first quarter as investors remained concerned about the lack of growth in the Macau market given the ongoing economic challenges in China. There is also uncertainty about the return on investment the company will generate from its recent $2 billion investment in Macau. We are optimistic about the prospects for this investment and believe Las Vegas Sands should capture additional market share and generate a respectable return on capital in 2026.
Management maintains a healthy and liquid balance sheet at only 2 times net debt to cash flow and is currently buying back approximately $2 billion of its stock a year or 7.5% of the company, while paying out a well-covered and respectable 2.5% yielding dividend. The shares are currently valued at less than 7.5 times its estimated 2025 cash flow (EBITDA) which represents a 6 multiple point discount to its historical valuation. We expect the company’s valuation to improve as investors begin to see the return from its recent capital projects and business activity reaccelerates in Macau.
Recent Activity
Table IX.
Top net purchases for the quarter ended March 31, 2025
| Quarter End Market Cap($ billions) | Net Amount Purchased($ millions) | |
|---|---|---|
| American Tower Corporation | 101.7 | 105.8 |
| Prologis, Inc. | 106.1 | 62.4 |
| Wynn Resorts, Limited | 8.9 | 58.6 |
| CRH public limited company | 59.6 | 57.5 |
| Taylor Morrison Home Corporation | 6.1 | 49.3 |
In our prior quarterly letter, we articulated that while we had exited our investment in American Tower Corporation in 2024 due to fair to full valuation relative to the company’s growth prospects, we may look to reacquire shares in the future due to our favorable view of the business model, secular growth, and superior management team. The opportunity presented itself sooner than we had anticipated. We re-acquired shares of American Tower in the first quarter at more attractive valuation levels combined with higher earnings visibility.
American Tower is a global owner of 150,000 wireless tower communication sites with a heavy emphasis on developed markets. We remain optimistic about the long-term growth prospects for American Tower given strong secular growth expectations for mobile data usage, 5G spectrum deployment and network densification (with 6G around the corner), edge computing (possible requirement of mini data centers next to a tower presents an additional revenue opportunity), and growth in connected IoT devices (e.g. homes and cars), which will require more wireless bandwidth usage and continued increased spending by the mobile carriers. In our view, shares of American Tower remain attractively valued on an absolute basis and relative to other data infrastructure companies, bookings activity is accelerating, and we believe the company will be able to deliver underlying per share organic earnings growth in the high single-digit range (with upside optionality through capital allocation opportunities such as share repurchases).
During the quarter we re-acquired shares of best-in-class industrial REIT Prologis, Inc.
For the last year we have been cautious on industrial REITs, as the companies were facing several near-term headwinds that included demand normalization to pre-pandemic levels (elongated corporate decision making), elevated supply deliveries in 2024, moderating rent growth in most geographic markets, inventory de-stocking, and pricey headline valuations relative to other REIT categories. As we noted at the time, we were likely to revisit industrial REITs at a later point given our optimism for the multi-year prospects for industrial REITs. Our optimism remains predicated on a compelling multi-year outlook for demand/supply/rent growth, significant embedded growth potential from in-place rents that are generally 30% below market rents, and several secular demand tailwinds (e-commerce, supply chain logistics, more inventory safety stock, near-shoring/onshoring).
We began re-acquiring shares for four reasons. First, we recently observed a notable pick up in leasing activity, which gave us confidence that the industry is on a better footing than a year ago. Second, we are encouraged by the sharp decline in supply deliveries forecasted for 2025 (down 50-75% year-over-year). Third, we expect that improved demand and supply can support stabilizing rents in most markets over the next year. Fourth, valuation multiples for industrial REITs screened more favorable following a recent correction in their share prices.
Prologis owns a high-quality real estate portfolio that is concentrated in major global trade markets and large population centers across the Americas, Europe, and Asia. It has an unmatched global platform, strong competitive advantages (scale, data, and technology), an exceptional management team, and attractive embedded growth prospects. We continue to believe the appreciation potential for Prologis’ shares remains compelling given that the company’s rents on its in-place leases are more than 40% below current market rents, thus providing a strong runway for cash flow and earnings growth in the next several years.
Wynn Resorts, Limited is the preeminent luxury global owner and operator of integrated resorts (hotels and casino resorts). The company has developed “best-in-class” real estate assets in Las Vegas (Wynn and Encore), Boston (Encore Boston Harbor), and Macau (Wynn Macau and Wynn Palace). The company continues to invest in its hotel and casino assets to maintain its lead in each market.
We are also bullish on the prospects for the company’s newest development – the Wynn Al Marjan Island in the UAE (expected to open early in 2027). We believe the UAE is the most exciting new market for integrated resort developments in decades.
At its recent price of only $70 per share, the shares are valued at less than 7.2 times 2025 estimated cash flow versus a long-term average multiple of 13 to 15 times cash flow. We believe Wynn’s discounted valuation reflects no growth in Las Vegas, Macau, and Boston. Further, we believe its UAE development could represent more than $35 per share in value on an $70 per share stock.
Wynn’s management agrees that its shares are highly discounted as they have been allocating incremental capital toward share repurchases. In addition, Tilman Fertitta, a highly successful hotel, casino, and entertainment executive, has acquired more than $1 billion of Wynn shares (including $150 million in his most recent March 2025 purchase) and is now the largest shareholder of Wynn with a 12% stake in the company.
Table X.
Top net sales for the quarter ended March 31, 2025
| Quarter End Market Cap($ billions) | Net Amount Sold ($ millions) | |
|---|---|---|
| Equinix, Inc. | 79.4 | 114.1 |
| GDS Holdings Limited | 4.9 | 84.2 |
| Digital Realty Trust, Inc. | 49.2 | 55.7 |
| Expedia Group, Inc. (EXPE) | 21.7 | 52.1 |
| Blackstone Inc. | 171.6 | 40.3 |
We continued to actively manage the portfolio and materially reduced our investment in data center companies Equinix, Inc. and Digital Realty Trust, Inc. due to company specific reasons in combination with reallocating capital to companies/sectors with more attractive investment prospects.
In the most recent quarter, we reduced the Fund’s exposure to Equinix. While we remain optimistic about the company’s ability to drive outsized bottom-line earnings growth through a combination of sales growth and operating leverage flow-through, the stock enjoyed two years of superior performance and valuation levels were no longer as compelling as other investment ideas we were surfacing. We may look to revisit the sizing of our investment should valuation levels relative to growth prospects become more attractive. Equinix is a blue chip data center operator with strong pricing power and the ability to drive outsized returns on capital.
The Fund also trimmed its investment in Digital Realty. As discussed earlier, our views on the risk/reward opportunity for the shares became more tempered early in 2025 due to an outsized valuation premium (sector leading both on historical basis and absolute level) combined with concerns regarding slowing demand from all-time highs, especially for larger footprint incremental new leasing. While we do not foresee a risk to bottom-line earnings over the next two years, the shares were pricing in elevated levels of new leasing, which we do not believe is sustainable. At recent trading levels, shares of Digital Realty have become more attractively valued and we may revisit our investment in the coming quarters. As always, we will review our investment through the lens of our capital allocation framework of identifying companies with the best risk-adjusted return prospects.
We first began to acquire shares of GDS Holdings Limited in early 2024 between $6 and $9 per share and continued to acquire shares as we got further proof points that our investment thesis was progressing. The stock closed out 2024 at $24 per share, representing a full year return of nearly 250%! While we remain optimistic regarding the multi-year growth prospects for the company and stock, we reduced our position due to risk management considerations given our investment in GDS grew to be an outsized position in the portfolio combined with several “needle moving” elements of our investment thesis playing out in a condensed timeframe. We always remain cognizant of the “unknowns” or risks that are harder to underwrite such as evolving geopolitical tensions, including the potential implementation of further restrictions to servers/chips, which is a consideration that informs position sizing despite the highly compelling risk/reward opportunity. While we don’t conflate price volatility with risk, other considerations include still elevated debt levels to drive continued equity volatility, potential competition in international markets over the next few years, and the possibility for external capital needs to execute on a higher growth (and higher capex) business plan. That said, shares remain compelling at approximately 10 times cash flow when adjusting for the company’s now minority stake in GDS International (renamed DayOne) versus REIT transactions in China at 13 to 15 times cash flows. Please refer to our third quarter 2024 shareholder letter where we lay out our investment case in greater detail.
Concluding Thoughts on the Prospects for Real Estate and the Fund
We are mindful that the equity market environment may remain challenging in the months ahead given that economic growth is slowing, inflation is likely to increase on the heels of the implementation of tariffs, and consumer and corporate confidence is waning. In our view, however, a portion of these concerns are reflected in current share prices, and we are identifying attractively valued best-in-class real estate companies.
Stepping back, we believe market turmoil will pass. We also believe we have developed the right real estate product for long-term success. In our opinion, the merits of our more equity-like and growth-oriented approach to investing in real estate, and our more comprehensive, flexible, liquid, and actively managed investment approach will shine even brighter in the years ahead because investing in real estate requires more discerning analysis (there are more “winners” and “losers”) than in the past.
We continue to believe that our highly differentiated real estate fund enjoys, in our opinion, attractive attributes compared to actively managed REIT funds, passive/ETF real estate funds, non-traded REITs, and private real estate. Please see our fourth quarter 2024 shareholder letter where we outline the case for our Fund versus various real estate products.
Our real estate team remains focused and energized to deliver for you, our shareholders, over the long term.
Table XI.
Top 10 holdings as of March 31, 2025
| Quarter End Market Cap($ billions) | Quarter End Investment Value($ millions) | Percent of Net Assets (%) | ||||
|---|---|---|---|---|---|---|
| Welltower Inc. | 98.3 | 130.8 | 6.3 | |||
| American Tower Corporation | 101.7 | 117.2 | 5.7 | |||
| Jones Lang LaSalle Incorporated | 11.7 | 115.2 | 5.6 | |||
| CBRE Group, Inc. | 39.2 | 102.0 | 4.9 | |||
| Brookfield Corporation | 86.2 | 80.8 | 3.9 | |||
| CoStar Group, Inc. | 33.4 | 66.5 | 3.2 | |||
| Prologis, Inc. | 106.1 | 61.0 | 3.0 | |||
| Hilton Worldwide Holdings Inc. | 54.5 | 57.2 | 2.8 | |||
| Equinix, Inc. | 79.4 | 55.9 | 2.7 | |||
| Wynn Resorts, Limited | 8.9 | 54.8 | 2.7 |
I proudly remain a major shareholder of the Baron Real Estate Fund.
Sincerely,
Jeffrey Kolitch, Portfolio Manager
|
The performance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate; an investor’s shares, when redeemed, may be worth more or less than their original cost. The Adviser waives and/or reimburses or may waive or reimburse certain Funds expenses pursuant to a contract expiring on August 29, 2035, unless renewed for another 11-year term and the Funds’ transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent month end, visit BaronCapitalGroup.com or call 1-800-99-BARON. Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary prospectuses contain this and other information about the Funds. You may obtain them from the Funds’ distributor, Baron Capital, Inc., by calling 1-800-99-BARON or visiting BaronCapitalGroup.com. Please read them carefully before investing. Risks: All investments are subject to risk and may lose value. Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary prospectus contain this and other information about the Funds. You may obtain them from the Funds’ distributor, Baron Capital, Inc., by calling 1-800-99-BARON or visiting Baron CapitalGroup.com. Please read them carefully before investing. Risks: In addition to general market conditions, the value of the Fund will be affected by the strength of the real estate markets as well as by interest rate fluctuations, credit risk, environmental issues and economic conditions. The Fund invests in companies of all sizes, including small and medium sized companies whose securities may be thinly traded and more difficult to sell during market downturns. The Fund may not achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk. Discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the respective portfolio managers only through the end of the period stated in this report. The portfolio manager’s views are not intended as recommendations or investment advice to any person reading this report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them. This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Real Estate Fund by anyone in any jurisdiction where it would be unlawful under the laws of that jurisdiction to make such an offer or solicitation. The portfolio manager defines “Best-in-class” as well-managed, competitively advantaged, faster growing companies with higher margins and returns on invested capital and lower leverage that are leaders in their respective markets. Note that this statement represents the manager’s opinion and is not based on a third-party ranking. Price/Earnings Ratio or P/E (next 12-months): is a valuation ratio of a company’s current share price compared to its mean forecasted 4 quarter sum earnings per share over the next twelve months. If a company’s EPS estimate is negative, it is excluded from the portfolio-level calculation. BAMCO, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Baron Capital, Inc. is a broker-dealer registered with the SEC and member of the Financial Industry Regulatory Authority, Inc. (FINRA). |
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