Baron WealthBuilder Fund | Q4 2025

Baron WealthBuilder Fund® (the Fund) is an allocation strategy that invests exclusively in Baron Funds. Its investments span market caps, sectors, and geographies to provide growth equity diversification.

The Fund closed out a challenging year on a high note, appreciating 4.95% (Institutional Shares) during the fourth quarter. This result surpassed its primary benchmark, the S&P 500 Index (the Index), as well as the globally oriented MSCI ACWI Index (the Global Index), which were up 2.66% and 3.29%, respectively. The Fund also outperformed peers in the Morningstar Aggressive Allocation Category (the Peer Group), which were up 2.02%.*

Solid absolute and relative performance in the fourth quarter was largely driven by a handful of underlying funds with material positions in private rocket, satellite, and spacecraft manufacturer Space Exploration Technologies Corp. (SpaceX). These include the high-conviction, non-diversified Baron Partners and Focused Growth Funds, as well as Baron Asset, Global Opportunity, and Opportunity Funds, which offer exposure to the U.S. mid-cap, global, and domestic all-cap equity asset classes, respectively. Strong stock selection, attributable to SpaceX, private AI company X.AI Holdings Corp. (xAI), and a dozen other holdings, helped overcome headwinds from being overexposed to small- and mid-cap growth stocks during a quarter when large caps continued to dominate market returns. The Fund’s absolute and relative performance was held back by its sizable positions in the Baron Growth and Baron Small Cap Funds, which are heavily invested in small- and mid-cap growth stocks.

For the year, the Fund rose 10.20%, trailing the Index and Global Index, which were up 17.88% and 22.34%, respectively. Performance also fell short of the Peer Group, which appreciated 13.03%.*

^* Not annualized.
^† Performance is calculated from the time the Fund was added to Baron WealthBuilder Fund: Baron SMID Cap ETF - 12/29/2025; Baron Durable Advantage Fund - 3/13/2018; Baron Global Opportunity Fund - 1/9/2018; Baron Financials ETF - 2/27/2020; Baron Health Care Fund - 10/18/2018; Baron Real Estate Income Fund - 5/17/2021; and Baron Technology ETF - 12/29/2025.
Performance data quoted represents past performance. Past performance is no guarantee of future results. The indexes are unmanaged. The index performance is not Fund performance; one cannot invest directly into an index.

Despite experiencing intermittent bouts of underperformance, with calendar year 2025 being a prime example, the Fund’s long-term track record remains solid. The Fund’s annualized return of 13.18% since inception is modestly below the Index (+14.33%) and ahead of the Global Index (+10.77%) and the Peer Group (+8.11%). As a result, the Fund ranked in the top percentile of its Peer Group since inception.

The recent year should not be viewed in isolation and should remind investors how the Fund has performed over the course of a full cycle. Results in 2025 follow a period of a surprise and drastic change in the U.S. political landscape. The business and investor euphoria experienced because of the Presidential election at the end of 2024 was met with the realities of policies enacted (and in some cases, enacted, paused, and/or withdrawn) at the start of 2025. Investors had believed that President Trump would usher in a pro-business era of less regulatory burdens, falling interest rates, and lower taxes. However, these same investors remain concerned about tariffs hindering international trade, inflation harming discretionary spending, and federal spending cuts, and the ongoing government shutdown impacting economic growth. It has been a whipsaw of forecasts.

We did not attempt to predict the 2024 election outcome, nor investor reaction to it. And we likewise are not attempting to predict current policy. We believe that our investments should achieve their goals regardless of political outcomes. Reduced regulatory burdens should enable our disruptive growth businesses to meet their objectives more quickly. And we find that more challenging economic environments tend to favor our core growth quality, competitively-advantaged businesses, which are well represented in the Fund. These businesses should face less competition from new entrants in such economies. And the executive teams should position their business to thrive. A transitional period is often volatile, and that has once again been the case.

Against this backdrop, the Fund’s annual performance was bolstered by underlying funds (Baron Partners, Focused Growth, Global Opportunity, and Opportunity Funds) with exposure to SpaceX and in some cases, xAI. SpaceX’s primary focus is on developing and launching advanced rockets, satellites, and spacecrafts, with the ambitious long-term goal of making life multi-planetary. SpaceX is generating significant value with the rapid expansion of its Starlink broadband service. The company is successfully deploying a vast constellation of Starlink satellites in Earth's orbit, reporting substantial growth in active users, and regularly deploying new and more efficient hardware technology. Furthermore, SpaceX has established itself as a leading launch provider by offering highly reliable and cost-effective launches, leveraging the company's reusable launch technology. SpaceX capabilities extend to strategic services such as human spaceflight missions. Moreover, SpaceX is making tremendous progress on its newest rocket, Starship, which is the largest, most powerful rocket ever flown. This next-generation vehicle represents a significant leap forward in reusability and space exploration capabilities. We value SpaceX using prices of recent financing transactions.

XAI was formed in early 2025 through the merger of X Holdings Corp. (“X”) (formerly Twitter) and X.AI Corp. (“xAI”), an AI company founded by Elon Musk in March 2023 with the mission to "understand the true nature of the universe". This strategic union paired xAI's large language models with X's real-time data and worldwide distribution, speeding Grok's development while providing X with transformative AI tools for search, personalization, and user engagement. Shortly after its founding, xAI released its AI model, Grok, which swiftly emerged as a top-tier contender. Fueling Grok’s performance was the rapid deployment of xAI's data centers: Colossus 1 became operational in just 122 days with 100,000 GPUs, while Colossus 2's first 100,000 GPUs deployed even faster, positioning xAI to pioneer a 1-gigawatt training facility. The upcoming 5^th version of Grok will use Colossus 2’s expanded resources and is expected to mark further improvement in the model's capabilities. Such early results demonstrate xAI’s innovation prowess and its prospects for enduring leadership in the highly competitive AI field. We value the stock based on material transaction in shares, leading to stock appreciation.

The Fund also benefited from exposure to Baron Emerging Markets and International Growth Funds given the outperformance of international and emerging market (EM) equities during the year. International and EM equities significantly outperformed their U.S. and global counterparts for first time in several years. The year was marked by a largely unexpected U.S. withdrawal from the decades-long multilateral security and trade equilibrium, which triggered a variety of defensive policy responses around the world. When the U.S. subsequently negotiated new bilateral trade agreements, or relented, and materially diluted tariff and other protectionist measures, the monetary, fiscal and reform stimulus already in the pipeline led to solid global economic growth, ultimately resulting in a much more constructive backdrop for EM and international equities.

Although the Fund had many more gainers than losers during the year, resulting in above-average annual performance of 10.20%, it failed to keep pace with the Index because of exposure to lagging small- and mid-cap growth stocks. Smaller-cap growth stocks trailed large caps for a fifth straight year. Given this backdrop, the Fund underperformed largely due to its elevated small- and mid-cap exposure via positions in Baron Growth, Small Cap, Discovery, and Asset Funds, which together accounted for approximately 40% of the Fund’s average assets. Investments in Baron Real Estate, Real Estate Income, and Health Care Funds that are heavily invested in certain sectors that were out of favor during the year (Real Estate, REITs, and Health Care) and lower exposure to the prime beneficiaries of AI (semiconductors) also proved costly.

The Fund is a compilation of our Baron Funds and provides broad equity exposure. All underlying Baron Funds follow a consistent investment philosophy and process. We do not try to mimic the indexes, and we do not alter our strategy to coincide with short-term macro events that we regard as unpredictable. We remain focused on underlying business fundamentals.

We believe small- and mid-cap growth stocks offer attractive return potential relative to their risk over the long term. Small- and mid-cap businesses represent 59.3% of the Fund (compared to only 19.2% for the Index). While our small- and mid-cap growth investments have been successful over our Firm’s 43-year history, these styles are occasionally out of favor. The past few years have been one of these environments. Large-cap growth companies outperformed small-cap growth companies this year and in many instances over the last decade. Since the Fund’s inception almost eight years ago, the one-year rolling monthly returns of the Russell 1000 Growth Index have outperformed the Russell 2000 Growth Index 81% of the time including seven out of the past eight calendar years.

Rather than only examining the Fund’s performance over a quarter or a year, we believe it is equally important to understand how the Fund has performed over the course of an economic cycle. The COVID-19 Pandemic and subsequent Macro-Induced Market Rotation has been very difficult for small- and mid-sized growth companies. Investors have favored larger-cap, value-oriented businesses that are deemed safer during a time of uncertainty. We believe this offers a great opportunity for long-term investors to invest in small- and mid-cap growth businesses at attractive prices. Markets first peaked in late February 2020 before rapidly dropping as the economy braced for the COVID-19 Pandemic. It recovered quickly, followed by another sizable drop based on macroeconomic factors. Over the three years of the COVID-19 Pandemic ended December 31, 2022, the Russell 2000 Growth Index, a small-cap growth index, gained only 1.96% on a cumulative basis. The Russell Midcap Growth Index fared better with a cumulative three-year return of 12.00%. With that backdrop, the Fund performed better and appreciated 28.11%. We believe protecting and growing clients’ assets during this challenging period positions long-term investors well for meaningful appreciation once the macro landscape changes. The table below provides a more complete look at how the Fund and various indexes performed during the pandemic and its aftermath.

Since the end of the COVID-19 Pandemic, volatility has remained high and new challenges have emerged. Global conflict has increased, geopolitics remains uncertain, and a global trade war is threatened. Given our weightings, the Fund’s performance has trailed the large-cap Index since the start of this cycle. However, the Fund’s return has continued to exceed the small-cap growth index.

Performance data quoted represents past performance. Past performance is no guarantee of future results. The indexes are unmanaged. Index performance is not Fund performance. Investors cannot invest directly in an index.

Source: FactSet SPAR.
Except for Standard Deviation and Sharpe Ratio, the performance based characteristics above were calculated relative to the S&P 500 Index.

* Represents less than 0.1%.

Thank you for joining us as fellow shareholders in Baron WealthBuilder Fund. We continue to work hard to justify your confidence and trust in our stewardship of your hard-earned savings. We remain dedicated to giving you the information we would want if our roles were reversed. We hope this letter enables you to make an informed decision about whether this Fund remains an appropriate investment.

Respectfully,