Baron Real Estate Fund | Q3 2026

The challenges facing much of public real estate in 2026 persisted in the most recent quarter. For the three-month period ended September 30, 2026, Baron Real Estate Fund® (the Fund) decreased 13.05% (Institutional Shares), underperforming the MSCI USA IMI Extended Real Estate Index (the Real Estate Index), which declined 10.53%, and the MSCI US REIT Index (the REIT Index), which declined 6.33%.

Despite these near-term headwinds, the Fund's long-term performance remains strong. According to Morningstar, the Fund was ranked #1 in the Real Estate category since inception (December 31, 2009) through September 30, 2026. It also ranks in the top 1% of all real estate funds over both the trailing 10- and 15-year periods ended September 30, 2026.

Latest Thoughts

Our real estate team recently presented our top-of-mind thoughts to the Baron portfolio managers and research analysts. Our key messages were as follows:

1. In our nearly 17 years managing the Baron Real Estate Fund®, 2026 has been uniquely challenging—nearly every one of the Fund's investment themes has faced headwinds, pressuring valuations across the board.
2. As a result, we believe much of public real estate now trades at compelling valuations.
3. Our optimism about public real estate and the Fund's long-term prospects remains firm, supported by compelling valuations and other favorable factors.

As of September 30, 2026, the Morningstar Real Estate Category consisted of 204, 197, 191, 149, 113, and 154 share classes for the 1-, 3-, 5-, 10-, 15-year, and since inception (December 31, 2009) periods. Morningstar ranked Baron Real Estate Fund Institutional Share Class in the 98th, 74th, 71st, 1st, 1st, and 1st percentiles, respectively. On an absolute basis, Morningstar ranked Baron Real Estate Fund Institutional Share Class as the 201st, 160th, 139th, 1st, 1st , and 2nd best performing share class in its Category, for the 1-, 3-, 5-, 10-, 15-year, and since inception periods, respectively.

As of September 30, 2026, Morningstar ranked Baron Real Estate Fund R6 Share Class in the 97th, 75th, 71st, 1st, 1st, and 1st percentiles, respectively. On an absolute basis, Morningstar ranked Baron Real Estate Fund R6 Share Class as the 200th, 161st, 140th, 2nd, and 1st best performing share class in its Category, for the 1-, 3-, 5, 10-year, and since inception periods, respectively.

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. 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.

Baron Real Estate Fund Institutional Share Class was rated 4 stars overall, 2 stars for the trailing 3 years, 2 stars for the trailing 5 years, and 5 stars for the trailing 10 years ended September 30, 2026. There were 197 share classes, 191 share classes, and 149 share classes for the 3-, 5-, and 10-year periods. The Morningstar Ratings™ are for the Institutional share class only; other classes may have different performance characteristics. The Morningstar Ratings are based on the Morningstar Risk-Adjusted Return measures.
 

We currently invest in REITs as well as eight additional non-REIT real estate-related categories. Allocations across these areas are dynamic and reflect our bottom-up research and assessment of relative opportunities, as outlined below.

* Individual weights may not sum to the displayed total due to rounding.

Investment Themes

REITs

We believe the outlook for REITs remains favorable for several reasons:

REITs have lagged. In the five years through September 30, 2026, the REIT Index trailed the S&P 500 Index by 74% cumulatively.

Several REITs offer compelling value. We have identified REITs trading at meaningful discounts to both historical norms and private market valuations:

• Multi-family and single-family rental REITs are valued at 6% to 7% capitalization rates versus private market rates of approximately 5% to 5.5%.
• Certain office REITs are valued at 7.5% to 8% capitalization rates versus private market values of 6% to 6.5%.
• Self-storage REITs are valued at 6% capitalization rates versus private market values of 5% to 5.5%.
• Tower REITs are valued at approximately 14 to 15 times adjusted funds from operations (“AFFO” or “free cash flow”) versus historically trading at 20 to 25 times AFFO.

Across property types—multi-family, single-family rentals, hotels, strip centers, office, life sciences, cold storage, self-storage, and timber—public market prices sit 10% to 50% below replacement cost or recent private transaction values. We believe this dislocation may attract private equity or other buyers seeking to take public REITs private.

Demand/supply dynamics are favorable. According to Green Street, demand is strong or improving across most categories, while new construction has fallen to decade lows amid high land, labor, and materials costs—a setup that, combined with occupancy above 90% in many properties, favors rent growth acceleration.

Cyclical and secular tailwinds. Real estate cycles typically run 7 to 10 years, and we appear early in the current one. Secular drivers—AI/cloud demand for data centers, an aging population, housing affordability pressures, suburbanization, 5G, and remote work—support multiple property types.

An AI haven. Many REITs are relatively insulated from AI-related disruption, backed by tangible assets, contracted cash flows, rent escalators, and well-covered dividends.

Solid fundamentals. Balance sheets are generally healthy, dividends are rising, and rents provide built-in inflation protection.

Attractive return prospects. We believe several REITs can deliver double-digit returns through a combination of earnings growth, dividend income, and multiple expansion.

As of September 30, 2026, we had investments in nine REIT categories representing 30.5% of the Fund’s net assets.

^† Exposure to Data Center REITs would be 7.7% if non-REIT data center company GDS Holdings Limited was included in the category.
^* Individual weights may not sum to the displayed total due to rounding.

Residential-related real estate

The housing market remains in a logjam. Home prices have risen roughly 50% over the past five years, while mortgage rates jumped from 3% to more than 7%, creating a buyers' strike among those priced out. At the same time, current homeowners—sitting on mortgages well below today's rates—are reluctant to sell, creating a sellers' strike (National Association of Realtors).

Despite these near-term headwinds, we remain firmly bullish on residential real estate long-term, for several reasons:

Early-cycle beneficiary. We believe we are early in the economic cycle, with potential tailwinds from stimulus, deregulation, and easing rates over time. Housing is especially sensitive to these shifts and carries a powerful multiplier effect on jobs, spending, and broader growth.

Secular tailwinds. Millennial household formation remains well below its long-term stabilized level. Buyers increasingly favor new homes for their layouts, efficiency, and lower maintenance. Meanwhile, the existing housing stock is aging (averaging 40-plus years), and homeowners with record equity are staying put longer—a combination that should support strong repair and remodeling activity.

AI beneficiary. Housing and select building products companies benefit from asset-heavy structures that offer relative insulation from AI disruption—what we call HALO.

Attractive valuations. Several homebuilders trade below book value, versus a historical range of 1.0 to 1.3 times book—a mispricing underscored by three public homebuilders receiving acquisition offers at significant premiums in 2026. Many building-products companies trade at or near trough valuations. A more dovish Fed, as inflation approaches its 2% target, would be a further catalyst, since housing stands to benefit meaningfully from lower mortgage rates.

The structural case. The U.S. faces a housing shortage of more than 4 million homes relative to the demographic need. Annual construction remains near 1.4 million homes—roughly the same pace as the 1960s—even as the population has nearly doubled, from 180 million to 340 million (Census Bureau).

As of September 30, 2026, residential-related real estate companies represented 26.2% of the Fund’s net assets.

^* Individual weights may not sum to the displayed total due to rounding.

Travel-related real estate

We continue to believe several travel-related real estate companies are well positioned to benefit from cyclical and secular tailwinds, supporting strong fundamentals and share price performance ahead.

Cyclical tailwinds. The regulatory backdrop remains business-friendly, supported by 2025 tax policies (including bonus depreciation), a major AI investment cycle, and initiatives like the CHIPS Act, and inflation may moderate over time. Broad-based and middle class wage growth adds further support. Supply growth is projected below 1% over the next few years, well under the 2% to 2.5% long-term average per Green Street.

Secular tailwinds. While many view travel spending as purely cyclical, we see it as secular as well: delayed household formation, flexible/hybrid work arrangements, and muted business activity are shifting discretionary spending toward travel and away from durable goods.

Attractively valued examples:

• Hyatt Hotels Corporation - now 90% asset-light, trades at a 3 to 4 times multiple discount to hotel C-Corp peers and below private market valuations.
• Red Rock Resorts, Inc. - positioned in the attractive Las Vegas Locals market, with capacity to potentially double its portfolio; trades at only 9.7 times 2027 estimated cash flow.
• Airbnb, Inc. - an asset-light global platform with over 9 million listings and $4-plus billion in annual free cash flow, limited AI disruption risk (90% direct traffic, unique inventory), trading at 14 times 2027 estimated cash flow.

Private equity dry powder. With substantial capital on the sidelines, we believe discounted public travel companies are attractive take-private targets—a thesis already validated by the takeover bid for Fund holding Caesars Entertainment, Inc. We expect further activity if valuations stay depressed.

As of September 30, 2026, travel-related real estate companies represented 14.0% of the Fund’s net assets.

^* Individual weights may not sum to the displayed total due to rounding.

Commercial real estate services companies

In the first nine months of 2026, shares of CBRE Group, Inc., Jones Lang LaSalle Incorporated (JLL), and Cushman & Wakefield Ltd. declined despite strong earnings and outlooks, as investors worried about AI disrupting parts of their operations. While business lines like office leasing, valuation services, and property management may face AI-related pressure over time, we believe this multi-year concern is overstated and already reflected in share prices; we continue to monitor the risk.

We remain long-term optimistic. We believe these firms stand to benefit from the ongoing outsourcing and institutionalization of commercial real estate, share-gain opportunities in a fragmented industry, and an early-stage rebound in sales and leasing activity—supporting potential EPS growth of 12% to 15% over the next several years.

Valuations look attractive: CBRE trades at a discount to the S&P 500 multiple despite superior earnings growth and a pristine balance sheet. JLL trades at just 11 times 2027 estimated earnings versus a high-teens multiple we believe is justified by its improving business mix. Cushman & Wakefield trades at only 7 times 2027 estimated earnings—a highly discounted level, in our view.
 

Real estate-focused alternative asset managers

Shares of alternative asset managers declined in the first nine months of 2026 amid several headwinds: AI-related risk to software holdings, credit concerns in private loans, redemption limits on semi-liquid products (2% monthly/5% quarterly), delayed monetizations, and the risk that retail-channel growth disappoints. We view these pressures as non-existential and largely reflected in current valuations.

We remain optimistic long term on Brookfield Corporation, Brookfield Asset Management Ltd., and Blackstone Inc., each positioned to gain share in a growing industry through strong track records, global scale, and secular growth in alternatives—often with lower perceived volatility than other investments.

Valuations look compelling: Brookfield trades at $36 per share, well below management's estimated liquidation value of $67 per share. Blackstone trades near the low end of its five-year valuation range.
 

Property technology companies

Proptech—the convergence of real estate and technology—remains in the early stages of a data- and digitization-driven investment cycle that lets real estate businesses generate new revenue and cut costs. We recently began acquiring shares in Procore Technologies, Inc., a construction-industry software provider, and will elaborate in future letters.

As of September 30, 2026, these three themes, plus investments in pure-play building performance platform Legence Corp. and Chinese data center operator GDS Holdings Limited, represented 20.2% of the Fund's net assets.

* Individual weights may not sum to the displayed total due to rounding.

Shares of Airbnb, Inc. performed well in the quarter following strong second quarter results that exceeded expectations and a confident outlook for sustained growth acceleration. Airbnb operates a global marketplace connecting travelers with unique accommodations and experiences across over 220 countries and regions. Top-line growth was in the high teens with cash flow growth exceeding 20% in the quarter. With a dynamic pricing rollout that enables hosts to use real-time demand and market data to optimize occupancy and nightly rates, a boutique hotels platform buildout, and a forthcoming loyalty program representing meaningful untapped opportunities, we believe Airbnb is in the early stages of a durable, multi-year growth re-acceleration.

Mohawk Industries, Inc. is the world's largest manufacturer of flooring products, including carpet, tile, laminate, wood, luxury vinyl, and more. The company serves residential and commercial customers across the U.S., Europe, Latin America, and Asia-Pacific. Shares of Mohawk contributed to performance this quarter, driven by optimism around the company's leadership transition as well as strong second quarter earnings results. We have taken a favorable view that new CEO Paul De Cock will bring several positive changes to the business, including a sharper growth strategy, more disciplined capital allocation, and improved messaging to investors and sell-side analysts which we believe should help build investor confidence. Second quarter results beat expectations, driven by better-than-anticipated volumes, strong product placements and stocking at retailers, and outperformance in the commercial channel, all of which point to momentum building in the business. We are shareholders in Mohawk and believe that, with valuation at the low end of the industry peer group, effective execution of the new leadership strategy can help close the valuation gap and drive strong share price performance.

Shares of Procore Technologies, Inc., a leading provider of cloud-based construction management software for general contractors and real estate owners, contributed to performance. The company delivered its strongest quarter in over two years, with revenue growth accelerating to 16% and current remaining performance obligations, its key forward-looking bookings metric, growing 22% year-over-year. Results were driven by large enterprise general contractors and owner wins, with notable strength in the data center construction segment. Procore now runs 9 of the 10 largest North American sites. Procore’s new management team is also making strong progress on margin improvement, with second quarter operating margins improving by nearly 800 basis points year-over-year. The company raised its full-year 2026 revenue, margin, and free cash flow guidance, while issuing preliminary 2027 operating margin guidance that was well ahead of expectations. We continue to hold Procore and retain conviction. We believe the company is taking share against a flat construction backdrop, and that its upmarket shift toward larger, stickier customers supports durable teens growth and long-term value creation.

Meritage Homes Corporation, a U.S. homebuilder, was a detractor in the third quarter, giving back some of its strong second quarter gains when the share price surged 20%. The pullback reflects a broader slowdown in U.S. residential construction, as rising U.S. 10-year Treasury rates have driven mortgage rates higher and caused many prospective buyers to sit on the sidelines. This has weighed on residential-related stocks broadly, Meritage included. While we expect softer industry conditions to pressure revenue and margins in the near term, we believe the stock's depressed valuation—approximately 80% of tangible book value—already prices in much of this pain, and we continue to expect book value to compound over time. Looking further out, we remain confident in the multi-year growth runway for U.S. housing and Meritage's focused strategy of serving first-time homebuyers. For additional detail, please see the "Recent Purchases" section of the Q2 Baron Real Estate shareholder letter.

Following strong share price performance in the first six months of 2026 when its shares gained 38% through June 30, 2026, the shares of PENN Entertainment, Inc., a regional casino operator and online gaming company, detracted from performance during the quarter amid broad weakness in gaming stocks. The gaming sector posted weak August and September results as higher rates, geopolitical tensions, and other macro concerns pushed many investors to the sidelines. In our view, PENN's share price disconnected from its fundamentals. Second quarter results showed record retail segment revenue, segment margins expanding to 34.4%, and property adjusted cash flow increased $76 million year-over-year. PENN’s Interactive segment narrowed its loss to $9.5 million in the second quarter, from $62 million a year earlier, after the company exited ESPN BET and refocused on higher-return iCasino and Canadian markets. Management is prioritizing free cash flow and deleveraging, and it recently announced plans to move its New Orleans property onto land. Our conviction in PENN remains intact while we monitor progress. We believe a profitable Interactive business, stable regional demand, and a lower leverage profile will drive value over time.

Toll Brothers, Inc., a leading luxury homebuilder in the U.S., underperformed in the third quarter, giving back a portion of its strong second-quarter gains when the share price rose over 20%. The pullback reflects a broader slowdown in U.S. residential construction, as rising U.S. Treasury rates have pushed mortgage rates higher and caused many prospective buyers to sit on the sidelines. While we expect softer industry conditions could pressure near-term revenue and margins, Toll Brothers should be more insulated than most peers from elevated mortgage rates—approximately 25% of its buyers pay all cash, and those who finance put down over 30% on average. This speaks to the exceptional financial strength of the Toll Brothers customer.

Looking further out, we see a long runway for growth. The company holds only a 2% market share, faces limited competition from other large national homebuilders, and owns a valuable land portfolio that provides a durable competitive advantage. Despite these strengths, the stock trades at just 1.5 times our 2026 estimated tangible book value, well below its prior peak multiple of 2.0 times. We believe a multiple of 1.8 to 2.0 times is ultimately warranted, supported by management's aspiration to generate a consistent return on equity in the high teens to 20% or better.

We began acquiring shares of Legence Corp. during the quarter. Legence is a leading provider of engineering, installation, and maintenance services for mission-critical systems in buildings, focused on complex heating, ventilation, and air conditioning (HVAC), process piping, and other mechanical, electrical, and plumbing systems for new and existing facilities. While data centers make up most of the business today, the company also does substantial work across manufacturing, life sciences and health care, government and education buildings. We are excited about the prospects for the business for several reasons:

1. Quality business with a unique combination of design and build capabilities. Legence combines both design and build services on a national scale, while competitors typically offer either engineering or installation, and only on a regional basis. The company's relationships with its top 10 clients average more than 23 years, evidence of the value it provides.
2. Structural advantages in the two likeliest growth bottlenecks: labor and prefabrication capacity. Legence employs roughly 11,000 people, including over 8,000 skilled craftspeople, giving it the ability to move labor across regions and attract workers in a tight labor market. It also operates roughly 1.5 million square feet of prefabrication capacity for data center cooling systems, plus management has indicated that they can flex capacity further through automation and additional shifts. In a market where skilled labor is the key constraint, access to labor and the ability to leverage headcount through factory-controlled production are important differentiators that de-risk execution and protect project schedule certainty.
3. A direct play on the continued data center buildout. Legence designs, fabricates, and installs the mechanical, electrical, and cooling systems that make data centers run. Data centers and technology make up 60% or more of the company's backlog today, and management has described current demand as the strongest it has ever seen, with RFPs and inquiries currently at record levels.
4. Activity is showing signs of accelerating beyond just data centers, creating multiple potential paths forward for continued growth. While data centers remain the single biggest driver, onshoring of manufacturing, life sciences and health care, state and local government and education have all posted strong growth in recent quarters, giving Legence room to grow even if data center spending moderates. The company has also continued to consolidate the mechanical/electrical contracting industry, most recently closing the roughly $475 million acquisition of The Bowers Group in January 2026. M&A represents an additional growth lever that Legence can pull in a large and still highly fragmented industry.

5. Valuation is attractive. We view valuation as attractive, with the stock trading at less than 10 times our estimate of next year's cash flow. This is a significant discount both to the peer group, which trades in the mid-teens on next year's cash flow, as well as to where Legence has traded over the last year since its IPO. We believe there is potential for the multiple to move higher compared to today’s levels as Legence continues to prove its growth story.

    

While uncertainty around the sustainability of the AI-driven data center buildout may continue to weigh on the shares in the near term, we are excited about Legence's long-term growth prospects and compelling valuation. We see meaningful potential for share price appreciation over the coming years, driven by earnings growth and multiple expansion.

During the quarter, we initiated a position in Armstrong World Industries, Inc. following a roughly 25% decline in the share price over the preceding months. Armstrong is a leader in the design and manufacture of innovative interior and exterior architectural solutions, including ceilings, specialty walls, and exterior metal applications—serving a diverse array of commercial construction end markets across the U.S. We are excited about the company's prospects for several reasons:

1. High-quality, competitively advantaged business. Armstrong is the dominant player in mineral fiber ceilings, which represent approximately 80% of cash flow. This is a well-structured industry characterized by exclusive distribution, consistent pricing power, and stable repair and remodel demand. Competitive advantages include a large installed base of highly specified products, strong brand loyalty, and a culture of ongoing product innovation. The remaining 20% of cash flow comes from Architectural Specialties—a capital-light, rapidly growing business that delivers highly customized solutions for statement spaces.

2. Consistent double-digit cash flow compounder. Armstrong has compounded cash flow at a more than 10% rate over the past several years—impressively, against a backdrop of lackluster nonresidential construction activity—and expects to sustain that trajectory going forward. Mineral Fiber cash flow typically grows at a high single-digit rate, driven by modest volume growth, mid-single-digit price and mix contributions, and margin expansion through operating leverage. Architectural Specialties typically grows at a mid-teens rate, fueled by 10%-plus organic growth from cross-selling into the Mineral Fiber customer base and accretive tuck-in acquisitions.

3. New leadership. Mark Hersey assumed the role of CEO in April 2026 following the retirement of long-tenured CEO Vic Grizzle. Mark has been with Armstrong since 2011 and is a proven executive with deep institutional knowledge. We believe his leadership may tilt the company toward a more aggressive posture on accretive acquisitions and share repurchases, which could further accelerate growth.

We viewed the pullback as a compelling entry point.

At the recent share price of $163, Armstrong trades at approximately 11 times cash flow—well below its recent historical range of 13 to 15 times. We conservatively estimate the shares could appreciate 50% to 75% over the next several years as fundamentals reassert themselves and the valuation gap closes.

We added to the Fund's AAON, Inc. position following a disappointing second quarter earnings result. AAON designs and manufactures commercial and industrial HVAC equipment.

After very strong first quarter results, in which the company raised sales growth guidance to 40% to 45% from 18% to 20% previously (at a slightly lower gross margin outlook), on the back of enormous BasX data center growth of over 100%, AAON's second quarter was more mixed. Management raised full-year growth guidance further, to 55% to 60%, but gross margin missed expectations, declining 230 basis points year-over-year as the company absorbed the costs of scaling capacity so quickly. Though there has been a pattern of extreme volatility in results relative to expectations quarter to quarter, we have spent time with management and are hopeful they will begin to deliver with fewer negative surprises going forward.

We see near-term upside given a depressed valuation—near its lowest level in over five years—alongside what we believe is conservative guidance amid excellent top-line growth expectations and margin pressures that should, in part, be addressed through straightforward actions already underway. The price-cost dynamic should improve as price increases already taken flow through, with line of sight to its backlog converting at higher margins into 2027.

We believe revenue growth will remain robust, and with steadier, improving margin performance, we see attractive near-term upside in the shares—perhaps 40% to 50%—on a reasonable multiple of roughly 15 times cash flow, well below the company's 5-year average forward multiple of 20 times, applied to 2028 estimates.

In the most recent quarter, we exited the Fund’s investments in Fortune Brands Innovations, Inc., a leading provider of plumbing, outdoor, and security products for the residential construction and remodel sectors, and Boyd Gaming Corporation, a casino gaming company, and reallocated the capital to other real estate companies that we believe offer superior total return prospects in the next few years.

Following strong year-to-date share price performance, we modestly trimmed the Fund’s position in Equinix, Inc., a leading global operator of data centers, but remain bullish about the company’s long-term business prospects.

In our December 31, 2015 shareholder letter—following a challenging year for performance and a difficult start to 2016—we introduced the concept of "The Cycle of Market Emotions." Now, more than 10 years later, we are revisiting this topic.

A chart in my office entitled "The Cycle of Market Emotions" remains an important reminder that alongside careful market and company research and valuation analysis, market psychology plays a critical role in investing. Market and company fundamentals can be overshadowed by exaggeration—whether positive euphoria or negative desperation.

What is unusual about today's market is that these emotions are not evenly distributed. In our view, parts of the market appear to be moving toward the "thrill" and "euphoria" end of the spectrum, with valuations in certain cases reflecting expectations for sustained, aggressive earnings growth in the years ahead. At the same time, other parts of the market, including certain real estate-related categories, remain closer to the "anxiety" and "fear" end, weighed down by concerns we believe are overstated. We think this divergence itself is a source of opportunity.

We are mindful of a broad set of concerns about the market outlook, including:

• Persistently high long-term interest rates, with the Federal Reserve navigating a difficult balance between still-elevated inflation and a cooling labor market
• Geopolitical risk and oil price volatility, including the war in Iran and the war in Ukraine
• Increasing talk of an "AI bubble," with mega-cap technology returns concentrated in a small number of companies
• Tariff-related trade tensions and their uncertain effects on corporate margins and global growth

A few mitigating considerations stand out to us. On rates: we don't predict the path of interest rates at Baron, but there is a credible case that long-term rates could decline in the year ahead, particularly if the wars in Iran and Ukraine end—which would be a meaningful tailwind for several of our real estate-related holdings. On AI and real estate: several categories—REITs, commercial real estate services companies, some travel-related real estate, and real asset-focused alternative asset managers—sold off in 2026 on fears that AI could disrupt parts of their businesses. We believe the actual risk is more limited than current valuations suggest.

As always, we remain disciplined: focused on companies with durable competitive positions, compelling long-term growth opportunities, strong balance sheets, and excellent management teams, so that we are prepared to act—whether that means adding to positions where fear has overshot fundamentals, or maintaining flexibility should broader conditions deteriorate.

Valuations for many of our real estate-related investments remain reasonable, and in some cases attractive, supported by favorable demand/supply dynamics. We recognize there may be periods of continued volatility along the way. Nevertheless, we remain confident that the opportunities ahead—in real estate and across the Fund—will reward the discipline and patience of our shareholders, particularly amid the market divergence we've described above.

Our real estate team and I remain fully committed and energized to delivering strong long-term results.

I proudly remain a major shareholder of the Baron Real Estate Fund®.

Sincerely,