Baron WealthBuilder Fund | Q1 2025

Dear Baron WealthBuilder Fund Shareholder:

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 lost ground in the first quarter of 2025, retreating 7.88% (Institutional Shares), lagging its mega-cap dominated benchmark, the S&P 500 Index (the Index), and the globally oriented MSCI ACWI Index (the Global Index), which were down 4.27% and 1.32%, respectively.

Over the one-year period, the Fund gained 4.30%, trailing the results of both the Index and Global Index, which advanced 8.25% and 7.15%, respectively.

While the Fund modestly trailed the Index since its inception, the Fund’s since inception annualized return of 11.84% is ranked in the top percentile of its Morningstar category over that period. While disappointed in the relative returns compared to the Index, we are proud of this long-term ranking achievement in the peer category and absolute results.

As of 03/31/2025, the Morningstar Aggressive Allocation Category consisted of 183, 183, 167, and 175 share classes for the 1-, 3-, 5-year, and since inception (12/29/2017) time periods. Morningstar ranked Baron WealthBuilder Fund Institutional Share Class in the 49th, 92nd, 9th, and 1st percentiles, respectively.

Morningstar calculates the Morningstar Aggressive Allocation 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.

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The recent quarter should not be viewed in isolation. It follows a period of surprising and drastic change in the U.S. political landscape. The business and investor euphoria experienced following the conclusion of the U.S. Presidential election at the end of 2024 was met with the realities of policies enacted (and postured) 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 are now concerned about tariffs hindering international trade, inflation harming discretionary spending, and federal spending cuts impacting economic growth. It has been a whipsaw of forecasts. We did not attempt to predict the 2024 election outcome, nor how investors would react 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 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, of which we attempt to populate in the underlying Baron Funds. (Fund underperformance against its Index was attributable to higher exposure to small- and mid-cap stocks during times in which larger, more value-oriented stocks led performance.) These businesses should face reduced competition in such economies, and the executive teams should position their business to thrive. The portfolio turnover of most underlying Baron Funds has remained very low throughout this period. A transitional period could be volatile, and that has once again been the case. But the Fund is weathering this most recent period. Since the U.S. election on 11/5/2024 when the macroeconomic and political environment shifted, the Fund declined 2.54% while the Index lost a similar 2.40% through the end of the quarter.

In the quarter, our Baron Emerging Markets and International Growth Funds performed the best as investors believed an isolated U.S. would assist these markets’ other trading partners. Our higher growth and concentrated portfolios like Baron Partners, Fifth Avenue Growth, and Opportunity Funds performed the worst because of a potential slowdown in the domestic economy. While our small-cap portfolios faced macro pressures, these funds performed relatively well versus their primary benchmarks.

For more information on the performance of the underlying Baron Funds, we encourage you to read their respective quarterly letters.

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 63.1% of the Fund (compared to only 19.0% for the Index). While our small- and mid-cap growth investments have been successful over our Firm’s 42-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 during the year and in many instances over the last decade. Since the Fund’s inception over 7 years ago the 1-year rolling monthly returns of the Russell 1000 Growth Index have outperformed the Russell 2000 Growth Index 79% of the time including 6 out of the past 7 calendar years.

* Not annualized. 
† Performance is calculated from the time the Fund was added to Baron WealthBuilder Fund: Baron Durable Advantage Fund – 3/13/2018; Baron Global Advantage Fund – 1/9/2018; Baron FinTech Fund – 2/27/2020; Baron Health Care Fund – 10/18/2018; and Baron Real Estate Income Fund – 5/17/2021.

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.

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 12/31/2022, 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 3-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. Table III provides a more complete look at how the Fund and various indexes performed during the pandemic and its aftermath.

We do not yet know if the challenges caused by the COVID-19 Pandemic will persist. Volatility has remained high, but we are hopeful that interest rate increases, policy factors, and COVID-19 hangovers are ending. However, as discussed above, 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 Benchmark since the start of this cycle. However, the Fund’s return has continued to meaningfully exceed small-cap growth indexes.

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. 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,