Baron WealthBuilder Fund | Q2 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 performed well as equity markets rallied to new all-time highs during the second quarter, recouping all losses from the prior quarter. The Fund appreciated 10.45% (Institutional Shares) during the June quarter, performing similarly to its primary benchmark, the S&P 500 Index (the Index), and modestly lagging the globally oriented MSCI ACWI Index (the Global Index), which were up 10.94% and 11.53%, respectively. The Fund fared well versus peers in the Morningstar Aggressive Allocation Category (the Peers), which were up 7.13%*

As of June 30, 2025, the Morningstar Aggressive Allocation Category consisted of 94, 94, 90, and 92 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 2nd, 28th, 40th, and 1st percentiles, respectively.

* As of June 30, 2025, the annualized returns of the Morningstar Aggressive Allocation Category Average were 11.32%, 12.76%, 11.55%, and 7.56% for the 1-, 3-, 5-year, and since inception (12/29/2017) periods, 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-lfees and other costs automatically deducted from fund assets.

Despite experiencing intermittent bouts of underperformance in recent years, the Fund's long-term track record remains outstanding. The Fund's annualized return of 12.91% since inception is somewhat comparable to the Index (+13.76%) and meaningfully ahead of the Global Index (+9.96%) and Peers (+7.56%). As a result, the Fund ranked in the top percentile of its Peer group since inception. While disappointed with recent relative returns, we are proud of the Fund's long-term absolute and relative performance.

The recent quarter should not be viewed in isolation. 2025 has been a period of surprise 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 in some cases, enacted, paused, and/or withdrawn) to begin 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 remained concerned about tariffs hindering international trade, inflation harming discretionary spending, federal spending cuts impacting economic growth, and the latest political wrangling. The year has featured 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.

More challenging economic environments tend to favor our core growth quality, competitively advantaged businesses, which are well represented in the underlying Baron Funds. We believe these businesses will face reduced competition from new entrants in such economies, and the executive teams will position their business to thrive. The portfolio turnover of most underlying Baron Funds has remained low throughout this period. A transitional period is often volatile, and that has once again been the case. We are pleased that the Fund is weathering this period well. Since the U.S. election on 11/5/2024 when the macroeconomic and political environment shifted, the Fund gained 7.63%, slightly trailing the Index, which rose 8.28%.

Investor concerns about tariffs and government spendings cuts subsided in the most recent quarter. There has been a trickle of positive news on trade deals and the expectations that more agreements will transpire. A relatively short and decisive war with Iran had minimal economic impact and (we are hopeful) could improve long-term regional stability.

Against this improving backdrop, the Fund's performance was driven by underlying Baron Funds with meaningful exposure to larger-cap, technology-oriented businesses. This group includes Baron Fifth Avenue Growth Fund, Baron Opportunity Fund, Baron Global Advantage Fund, and Baron Durable Advantage Fund. These underlying Baron Funds generally benefited from exposure to Meta Platforms, Inc. and strong-performing semiconductor (NVIDIA Corporation, Taiwan Semiconductor Manufacturing Company Limited, and Broadcom Inc.) and/or software (Microsoft Corporation, Cloudflare, Inc., Zscaler, Inc., and Snowflake Inc.) stocks, which were up sharply in the period due to outstanding financial results and ongoing momentum around the "Al trade."

Multi-channel commerce platform Shopify Inc., held in most of the larger cap underlying Baron Funds, also performed well due to strong financial results and a de-escalation in trade tensions. The company reported 27% year-over-year revenue growth, with gross merchandise volume up 23%, driven by continued expansion into offline retail, international markets, and business-to-business commerce. Shopify also continued to gain share in its core domestic e-commerce market. While tariffs have increased uncertainty, Shopify's diverse merchant base and resilient business model position it well to navigate ongoing challenges. The company remains focused on reinvesting in the business, continuously improving its product, and expanding its addressable market opportunity.

The high-conviction, non-diversified Baron Partners and Baron Focused Growth Funds also contributed to the Fund's gains in the period, with most of the strength coming from meaningful positions in electric vehicle manufacturer Tesla, Inc. and global digital music service provider Spotify Technology S.A. Despite ongoing macroeconomic challenges and regulatory complexities, Tesla's shares rebounded after the company completed a limited commercial rollout of its highly anticipated robotaxi business in Austin-following more than a decade of development and billions of dollars in investment. This milestone signals a potentially transformative shift in the automotive industry and opens a sizable new market beyond the company's core operations. Investor sentiment also improved after Elon Musk stepped back from government-related engagements, boosting confidence in Tesla's near-term execution. Tesla introduced a refreshed Model Y globally, featuring design and performance upgrades, and outlined plans to unveil new mass-market models starting next quarter. Meanwhile, the company is progressing toward scaling production of its humanoid robot, adding another dimension to its long-term growth story.

Spotify's share price was lifted by solid underlying results and the company's durability amid an unpredictable macroeconomic environment. Spotify has been on a path to structurally increase gross margins, aided by its high-margin artist promotions marketplace, growing contribution from podcasts, and structural investments in advertising. Users continued to grow at a double­-digit pace despite recent price hikes. Spotify remains a sticky subscription product with relative resilience in times of consumer uncertainty. The company also continued to innovate on the product side, calling 2025 the "year of accelerated execution," with priorities in improving advertising, expanding into video, developing a Super Premium tier, and taking more market share.

Baron Health Care Fund and Baron Real Estate Income Fund were the only underlying Baron Funds to detract from performance in the period, as sector-specific headwinds weighed on performance. Health Care performance was hampered by multiple factors, including regulatory uncertainty, particularly around drug pricing and Medicare Advantage reimbursement rates, federal investigations involving sector heavyweight UnitedHealth Group Incorporated, disruption at the Food and Drug Administration and cancellations/delays of National Institutes of Health grants for academic research, and concerns about tariffs on the pharmaceutical industry. Similarly, REITs faced headwinds from persistently high interest rates and category-specific challenges from tariff-related pressures and broader macroeconomic uncertainty.

From a relative standpoint, the Fund performed in line with the Index as style-related tailwinds were offset by disappointing stock selection. Contrary to last quarter, when overexposure to the Beta factor hampered relative results, the Fund's higher exposure to Beta added value in the second quarter. Higher beta stocks experienced one of their best quarters of performance in the last 25 years. This helped overshadow headwinds from the Fund's overexposure to the Mid Capitalization (mid-cap stocks) factor given large-cap stocks outperformed in the period. While the Fund does have exposure to large-cap stocks, it has always been meaningfully overexposed to small- and mid-cap stocks when compared to the Index.

Adverse stock selection was mostly attributable to the underlying Baron Funds' lower exposure to certain mega-cap Magnificent Seven names that performed exceptionally well in the period, such as Microsoft, NVIDIA, Alphabet Inc., and Meta. Lower exposure to mega-cap company Broadcom and lack of exposure to Netflix, Inc. also hurt relative results in the period.

* 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.

We invest in companies of any market capitalization that we believe will deliver durable growth from the development, advancement, and/or use of technology. We invest principally in U.S. securities but may invest up to 35% in non-U.S. securities.

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 62.5% of the Fund (compared to only 18.8% 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 seven and a half years ago, the one-year rolling monthly returns of the Russell 1000 Growth Index have outperformed the Russell 2000 Growth Index 80% of the time including six out of the past seven 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 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. 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 meaningfully exceed the small-cap growth index.

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,