Baron Global Opportunity Fund: Latest Insights and Commentary

Global equity markets delivered a steady finish to an otherwise turbulent year in the fourth quarter of 2025, with moderate gains across major market indexes amid easing economic pressures and holiday-season stability. U.S. equities were a key contributor, with large caps outperforming while mid caps lagged and small caps delivered more modest advances. Market participation broadened beyond technology, with value stocks faring better than growth across all size segments. Multiple record highs were reached during the quarter, with the S&P 500 Index and Dow Jones Industrial Average peaking on December 24, the NASDAQ Composite reaching several all-time highs earlier in the quarter, and the Russell 2000 hitting a fresh peak on December 11. Volatility spikes in mid-October and mid-November proved short-lived, and the CBOE Volatility Index reached a 2025 low by late December, supported by resilient economic data.

Fourth-quarter gains were underpinned by moderating tariff impacts, robust corporate earnings, and continued monetary easing. Following a 25-basis-point rate cut in September, the Federal Reserve lowered rates twice more during the quarter, with additional 25-basis-point cuts in October and December. Investor sentiment reflected optimism, as Bank of America’s mid-December Global Fund Manager Survey showed the most bullish outlook in three-and-a-half years, with record-low cash levels and elevated allocations to equities and commodities, though concerns persisted around AI bubbles, private credit events, and elevated hyperscaler capital spending. While a prolonged government shutdown introduced some uncertainty, resilient labor market conditions and the absence of major inflation spikes helped support the rally. The Magnificent Seven complex also posted another positive quarter, rising 3.6% and accounting for nearly half of the S&P 500 Index’s gains, though performance moderated meaningfully from prior quarters.

Beyond the U.S., international equities outperformed during the quarter, supported by currency tailwinds and easing trade concerns, despite ongoing headwinds in continental Europe tied to corporate earnings and political instability. Emerging market (EM) equities advanced, led by semiconductor-driven strength in Korea and Taiwan and continued optimism around AI innovation. China was a notable laggard, detracting 215 basis points from EM returns, though this was more than offset by stronger performance across other regions.

Looking ahead, we remain focused on well-managed companies with durable competitive advantages and attractive growth prospects. While macroeconomic and policy uncertainty persists, we believe maintaining a disciplined, long-term perspective and emphasizing company fundamentals will be essential to navigating the evolving landscape.

CONTRIBUTORS

• Space Exploration Technologies Corp. (SpaceX) is a high-profile private company founded by Elon Musk. The company'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.

• Shopify Inc. is a cloud-based software provider for multi-channel commerce. Shares rose following an earnings release that exceeded Street expectations, highlighting the company’s ability to deliver rapid growth at scale, with both gross merchandise volume and revenue growing more than 30% year over year. Strength remains broad-based across geographies, customer types, and verticals, with resilient demand across channels and commerce categories. Shopify also signed Estée Lauder to Shopify Plus, a significant enterprise win that further validates the scalability of the platform. The company continues to expand its vertical total addressable market by deepening the breadth of solutions offered to merchants, while demonstrating success across its checkout button, payments attachment, Shopify Capital, and other services. Shopify has also emerged as a leading enabler of nascent AI-driven commerce, including shopping experiences embedded within large language models. Driven by a merchant-centric culture that fosters rapid innovation and product-led growth, we believe Shopify is a rare platform business with many call options across future growth verticals.
• Argenx SE is a biotechnology company best known for developing Vyvgart, the leading FcRn inhibitor for the treatment of autoimmune conditions. Shares rose as Vyvgart sales meaningfully exceeded investor expectations. Our conversations with management and neurologists continue to reinforce Vyvgart’s value as an important treatment option with strong long-term growth potential. The drug continues to launch well in generalized myasthenia gravis, and its launch in chronic inflammatory demyelinating polyneuropathy is off to a strong start. Over time, we expect Vyvgart to demonstrate efficacy across an expanding range of autoantibody-driven autoimmune conditions, and we are excited by argenx’s pipeline progress and upcoming Phase 3 readouts for Vyvgart in myositis and empasiprubart in multifocal motor neuropathy.

DETRACTORS

• Shares of Coupang, Inc., Korea's largest e-commerce platform, declined during the quarter. The weakness was initially driven by elevated upfront investment in the company’s new market, Taiwan, where aggressive customer acquisition, supplier onboarding, product procurement, and logistics infrastructure buildout weighed on near-term profitability. Investor sentiment was further pressured by a recent customer data breach, raising short-term concerns around compliance costs, reputational risk, and potential regulatory scrutiny. A softer domestic consumption backdrop in Korea toward year-end also contributed to more cautious positioning. Despite these headwinds, our conviction in Coupang remains intact. We view the data security issue as operational rather than structural, with no evidence of lasting customer attrition or erosion in competitive positioning. Over the longer term, Coupang continues to gain market share in its core business while leveraging its differentiated fulfillment infrastructure and technology to scale new services and expand into new markets. We remain invested.
• MercadoLibre, Inc., the leading e-commerce marketplace across Latin America, detracted from performance on concerns over near-term margin pressure and longer-term structural risks. Competitive intensity in Brazil rose during the second half of 2025, as Amazon and Shopee ramped promotional activity and prioritized growth. These actions compelled MercadoLibre to respond with discounts, expanded free shipping, and increased marketing spend, driving fears of margin compression. At the same time, investors began to discount emerging risks from agentic AI-driven commerce, which could pressure gross merchandise volume growth and take rates by reducing marketplace product discovery and high-margin advertising revenue growth. Continued volatility in Argentina, one of MercadoLibre’s fastest-growing markets, also raised concerns that weaker economic conditions could result in less reliable profit contribution. We maintain conviction in the company’s long-term opportunity. In our view, MercadoLibre is uniquely positioned to capture a significant share of Latin America’s underpenetrated e-commerce and fintech markets, supported by its scale, brand trust, and powerful ecosystem.
• Wix.com Ltd. provides cloud-based software that enables micro-businesses to build websites, manage operations, and engage with customers. Shares declined following a quarterly earnings release that emphasized higher-than-expected investment in Wix’s new acquisition, Base44. Wix sits at the center of an emerging AI-driven "vibe coding” debate, as a new cohort of companies using large language models to generate code from simple prompts by inexperienced, non-technical users has rapidly scaled annual recurring revenue, prompting investors to reassess the long-term outlook for Wix's web development business. In June, Wix acquired Base44, which has emerged as a leading player in the nascent vibe-coding category. The company has chosen to prioritize growth and market share in Base44, accepting near-term free cash flow margin pressure in the process. While uncertainty around customer lifetime values weighed on shares, we believe Wix’s core web development business is not being negatively impacted by vibe coding and that its product capabilities provide a strong right to win as the industry evolves. 

When reviewing performance attribution on our portfolio, please be aware that we construct the portfolio from the bottom up, one stock at a time. Each stock is included in the portfolio if it meets our rigorous investment criteria. To help manage risk, we are aware of our sector and security weights, but we do not include a holding to achieve a target sector allocation or to approximate an index. Our exposure to any given sector is purely a result of our stock selection process.

Baron Global Opportunity Fund (the Fund) appreciated 6.52% (Institutional Shares) in the fourth quarter, outperforming the MSCI ACWI Index by 323 basis points as positive stock selection more than offset adverse impacts from active sector exposures and style-related headwinds.

From a geographic perspective, favorable stock selection in developed markets accounted for all of the outperformance in the period, driven almost entirely from gains in the U.S. The only blemish in developed markets came from Israel, owing to declines from Wix.com Ltd. Partially offsetting the above was disappointing stock selection in emerging markets (EM), driven by the Fund’s investments in Korea and India. Investments in Argentina detracted another 130-plus basis points due to declines in MercadoLibre, Inc.

On a sector level, stock selection in Industrials accounted for more than three times the total outperformance in the period entirely due to gains from private rocket and spacecraft manufacturer Space Exploration Technologies Corp. (SpaceX), whose shares were revalued sharply higher in the period.  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.

Partially offsetting the above were investments in Consumer Discretionary, Information Technology (IT), and Financials. Weakness in Consumer Discretionary came from Korean e-commerce business Coupang, Inc. and Latin American e-commerce marketplace MercadoLibre, Inc. Coupang shares declined during the quarter with weakness initially driven by elevated upfront investment in the company’s new market, Taiwan, where aggressive customer acquisition, supplier onboarding, product procurement, and logistics infrastructure buildout weighed on near-term profitability. Investor sentiment was further pressured by a recent customer data breach, raising short-term concerns around compliance costs, reputational risk, and potential regulatory scrutiny. A softer domestic consumption backdrop in Korea toward year-end also contributed to more cautious positioning. Despite these headwinds, our conviction in Coupang remains intact. We view the data security issue as operational rather than structural, with no evidence of lasting customer attrition or erosion in competitive positioning. Over the longer term, Coupang continues to gain market share in its core business while leveraging its differentiated fulfillment infrastructure and technology to scale new services and expand into new markets. We remain invested.

Shares of MercadoLibre fell on concerns over near-term margin pressure and longer-term structural risks. Competitive intensity in Brazil rose during the second half of 2025, as Amazon and Shopee ramped promotional activity and prioritized growth. These actions compelled MercadoLibre to respond with discounts, expanded free shipping, and increased marketing spend, driving fears of margin compression. At the same time, investors began to discount emerging risks from agentic AI-driven commerce, which could pressure gross merchandise volume growth and take rates by reducing marketplace product discovery and high-margin advertising revenue growth. Continued volatility in Argentina, one of MercadoLibre’s fastest-growing markets, also raised concerns that weaker economic conditions could result in less reliable profit contribution. We maintain conviction in the company’s long-term opportunity. In our view, MercadoLibre is uniquely positioned to capture a significant share of Latin America’s underpenetrated e-commerce and fintech markets, supported by its scale, brand trust, and powerful ecosystem.

Within IT, broad-based weakness was led by sharp declines from web development services provider Wix.com Ltd. and software holdings Zscaler, Inc. and Cloudflare, Inc. Wix shares declined following a quarterly earnings release that emphasized higher-than-expected investment in Wix’s new acquisition, Base44. While uncertainty around customer lifetime values weighed on shares, we believe Wix’s core web development business is not being negatively impacted by vibe coding and that its product capabilities provide a strong right to win as the industry evolves. Shares of Zscaler and Cloudflare fell during the period, despite reporting better than expected earnings results. We retain conviction and believe both companies are well positioned for long-term growth.

Weakness in Financials was due to sharp declines from non-bank financial company Bajaj Finance Limited and payment company Block, Inc. 

Yearly Attribution Analysis (for year ended 12/31/2025)

Baron Global Opportunity Fund (the Fund) appreciated 27.53% (Institutional Shares) for the year, outpacing the MSCI ACWI Index, which increased 22.34%, by 519 basis points due to stock selection.

From a geographic perspective, favorable stock selection in developed markets accounted for all of the outperformance in the period, led by the Fund’s U.S. investments which contributed approximately 16.70% to relative results. Gains stemming from the U.S. were partially offset by adverse stock selection in Israel and the U.K. Higher exposure to emerging markets (EM) added value during the period but was offset by negative stock selection in Korea and Poland, which trailed their index counterparts. Investments in Argentina further detracted another 227 basis points due to declines from outsourced software developer Globant S.A.

On a sector level, stock selection in Industrials accounted for more than the entirety of the total outperformance in the period due to gains from private rocket and spacecraft manufacturer Space Exploration Technologies Corp. (SpaceX), whose shares were revalued sharply higher in the period. 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.

Underexposure to the lagging Health Care sector coupled with gains from argenx SE was another area of relative strength in the period. Argenx is a biotechnology company best known for developing Vyvgart, the leading FcRn inhibitor for the treatment of autoimmune conditions. Shares rose as Vyvgart sales meaningfully exceeded investor expectations. Our conversations with management and neurologists continue to reinforce Vyvgart’s value as an important treatment option with strong long-term growth potential. The drug continues to launch well in generalized myasthenia gravis, and its launch in chronic inflammatory demyelinating polyneuropathy is off to a strong start. Over time, we expect Vyvgart to demonstrate efficacy across an expanding range of autoantibody-driven autoimmune conditions, and we are excited by argenx’s pipeline progress and upcoming Phase 3 readouts for Vyvgart in myositis and empasiprubart in multifocal motor neuropathy.

Lack of exposure to Consumer Staples also added value during the period.

Partially offsetting the above was disappointing stock selection in Financials coupled with lower exposure to this better performing sector. Weakness in the sector was led by payment company Block, Inc. whose shares were down approximately 23% during the year.

Minimal exposure to the top performing Communication Services sector and overexposure to the lagging Consumer Discretionary sector also proved costly, detracting 200-plus basis points.