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Baron Real Estate Income Strategy

Symbol REALINCOME
SCT
Sector

Total Strategy Assets

$229.73 M

As of 12/31/2024

Inception date

01/31/2018

Performance

PerformanceAs of 12/31/2024

Portfolio or IndexQTDYTD1 Year3 Years5 YearsSince Inception 01/31/2018
Baron Real Estate Income Strategy (Net)-17.59%17.59%-0.31%9.71%10.21%
Baron Real Estate Income Strategy (Gross)-18.29%18.29%0.27%10.20%10.57%
MSCI US REIT Index-7.49%7.49%-3.43%3.10%5.25%
S&P 500 Index-25.02%25.02%8.94%14.53%13.10%

Performance InformationAs of 12/31/2024

Performance statistics3 Years5 YearsSince Inception
Standard Deviation (%)19.7419.2218.26
Sharpe Ratio-0.220.370.43
Alpha (%)2.836.795.46
Beta0.910.830.85
R-Squared (%)95.1988.5587.01
Tracking Error (%)4.717.547.23
Information Ratio0.660.880.69
Upside Capture (%)94.2399.5698.74
Downside Capture (%)85.9779.0680.58
Source: FactSet SPAR. Except for Standard Deviation and Sharpe Ratio, the performance based characteristics above were calculated relative to the Strategy's benchmark.

Portfolio Holdings & Characteristics

HoldingsAs of 01/31/2025

HoldingSector% of Net Assets
Welltower Inc.
Welltower Inc. (WELL) is a $45 billion diversified health care owner and manager of senior housing, including assisted and independent living. Core to its strategy is to partner with top-tier operators and health systems while providing operators access to its proprietary data analytics platform.
We are optimistic about the prospects for Welltower given the substantial opportunity for cyclical recovery and continued secular growth in its senior housing business through occupancy and rent growth. The company also benefits from its proven ability to recycle capital at attractive rates of returns, premier health care platform, partnerships with top-tier operators, and well-respected management team focused solely on creating value on a per-share basis.
Real Estate9.5%
Prologis, Inc.
Prologis, Inc. (PLD) is the world's largest industrial REIT, with a $100 billion global portfolio. 
In our view, industrial real estate has attractive fundamentals over the next several years, with organic growth among the highest across all real estate asset types. Stabilizing demand, driven by the growth of e-commerce, inventory building, and the need for infill locations to service "last mile" delivery, should be able to absorb a sharp decline in supply deliveries over the next several years. Given Prologis's assets, markets, management, and balance sheet, we believe the company is well positioned to benefit from this favorable fundamental backdrop.
Real Estate8.6%
Vornado Realty Trust
Vornado Realty Trust (VNO) is a $30 billion REIT that owns and operates a diversified portfolio of office and retail buildings, mostly in New York.
We believe Vornado is trading at a highly discounted valuation relative to its liquidation value. Vornado also has several sources of embedded value in its portfolio that we believe offer additional upside potential. These sources include improvements in the NYC office portfolio as workers return to offices, the bottoming of the NYC retail portfolio, and the development of the Penn District. Management appears open to pursuing paths to simplify and improve shareholder returns.
Real Estate7.9%
Equinix, Inc.
Equinix, Inc. (EQIX) is a network-neutral operator of 260 data centers across 70 metro areas and 33 countries in North America, Europe, and Asia-Pacific. It provides highly reliable facilities and offers low-latency interconnection to and among business partners, networks, and cloud service providers.
Equinix benefits from several long-term secular trends, including increasing internet traffic, IT outsourcing, cloud computing, AI, and mobility. As data and customer needs become more global, Equinix should be able to leverage its leading global data center platform. We believe Equinix can continue to grow through new data center development, rent increases, and the addition of value-added services supplemented by accretive acquisitions that increase market penetration and reach.
Real Estate6.3%
The Macerich Company
The Macerich Company (MAC) is a REIT that owns a high-quality portfolio of mall properties, primarily in California, New York, and Arizona.
Macerich should benefit from favorable real estate fundamentals for high-quality, well-located retail properties, with tenant demand exceeding available space and generating rent growth. The recent appointment of a new CEO to lead Macerich through a multi-year business transformation should also help simplify the company’s portfolio, reduce debt, and improve growth prospects. We believe the stock is undervalued and a successful conversion will result in a higher valuation multiple over time.
Real Estate5.0%
Simon Property Group, Inc.
Simon Property Group, Inc. (SPG) is the largest U.S. mall and outlet REIT, with a $90 billion portfolio consisting of malls (50%), outlets (40%) and international operations (10%).
Simon's size and balance sheet strength should ensure it will stay a dominant force in the U.S. mall business, where scale matters, and in the outlet business (50% market share). Simon has unparalleled access to a variety of capital sources and a distinct cost-of-capital advantage in raising debt and equity. In our opinion, the executive team, led by David Simon, is deep and talented. Simon continues to invest domestically and abroad. We believe the stock price is attractive, trading at a discounted valuation multiple.
Real Estate4.5%
Brookfield Corporation
Brookfield Corporation (BN) is one of the world's largest alternative asset managers, with $1 trillion in assets under management (AUM) and more than $500 billion of fee-generating AUM. It owns stakes in several publicly listed affiliates as well as other unlisted investments.
Brookfield Corporation's stake in listed companies, including Brookfield Infrastructure, Business Partners, Renewable Partners, and recently spun off Brookfield Asset Management, is worth $45 per share. We see another $25 per share in unlisted investments and $10 per share in carried interest generated for a total of $80 per share, well above the stock's current price. We think the company will profit from growth in alternative asset management, given its superior track record, highly respected CEO, global reach, scale, and diverse product offerings.
Financials4.0%
EastGroup Properties, Inc.
EastGroup Properties, Inc. (EGP) is an industrial REIT that owns a business distribution building portfolio valued at approximately $8 billion, located primarily in Texas, Florida, and California.
In our view, industrial real estate has attractive fundamentals, with organic growth that is among the highest across all real estate asset types. Strengthening demand, driven by the growth of e-commerce, inventory building, and the need for infill locations to service "last mile" delivery, continues to absorb elevated supply deliveries. Given EastGroup's assets, markets, management, and balance sheet, we believe the company is well positioned to continue benefiting from this favorable fundamental backdrop.
Real Estate4.0%
Kilroy Realty Corporation
Kilroy Realty Corporation (KRC) is a REIT that owns a $9 billion West Coast office portfolio in key markets that include San Francisco, San Diego, Los Angeles, and Seattle. CEO John Kilroy owns 1.2%, or $80 million, of total stock.
West Coast office real estate fundamentals are healthy, as record demand growth is exceeding modest new supply growth, leading to increasing market rents. Rents have reaccelerated in San Francisco and Seattle and continue to grow in LA and San Diego. Kilroy is expecting to grow cash flow significantly over the next several years from organic opportunities and an accretive development pipeline. We believe the stock is attractively priced at a discount to NAV.
Real Estate3.9%
Equity Residential
Equity Residential (EQR) is the largest U.S. apartment REIT, with over 75,000 units and a portfolio valued at over $35 billion, focused largely on coastal markets such as New York City, Washington, D.C., Los Angeles, Boston, and San Francisco.
Equity Residential is a blue-chip apartment REIT, with high-quality assets in markets with high barriers to entry, a proven management team, a state-of-the-art operating platform, and a strong balance sheet. Tenant demand for apartments remains strong, driven by low housing inventories and changing demographics. Following a period of decelerating rent growth driven by elevated new construction levels, we think Equity Residential should begin to see stabilizing rent growth.
Real Estate3.9%
Total
Total
57.3%

Contributors / DetractorsQuarterly as of 12/31/2024

Top ContributorsAverage WeightContribution
GDS Holdings Limited5.03%0.81%
Equinix, Inc.10.00%0.62%
Digital Realty Trust, Inc.5.91%0.53%
Vornado Realty Trust6.54%0.49%
The Macerich Company5.11%0.46%
Source: FactSet PA.

GICS Sector BreakdownAs of 01/31/2025

Sector

Real Estate

80.1%

Financials

9.3%

Consumer Discretionary

4.0%

Cash & Cash Equivalents

3.9%

Information Technology

2.7%

Sub-Industry

01/31/2025
Health Care REITs 16.30%
Industrial REITs 12.60%
Office REITs 11.70%
Retail REITs 11.00%
Multi-Family Residential REITs 10.30%
Asset Management & Custody Banks9.30%
Data Center REITs 8.60%
Hotels, Resorts & Cruise Lines4.00%
Internet Services & Infrastructure2.70%
Telecom Tower REITs 2.50%
Timber REITs 2.50%
Other Specialized REITs 2.00%
Hotel & Resort REITs 1.60%
Single-Family Residential REITs 1.10%
0369121518
Health Care REITs 16.30%
Industrial REITs 12.60%
Office REITs 11.70%
Retail REITs 11.00%
Multi-Family Residential REITs 10.30%
Asset Management & Custody Banks9.30%
Data Center REITs 8.60%
Hotels, Resorts & Cruise Lines4.00%
Internet Services & Infrastructure2.70%
Telecom Tower REITs 2.50%
Timber REITs 2.50%
Other Specialized REITs 2.00%
Hotel & Resort REITs 1.60%
Single-Family Residential REITs 1.10%
0369121518

Portfolio CharacteristicsAs of 06/30/2024

DescriptionBaron Real Estate Income StrategyMSCI US REIT Index
Inception DateJanuary 31, 2018
# of Issuers / % of Net Assets32 / 97.3%
Turnover (3 Year Average)144.57%
Active Share59.3%
Median Market Cap$18.82 billion$3.06 billion
Weighted Average Market Cap$41.83 billion$36.26 billion
EPS Growth (3-5 year forecast)8.5%5.3%
Price/Earnings Ratio (trailing 12-month)30.631.5
Price/Book Ratio1.91.8
Price/Sales Ratio4.46.7
Total Strategy Assets$229.73 million
Price/Book Ratio and Price/Sales Ratio are calculated using the Weighted Harmonic Average. Source: FactSet PA. Internal valuation metrics may differ.

Documents

Document Name
Fact Sheet