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Baron Real Estate Strategy

Symbol REALESTATE
SCT
Sector

Total Strategy Assets

$1.78 B

As of 09/30/2024

Inception date

01/31/2010

Performance

PerformanceAs of 06/30/2024

Portfolio or IndexQTDYTD1 Year3 Years5 Years10 YearsSince Inception 01/31/2010
Baron Real Estate Strategy (Net)--1.65%6.96%-1.94%12.99%8.94%13.63%
Baron Real Estate Strategy (Gross)--1.16%8.03%-0.95%14.12%10.03%14.59%
MSCI USA IMI Extended Real Estate Index-2.29%12.31%2.94%8.18%8.48%11.24%
MSCI US REIT Index--0.84%6.25%-0.97%2.68%4.55%8.18%
S&P 500 Index-15.29%24.56%10.01%15.05%12.86%14.13%

Performance InformationAs of 09/30/2024

Performance statistics3 Years5 Years10 Years
Standard Deviation (%)24.0523.4619.97
Sharpe Ratio0.020.570.47
Alpha (%)-3.685.600.94
Beta1.050.961.01
R-Squared (%)95.3187.1085.63
Tracking Error (%)5.318.487.57
Information Ratio-0.720.650.11
Upside Capture (%)98.26107.97104.76
Downside Capture (%)109.7792.40103.07
Except for Standard Deviation and Sharpe Ratio, the performance based-characteristics above were calculated relative to the Baron Real Estate Strategy's benchmark MSCI USA IMI Extended Real Estate Index. Performance statistics for additional periods will be provided on request. Source FactSet: SPAR.

Portfolio Holdings & Characteristics

HoldingsAs of 11/30/2024

HoldingSector% of Net Assets
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 also 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 Estate8.0%
Toll Brothers, Inc.
Toll Brothers, Inc. (TOL) is a leading high-end, luxury homebuilder that caters to move-up, empty-nester, active-adult, age-qualified, and second-home buyers in 19 states in the U.S.
New single-family home construction activity in the U.S. remains below the levels needed to meet current and pent-up demand following a decade of underbuilding. We expect single-family home construction activity to continue over the medium term. In our view, Toll Brothers is a differentiated homebuilder with a niche focus on high-end homes and an excellent management team. We think Toll Brothers is well positioned to benefit from housing growth through its sizable land bank, healthy balance sheet, and market share gains against smaller players.
Consumer Discretionary5.9%
Blackstone Inc.
Blackstone Inc. (BX) is the world’s largest alternative asset manager. It has $1 trillion in assets under management, with specialization across Private Equity, Real Estate, Hedge Fund Solutions, and Credit & Insurance.
Blackstone is a best-of-breed global alternative asset manager, with a strong brand, global scale, long-term investment track record, full suite of products, and a proven executive team. The company is still in the early innings of democratizing access to alternative investments for a broader array of investors. Blackstone is asset-light, maintains minimal corporate level debt, and returns most of its cash flow through dividends and share repurchases.
Financials5.2%
Jones Lang LaSalle Incorporated
Jones Lang LaSalle, Inc. (JLL) is one of the world's largest providers of commercial real estate transaction, consulting, and investment management services through a network of more than 100 offices worldwide.
Jones Lang has a leading brand, sophisticated technology, global platform, deep bench of talent, and a solid balance sheet. Its scale and platform provide a strong moat. We think the company will benefit from stabilization in interest rates and the economy, which should lead to improvement across business lines, in particular leasing and capital markets. We think the company can grow EPS at a double-digit CAGR over the next several years, driven by a cyclical recovery, secular growth tailwinds, market share gains, operating leverage, acquisitions, and share buybacks.
Real Estate4.9%
CBRE Group, Inc.
CBRE Group, Inc. (CBRE) is a leading commercial real estate services company with the leading market share in all of its major businesses.
We believe CBRE will gain meaningfully from the long-term recovery in the commercial real estate industry. Its leasing and investment sales units have high incremental margins, and we believe its profitability will improve with healthier end markets. We also believe the market under-appreciates the value associated with CBRE’s property management unit given its growing, highly recurring revenue stream and open-ended growth prospects. CBRE is also one of the world’s leading managers of real estate assets.
Real Estate4.8%
Brookfield Corporation
Brookfield Corporation (BN) is one of the world's largest alternative asset managers, with $1 trillion in 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/share. We see another $25/share in unlisted investments and $10/share in carried interest generated for a total of $80/share, well below 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.
Financials4.7%
Lennar Corporation
Lennar Corporation (LEN) is one of the nation's largest homebuilders.
New single-family home construction activity in the U.S. remains below the levels needed to meet current and pent-up demand following a decade of under-building. We expect single-family home construction activity to continue over the next several years. As one of the largest U.S. homebuilders, Lennar is well positioned to benefit from end-market growth and market share gains. The company is also driving improved returns on capital via margin expansion and improved capital efficiency.
Consumer Discretionary4.6%
Digital Realty Trust, Inc.
Digital Realty Trust, Inc. (DLR) is a leading global provider of large-scale data center services to enterprises, cloud providers, and network operators. The company has 310 data centers in over 50 metro areas around the globe, with 51% of revenue in North America and the remainder in other regions worldwide.
Digital Realty enjoys strong growth prospects driven by cloud adoption, IT/data center outsourcing, and emerging AI applications. With a recurring revenue model, a sticky customer base with long-term leases, scale advantages, and a strong management team, we think Digital Realty is well positioned to take share. It offers a comprehensive suite of services through its acquisitions of Telx Group (network dense interconnection provider), Equicity (eight European assets), DuPont Fabros (U.S.-based wholesale operator), Ascenty (Brazil-based operator), and InterXion (Europe).
Real Estate4.2%
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 Estate4.1%
D.R. Horton, Inc.
D.R. Horton, Inc. (DHI) is the largest homebuilder in the U.S.
New single-family home construction activity in the U.S. remains below the levels needed to meet current and pent-up demand following a decade of underbuilding. We expect single-family home construction activity to continue over the medium term. D.R. Horton is well positioned to benefit from end-market growth and market share gains. The company is also driving higher returns on capital via margin expansion and improved capital efficiency.
Consumer Discretionary4.1%
Total
Total
50.5%
Top Ten Holdings, Portfolio Holdings, and Sector Breakdown based on net assets. Positions smaller than 0.05% round to 0.0%. Portfolio holdings may change over time.
Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.

Contributors / DetractorsQuarterly as of 09/30/2024

Top ContributorsAverage WeightContribution
Toll Brothers, Inc.6.23%1.95%
D.R. Horton, Inc.5.65%1.85%
GDS Holdings Limited2.12%1.75%
Lennar Corporation6.15%1.49%
CBRE Group, Inc.3.54%1.23%
Source:  FactSet PA.  Based on the gross performance results of the representative account. 

GICS Sector BreakdownAs of 11/30/2024

Sector

Real Estate

40.5%

Consumer Discretionary

31.9%

Financials

12.5%

Industrials

4.9%

Materials

4.4%

Information Technology

3.7%

Cash & Cash Equivalents

2.1%

Sub-Industry

11/30/2024
Homebuilding15.70%
Asset Management & Custody Banks12.50%
Real Estate Services 12.50%
Data Center REITs 12.20%
Hotels, Resorts & Cruise Lines8.00%
Casinos & Gaming5.20%
Health Care REITs 4.10%
Multi-Family Residential REITs 4.10%
Office REITs 3.70%
Internet Services & Infrastructure3.70%
Home Improvement Retail3.00%
Forest Products2.70%
Trading Companies & Distributors2.60%
Retail REITs 2.40%
Building Products2.20%
0369121518
Homebuilding15.70%
Asset Management & Custody Banks12.50%
Real Estate Services 12.50%
Data Center REITs 12.20%
Hotels, Resorts & Cruise Lines8.00%
Casinos & Gaming5.20%
Health Care REITs 4.10%
Multi-Family Residential REITs 4.10%
Office REITs 3.70%
Internet Services & Infrastructure3.70%
Home Improvement Retail3.00%
Forest Products2.70%
Trading Companies & Distributors2.60%
Retail REITs 2.40%
Building Products2.20%
0369121518

Portfolio CharacteristicsAs of 06/30/2024

DescriptionBaron Real Estate StrategyMSCI USA IMI Extended Real Estate Index
Inception DateJanuary 31, 2010
# of Issuers / % of Net Assets34 / 94.0%
Turnover (3 Year Average)83.83%
Active Share75.2%
Median Market Cap$26.81 billion$3.18 billion
Weighted Average Market Cap$43.36 billion$77.03 billion
EPS Growth (3-5 year forecast)13.5%9.9%
Price/Earnings Ratio (trailing 12-month)19.922.2
Price/Book Ratio2.42.4
Price/Sales Ratio2.02.4
Total Strategy Assets$1.78 billion
Price/Book Ratio and Price/Sales Ratio are calculated using the Weighted Harmonic Average. Source: FactSet PA. Internal valuation metrics may differ.