Frequently Asked Questions
What can WealthBuilder do for me?
Baron WealthBuilder is a mutual fund that invests exclusively in an array of Baron Capital funds. These investments span market caps, sectors and geographies and create equity diversification under one portfolio. Some refer to this approach as a fund of funds. We believe it is more akin to an equity allocation fund because it is based on our continual analysis of various equity segments and we reallocate the portfolio to achieve our desired exposure.
Baron WealthBuilder launched at the end of 2017, but the funds in which it invests have a much longer history. Baron Capital was founded in 1982 and its mutual funds have a demonstrated track record with the first fund launching in 1987. Click here to see how Baron WealthBuilder and the underlying funds have performed since their respective inceptions.
The exclusive use of Baron Funds enables us to keep fees low. There is no additional management fee for Baron WealthBuilder and investors only pay the expenses of the underlying funds. Institutional and TA Share annual operating expenses are capped at 5 basis points (0.05%). Retail Share annual operating expenses are capped at 30 basis points (0.30%).
We believe equity allocation fund best describes Baron WealthBuilder although some people may refer to it as a fund of funds. A fund of funds is a broad term for funds that invest in other funds. Historically, they attempt to reduce the risk of investing in a single asset class, sector, market cap, or manager by diversifying among many. In contrast, Baron WealthBuilder takes into account our views on investable categories. We are not diversifying because we have low conviction in a particular strategy. Rather, we believe that diversifying across equity categories should result in improved risk-adjusted returns in the long term. But you can call us whatever you like -- we won’t be mad.
Fund of funds have gotten a bad reputation for high fees because many charge a management fee for the allocation process. This expense is on top of the fees associated with the underlying holdings. In other words, investors pay two sets of fees. We think this is egregious and detrimental to investor returns. Baron WealthBuilder does NOT charge a management fee for the allocation process because we want to keep the cost of investing in the fund low.
For years, investors sought our recommendations on how to diversify across the various Baron Funds. Prospective investors believed in our repeatable investment approach and were impressed by our results; however, they had difficulty determining the appropriate allotment in each fund. We created Baron WealthBuilder to address this dilemma by allocating and rebalancing among our funds. We never considered charging an additional management fee for this service. Pent-up demand resulted in Baron WealthBuilder becoming our fastest fund to surpass $100 million under management in the Firm’s 40-year history. Additionally, Baron Capital employees are among the largest investors in the fund.
No. Call us old school, but we like humans. Ron Baron, the founder and CEO of Baron Capital, and Michael Baron, a tenured portfolio manager, are the decision makers on all transactions. Ron leverages his extensive experience, time-tested investment philosophy, and insights into various markets and portfolios to determine an appropriate allocation with the goal of enhancing returns while mitigating risk.
Ron and Michael use numerous metrics in managing to the portfolio, including:
- Absolute performance
- Excess performance
- Standard deviation of returns
- Sharpe ratio
- Beta
- Alpha
- Portfolio turnover
- Growth rates
- Fund size
- Portfolio manager tenure
We constantly review fund characteristics, weightings, correlations, sectors, and performance. Changes to the allocation are made when appropriate. However, there is no predetermined rebalancing or quantitative formula to determine weightings, and drastic changes in the allocation of the portfolio are unlikely. We are not attempting to time the market, but rather find the right balance of funds for long term success.
Definitions (provided by BAMCO, Inc.):
Alpha measures the difference between a fund’s actual returns and its expected performance, given its level of risk as measured by beta. Beta measures a fund’s sensitivity to market movements. The beta of the market is 1.00 by definition. Sharpe Ratio is a risk-adjusted performance statistic that measures reward per unit of risk. The higher the Sharpe ratio, the better a fund’s risk adjusted performance. Standard Deviation (Std. Dev) measures the degree to which a fund’s performance has varied from its average performance over a particular time period. The greater the standard deviation, the greater a fund’s volatility (risk).
In our opinion, the most successful way to create financial security is finding a partner with strong long-term investment returns, consistently investing across market cycles and allowing compounding to work its magic over time. There are no shortcuts and Baron WealthBuilder is not intended to be a homerun overnight. It was built for people whose long-term financial plan align with our investment approach. Additionally, investors are required to hold their investment for at least 3 months as to not burden other long-term shareholders with transactional expenses.
If you still want to get rich quick, may we suggest Las Vegas or the lottery. Good luck!
How does WealthBuilder work?
For nearly 40 years, we have built our business on the quality of our research and the idea of being a long-term investor. While investment fads come and go, we have always stayed committed to our analytical process, our clients, and our community. Our 40-year history not only provides a demonstrated track record of success but also has enhanced our investment skills. We believe:
- Independent, exhaustive research and analysis is essential to successful investing
- A long-term perspective allows us to focus on business fundamentals and prospects rather than short term noise
- Attractive growth investments have unsatisfied demand from sizable addressable markets
- A sustainable competitive advantage is essential for a business to deliver on its goals
- People are the key drivers of a successful business; understanding the strategies, motivations and ethics of a business’s leaders and employees is equally as important as understanding its financial structure.
- An investment’s entry price is important to mitigate risk and enhance returns, but it does not dictate its future value
- There is no finish line: research, analysis, and risk management are a continuous and evolving process
This consistent investment approach has worked. Since their inception, 16 funds, representing 98.5% of Baron Funds assets under management, have outperformed their respective benchmarks. Twelve funds, representing 97.3% of assets, rank in the top 17% of their respective category.* And nine funds, representing 65.1% of assets, rank in the top 7% of their respective category.*
*as of June 30, 2020
Ranking information provided is calculated for the Retail Share Class and is as of 9/30/2020. The number of share classes in each category may vary depending on the date that Baron downloaded information from Morningstar Direct.
Morningstar calculates its category averages using its Fractional Weighting methodology. Morningstar rankings are based on total returns and do not include sales charges. Total returns account for management, administrative, and 12b-1 fees and other costs automatically deducted from fund assets.
The Morningstar Mid-Cap Growth Category consisted of 607, 500, and 380 share classes for the 1-, 5-, and 10-year periods. Morningstar ranked Baron Asset Fund in the 42nd, 21st, 16th, and 16th percentiles for the 1-, 5-, 10-year, and since inception periods, respectively. The Fund launched 6/12/1987, and the category consisted of 20 share classes. Morningstar ranked Baron Growth Fund in the 58th, 34th, 36th, and 7th percentiles for the 1-, 5-, 10-year, and since inception periods, respectively. The Fund launched 12/31/1994, and the category consisted of 56 share classes. Morningstar ranked Baron Partners Fund in the 2nd, 2nd, 1st, and 1st percentiles for the 1-, 5-, 10-year, and since conversion periods, respectively. The Fund converted into a mutual Fund 4/30/2003, and the category consisted of 227 share classes. Morningstar ranked Baron Focused Growth Fund in the 3rd, 3rd, 6th, and 8th percentiles for the 1-, 5-, 10-year, and since conversion periods, respectively. The Fund converted into a mutual Fund 6/30/2008, and the category consisted of 326 share classes. Morningstar ranked Baron WealthBuilder Fund in the 10th and 14th percentiles for the 1-year and since inception periods, respectively. The Fund launched 12/29/2017, and the category consisted of 567 share classes.
The Morningstar Small Growth Category consisted of 624, 513, and 384 share classes for the 1-, 5-, and 10-year time periods. Morningstar ranked Baron Small Cap Fund in the 25th, 20th, 31st, and 13th percentiles for the 1-, 5-, 10-year, and since inception periods, respectively. The Fund launched 9/30/1997, and the category consisted of 97 share classes. Morningstar ranked Baron Discovery Fund in the 7th, 4th, and 2nd percentiles for the 1-, 5-year, and since inception periods, respectively. The Fund launched 9/30/2013, and the category consisted of 452 share classes.
The Morningstar Real Estate Category consisted of 253, 197, and 141 share classes for the 1-, 5-, and 10-year time periods. Morningstar ranked Baron Real Estate Fund in the 1st, 3rd, 1st, and 1st percentiles for the 1-, 5-, 10-year, and since inception periods, respectively. The Fund launched 12/31/2009, and the category consisted of 132 share classes. Morningstar ranked Baron Real Estate Income Fund in the 3rd and 4th percentiles for the 1-year and since inception periods, respectively. The Fund launched 12/29/2017, and the category consisted of 229 share classes.
The Morningstar Large Growth Category consisted of 1,328, 1,095, 813, and 300 share classes for the 1-, 5-, 10-year, and since inception (2/29/2000) periods. Morningstar ranked Baron Opportunity Fund in the 3rd, 3rd, 13th, and 3rd percentiles, respectively. The Morningstar Foreign Large Growth Category consisted of 469, 336, 243, and 223 share classes for the 1-, 5-, 10-year, and since inception (12/31/2008) periods. Morningstar ranked Baron International Growth Fund in the 29th, 26th, 23rd, and 15th percentiles, respectively. The Morningstar Diversified Emerging Markets Category consisted of 790, 590, and 279 share classes for the 1-, 5-year, and since inception (12/31/2010) periods. Morningstar ranked Baron Emerging Markets Fund in the 20th, 32nd, and 4th percentiles, respectively.
The Morningstar World Large Stock Category consisted of 823, 608, and 421 share classes for the 1-, 5-year, and since inception (4/30/2012) periods. Morningstar ranked Baron Global Advantage Fund in the 2nd, 1st, and 2nd percentiles, respectively. The Morningstar Health Category consisted of 155 and 139 share classes for the 1-year and since inception (4/30/2018) periods. Morningstar ranked Baron Health Care Fund in the 11th and 5th percentiles, respectively.
© 2020 Morningstar. All Rights Reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
We launched Baron Capital’s first investment vehicle nearly 40 years ago, with a focus on investing in small companies. We soon realized that our successful investment philosophy could be broadened to additional categories. Over our history, we have launched 16 strategies that specialize in different investment segments. Baron WealthBuilder provides a diversified portfolio of these top-performing Baron mutual funds in a single product.
In theory, you could replicate the portfolio of Baron WealthBuilder, but we do not recommend this. Baron WealthBuilder discloses its holdings every three months and the underlying portfolios also disclose their holdings at similar increments. Changes in the portfolio within these periods will not be captured if you attempt to mimic the portfolio. Additionally, holding the minimum investment per fund ($2,000 for Retail and TA shares and $1,000,000 for Institutional shares) would require significant capital to replicate the entire portfolio. And finally, the inter-period flows enable the fund to rebalance the portfolio in a tax advantageous manner. This benefit would be lost for individuals trying to duplicate the portfolio.
How do I start investing?
Baron WealthBuilder can be purchased through leading independent brokerage platforms like Schwab and Fidelity. It will be listed under their typical area for purchasing funds. If you elect to purchase TA shares directly through Baron Capital, you can start the process here.
The various share classes do get confusing. Brokerage platforms like Schwab and Fidelity offer both the Institutional and Retail Share classes. The Institutional Shares have a minimum initial investment of $1,000,000 and do not have a distribution fee. The Retail share class only has a $2,000 minimum initial investment, which makes it suitable in our opinion for continuous investment and dollar cost averaging. Baron WealthBuilder is our first Fund to offer a TA share class. This share class is only offered directly through Baron Capital. It has a minimum investment of $2,000 and no distribution fee.
We hope so! The government taxes gains on investments and we anticipate this fund will appreciate over time. Owing some taxes would mean that we are doing our job successfully. However, there are some nontaxable structures that could make this fund even more attractive for you. Taxes vary by the individual and institutions and we encourage you to find an appropriate structure for you.
We will take steps to mitigate taxes through tax loss harvesting and rebalancing through the fund’s asset flows.
This information does not constitute tax, legal or accounting advice and neither Baron Funds nor any of its agents, employees or registered representatives are in the business of offering such advice. It was not intended or written for use and cannot be used by any taxpayer for the purpose of avoiding any IRS penalty. It was written to support the marketing of the transactions or topics it addresses. Anyone interested in these transactions or topics should seek advice based on his or her particular circumstances from independent professional advisors.
If you purchase the fund through a third-party broker like Schwab or Fidelity, you should be able to log into your account on their platform. Those who purchased TA Shares directly through Baron Capital can log into their account here.
You can also check Baron WealthBuilder’s latest performance by clicking here.
That’s good, because we like to write. We provide our clients with the same level of insight and disclosure we would expect if the roles were reversed. We host annual conferences where attendees have the opportunity to openly question the managers of their investments. We write quarterly letters explaining performance and positioning of the portfolios and publish thought pieces about investing. And we make ourselves available to the financial press. Some of this information can be found here.
Of course. We are here to help answer any questions you may have. We can be reached at info@baronfunds.com or give us a call at 1(800) 992-2766.