Table I. Performance
Annualized for periods ended December 31, 2019.
| Three Months3 | One Year | Since Inception (December 29, 2017) |
|
|---|---|---|---|
| Baron Wealth Builder Fund Retail Shares1,2 | 10.78% | 36.24% | 12.82% |
| Baron Wealth Builder Fund Institutional Shares1,2 | 10.83% | 36.49% | 13.04% |
| Baron Wealth Builder Fund TA Shares1,2 | 10.83% | 36.49% | 13.04% |
| S&P 500 Index1 | 9.07% | 31.49% | 12.13% |
| MSCI ACWI Index1 | 8.95% | 26.60% | 7.09% |
1 The indexes are unmanaged. The index performance is not Fund performance; one cannot invest directly into an index. The S&P 500 Index measures the performance of 500
widely held large cap U.S. companies. The MSCI ACWI Index is an unmanaged, free float-adjusted market capitalization weighted index reflected in US dollars that measures the equity market performance of large- and mid-cap securities across developed and emerging markets. The indexes and the Fund are with dividends, which positively impact the performance results.
2 The performance data in the table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
3 Not annualized.
Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares, Institutional Shares, and TA Shares as of December 31, 2018 was 2.02%, 1.61%, and 1.71%, respectively, but the net annual expense ratio was 1.42%, 1.17%, and 1.17% (includes acquired fund fees, net of the Adviser’s fee waivers), respectively. The performance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate; an investor’s shares, when redeemed, may be worth more or less than their original cost. BAMCO, Inc. (‘BAMCO” or the “Adviser”) has agreed that, pursuant to a contract expiring on August 29, 2030, unless renewed for another 11-year term, it will reimburse certain expenses of the Fund, limiting net annual operating expenses (portfolio transaction costs, interest, dividend, acquired fund fees and expenses and extraordinary expenses are not subject to the operating expense limitation) to 0.30% of average daily nest assets of Retail Shares, 0.05% of average daily net assets of Institutional Shares and 0.05% of average daily net assets of TA Shares, without which performance would have been lower. Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent month end, visit www.BaronFunds.com or call 1-800-99BARON.
In 2019, U.S. markets continued their strong performance that began after the 2008 Financial Crisis. The U.S. economy remains robust. The labor market is healthy. There has been continual job creation and the unemployment rate is declining. Home price growth has slowed marginally, but consumer sentiment remains strong and is powering GDP growth. Inflation has remained within target ranges which has allowed the Fed to lower interest rates and embark upon “QE IV, The Fourth Round of Quantitative Easing” since 2008. Many anticipate additional rate cuts in 2020.
This backdrop has been beneficial to the underlying Baron Funds that compose Baron WealthBuilder Fund. Baron’s domestic-focused, concentrated, high-quality growth and sector funds were the strongest performers for the quarter. Baron Health Care Fund and Baron Partners Fund had the largest quarterly percentage gains. The political conversation regarding health care pricing that dominated headlines in the previous quarter subsided which allowed favorable health care company fundamentals to positively impact stock prices. Additionally, health care M&A activity increased as large companies continued to broaden their biotechnology lineups. Baron Partners Fund also had many successful investments in the period. Businesses in which that fund has invested reported strong results. Stocks of “disruptive” growth companies like Tesla, Inc. and Zillow Group, Inc., reacted favorably to the increased likelihood of their future successes.
Baron WealthBuilder Fund’s underlying funds also performed very well in 2019. Of the 14 Baron Funds in which Baron WealthBuilder has invested, 6 achieved returns of more than 40% for the year. An additional 5 funds had gains of at least 30%. Another 2 funds had returns greater than 25%. The funds that had the highest returns were high-quality, high-conviction portfolios. Baron Global Advantage Fund gained 45.5% in 2019. This was despite its heavy weighting in international markets that were harmed by
global trade tariffs and slower growth rates than domestic markets.