DCHPF - Baron Small Cap Fund Q1 2024 Shareholder Letter

2024-05-10 03:35:00 ET

Summary

• Baron is an asset management firm focused on delivering growth equity investment solutions known for a long-term, fundamental, active approach to growth investing.
• Baron Small Cap Fund had a strong first quarter, outperforming the Russell 2000 Growth Index and the S&P 500 Index.
• The Fund's performance was driven by stock selection, particularly in the Industrials and Financials sectors.
• The Fund remains focused on long-term investments in high-quality, well-managed businesses with strong growth prospects.

Dear Baron Small Cap Fund Shareholder:

Performance

Baron Small Cap Fund® ( BSFIX , the Fund) had a stellar first quarter. The Fund was up 11.81% (Institutional Shares) in the quarter, which was well ahead of the Russell 2000 Growth Index (the Benchmark), which was up 7.58%. The Benchmark's performance was inflated by the anomalous performance of one stock, Super Micro Computer, Inc., which more than tripled in the quarter and accounted for over one-third of the Benchmark's gains, so the relative performance of the Fund was actually more impressive in comparison. The Fund outpaced the broader S&P 500 Index as well, which was up 10.56% in the quarter. Large-cap stocks outperformed small caps and a handful of popular stocks drove general market returns.

As shown in Table I below, the Fund has outperformed the Benchmark for all relevant periods. Since inception, the Fund has generated an annualized excess return of 4.18% and has exceeded that level over the last 1-, 3-, and 5- year periods. If you would have hypothetically invested $10,000 at the inception of the Fund in September 1997, your investment would be worth $142,341, which is well in excess of the $51,189 you would have if you had hypothetically invested in a fund that tracked the Benchmark. Many investors have been with us the whole way…for 26 years plus. We thank you for your confidence in us and are happy we have been able to do well for you. We are working hard in an effort to continue to outperform. We are confident we can do so....

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