Baron Health Care Fund Q3 2023 Shareholder Letter

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Pricey Baron Well being Care Fund Shareholder:

Efficiency

Within the quarter ended September 30, 2023, Baron Well being Care Fund® (the Fund) declined 6.05% (Institutional Shares), in contrast with the three.88% loss for the Russell 3000 Well being Care Index (the Benchmark) and the three.27% loss for the S&P 500 Index. 12 months-to-date by means of September 30, 2023, the Fund declined 1.17%, the Benchmark declined 3.83%, and the S&P 500 Index elevated 13.07%. Since inception (April 30, 2018), the Fund elevated 11.62% on an annualized foundation in contrast with the 9.52% acquire for the Benchmark and the 11.24% acquire for the S&P 500 Index.

Desk I.

Efficiency†

Annualized for intervals ended September 30, 2023

	Baron Well being Care Fund Retail Shares¹,2	Baron Well being Care Fund Institutional Shares1,2	Russell 3000 Well being Care Index¹	S&P 500 Index¹
Three Months²	(6.13)%	(6.05)%	(3.88)%	(3.27)%
9 Months³	(1.36)%	(1.17)%	(3.83)%	13.07%
One 12 months	7.58%	7.80%	7.27%	21.62%
Three Years	3.38%	3.63%	5.64%	10.15%
5 Years	9.08%	9.35%	6.86%	9.92%
Since Inception (April 30, 2018)	11.34%	11.62%	9.52%	11.24%

Efficiency listed within the above desk is web of annual working bills. The gross annual expense ratio for the Retail Shares and Institutional Shares as of December 31, 2022 was 1.21% and 0.90%, respectively, however the web annual expense ratio was 1.10% and 0.85% (web of the Adviser’s price waivers), respectively. The efficiency knowledge quoted represents previous efficiency. Previous efficiency is not any assure of future outcomes. The funding return and principal worth of an funding will fluctuate; an investor’s shares, when redeemed, could also be price roughly than their authentic value. The Adviser reimburses sure Fund bills pursuant to a contract expiring on August 29, 2034, until renewed for an additional 11-year time period and the Fund’s switch company bills could also be diminished by expense offsets from an unaffiliated switch agent, with out which efficiency would have been decrease. Present efficiency could also be decrease or greater than the efficiency knowledge quoted. For efficiency info present to the newest month finish, go to baronfunds.com or name 1-800-99-BARON

The Fund trailed the Benchmark by 217 foundation factors this quarter as a consequence of a mix of inventory choice and lively sub-industry weights. Investments in well being care gear, life sciences instruments & providers, biotechnology, and well being care provides accounted for many of the underperformance within the interval. Hostile inventory choice in well being care gear was linked to considerations in regards to the rising adoption of diabetes and weight reduction medicines Wegovy, Ozempic, Mounjaro, and future generations of medication on this class and the way adoption would impression the expansion prospects of sure Fund holdings, specifically sleep apnea therapy chief Encourage Medical Programs, Inc. (INSP) and diabetes machine firms DexCom, Inc. (DXCM) and Insulet Company (PODD). Novo Nordisk (NVO) launched SELECT trial ends in early August displaying that its GLP-1 weight reduction medication Wegovy diminished the chance of main hostile cardiovascular occasions in comparison with placebo by 20% in adults aged 45 or older who’re chubby or overweight and have established heart problems with no prior historical past of diabetes. Based mostly on these compelling well being advantages, traders concluded that the GLP-1 drug class would finally be broadly coated by payors and broadly adopted within the U.S. This information drove sharp positive factors in Eli Lilly and Firm and Novo Nordisk, whereas shares of firms like Encourage Medical, DexCom, and Insulet suffered extreme losses. We talk about most of those shares later on this letter.

Weak point in life sciences instruments & providers was pushed by double-digit declines from most cancers diagnostics firm Actual Sciences Company (EXAS) and precision devices supplier Mettler-Toledo Worldwide Inc. (MTD). After rallying within the first half of the yr as considerations concerning a competing blood-based screening check dissipated, Actual Sciences’ shares pulled again this quarter as a result of the corporate’s quarterly outcomes fell in need of lofty expectations. We talk about Actual Sciences later on this letter. Mettler’s inventory declined in response to disappointing second-quarter monetary outcomes and lowered 2023 steerage. Administration famous market situations in China have worsened significantly, notably amongst biopharmaceutical clients who’re delaying funding selections as they wait for presidency stimulus. Administration additionally acknowledged that world manufacturing Buying Managers’ Indexes have continued to pattern decrease. We expect these headwinds are momentary and proceed to consider Mettler has a stable long-term outlook. One other materials detractor within the sub-industry was Bio-Techne Company (TECH), a number one developer and producer of reagents, devices, and providers for the life sciences analysis, diagnostics, and bioprocessing markets. Bio-Techne’s shares had been pressured by numerous headwinds within the life sciences instruments finish market together with diminished biotechnology funding, continued stock destocking by clients, and a slowdown in China.

The relative shortfall in biotechnology largely needed to do with not proudly owning a number of bigger cap names, notably AbbVie Inc. (ABBV), Amgen Inc. (AMGN), and Regeneron Prescription drugs, Inc. (REGN), whose share costs had been up double digits for the quarter as traders flocked to bigger, safer, money stream constructive biotechnology firms as long-term rates of interest rose. These losses had been considerably offset by robust efficiency from argenx SE (ARGX) and Rocket Prescription drugs, Inc. (RCKT). The Fund’s greater publicity to heath care provides through positions in The Cooper Firms, Inc. (COO) and Neogen Corp. (NEOG) additionally proved expensive because the sub-industry was among the many worst performers within the Benchmark in the course of the quarter.

Partially offsetting the above was favorable inventory choice in prescription drugs and well being care distributors together with money publicity in a declining market. Energy in prescription drugs and well being care distributors was pushed by positive factors from Lilly and McKesson Company (MCK), respectively. International pharmaceutical firm Lilly was the most important contributor as a consequence of robust second-quarter gross sales of Mounjaro and ongoing enthusiasm surrounding the corporate’s weight problems and diabetes franchises. McKesson is a number one distributor of prescription drugs and medical provides and likewise supplies prescription know-how options that join pharmacies, suppliers, payers, and biopharmaceutical clients. McKesson’s inventory carried out nicely as a consequence of robust monetary ends in the corporate’s pharmaceutical distribution and prescription know-how options companies, pushed partly by greater volumes of GLP-1 medicines and prior authorization know-how providers associated to GLP-1 medicines.

Our technique is to establish competitively advantaged development firms that we are able to personal for years. Just like the opposite Baron Funds, we stay targeted on discovering companies that we consider have secular development alternatives, sturdy aggressive benefits, and robust administration groups. We conduct unbiased analysis and take a long-term perspective. We’re notably targeted on companies that remedy issues in well being care, whether or not by decreasing prices, enhancing effectivity, and/or bettering affected person outcomes.

We proceed to assume the Well being Care sector will provide enticing funding alternatives over the subsequent decade and past. Well being Care is likely one of the largest and most complicated sectors within the U.S. financial system, accounting for an estimated 17.4% of GDP in 2022 and encompassing a various array of sub-industries. Well being Care can also be a dynamic {industry} present process modifications pushed by laws, regulation, and advances in science and know-how. We expect navigating these modifications requires funding expertise and sector experience, which makes the Well being Care sector notably well-suited for lively administration.

Desk II.

Prime contributors to efficiency for the quarter ended September 30, 2023

	P.c Influence
Eli Lilly and Firm	1.03%
argenx SE	0.47
UnitedHealth Group Integrated	0.42
Rocket Prescription drugs, Inc.	0.12
Arcellx, Inc.	0.10

Eli Lilly and Firm is a world pharmaceutical firm that discovers, develops, manufactures, and sells medicines within the classes of diabetes, oncology, neuroscience, and immunology, amongst different areas. Inventory efficiency was robust as a consequence of robust second-quarter gross sales of blockbuster diabetes/weight problems medication Mounjaro and ongoing enthusiasm surrounding the corporate’s weight problems and diabetes franchises, notably after Novo Nordisk launched its SELECT trial outcomes. We proceed to assume Lilly is well-positioned to develop income and earnings at enticing charges by means of the tip of the last decade and past.

argenx SE is a commercial-stage biopharmaceutical firm targeted on growing and commercializing therapies for uncommon autoimmune ailments. Shares elevated within the quarter after the corporate reported constructive knowledge from a research of Vyvgart Hytrulo in adults with power inflammatory demyelinating polyneuropathy (CIDP). CIDP is a crucial business market representing billions of {dollars} in potential gross sales, which provides to the general income alternative for the Vyvgart franchise. We count on further upcoming scientific knowledge readouts to additional improve the income alternative for argenx.

UnitedHealth Group Integrated (UNH) is a diversified well being and well-being firm with $200 billion in income that operates throughout 4 segments, United Healthcare, Optum Well being, OptumInsight, and OptumRX, serving 134 million people in all 50 states and greater than 125 international locations. Shares elevated on a second-quarter upside shock, together with an EPS beat and medical loss ratio of 82.3%, 30 foundation factors higher than traders had feared after administration’s warning of upper Medicare Benefit utilization. Traders had been additionally reassured by administration’s confidence that it had priced to pattern, which it backed up by elevating the low finish of 2023 steerage. We stay constructive on this market-leading managed care firm with income twice that of its closest competitor. The corporate continues to achieve Medicare Benefit share given enticing and secure advantages and will obtain larger profitability as medical administration is deployed throughout newer, greater acuity lives. We consider UnitedHealth has a broad variety of levers at its command and may sustainably ship 13% to 16% annual long-term earnings development.

Desk III.

Prime detractors from efficiency for the quarter ended September 30, 2023

	P.c Influence
Encourage Medical Programs, Inc.	-1.12%
DexCom, Inc.	-1.02
Actual Sciences Company	-0.70
Intuitive Surgical, Inc.	-0.65
Insulet Company	-0.56

Encourage Medical Programs, Inc. provides a therapy possibility known as hypoglossal nerve stimulation for sufferers with moderate-to-severe obstructive sleep apnea who’re unable to make use of or profit from steady constructive airway strain. The inventory declined after Novo Nordisk launched SELECT trial outcomes. The trial outcomes have led to investor considerations that GLP-1 medicines could also be broadly reimbursed by payors and extensively adopted sooner or later. Whereas this has raised questions in regards to the long-term impression of GLP-1 medication on the scale of Encourage Medical’s addressable market and the terminal worth of the inventory as weight reduction can considerably cut back the severity of sleep apnea, the web impression stays unclear as some severely overweight sufferers who would in any other case be ineligible for the corporate’s remedy may develop into candidates for therapy after shedding weight. We retain conviction in Encourage Medical’s development outlook.

DexCom, Inc. is a number one supplier of steady glucose monitoring know-how (CGM) for individuals with diabetes. The inventory declined after Novo Nordisk launched SELECT trial outcomes. The trial outcomes have led to investor considerations that Wegovy and medicines in the identical class (Ozempic, Mounjaro, and different medication in growth) could also be broadly reimbursed by payors and extensively adopted. This has raised questions in regards to the long-term impression of GLP-1 medication on the scale of DexCom’s addressable market and the terminal worth of the inventory as these new medicines may gradual the development of diabetes for many who are pre-diabetic and cut back the necessity for insulin for these with Kind 2 diabetes. We expect GLP-1 medication will probably be used at the side of CGM know-how, which can stay a important diabetes administration software. We proceed to consider DexCom has a horny long-term development runway forward.

Actual Sciences Company is a most cancers diagnostics firm whose flagship product is Cologuard, a stool-based screening check for colon most cancers. The inventory declined as a result of monetary outcomes didn’t fulfill lofty expectations and there was a broader sell-off within the diagnostics shares. We retain conviction within the funding, although we diminished the place dimension to handle threat forward of privately held firm Freenome’s scientific trial readout of a doubtlessly competing blood-based screening check for colorectal most cancers. We consider the screening marketplace for colon most cancers is huge, and administration continues to construct optionality by shifting a number of liquid biopsy packages of their very own by means of the pipeline.

Portfolio Construction

We construct the portfolio from the underside up, one inventory at a time, utilizing the Baron funding strategy. We don’t attempt to mimic an index, and we count on the Fund to look very totally different than the Benchmark. We loosely group the portfolio into three classes of shares: earnings compounders, high-growth firms, and biotechnology firms. We outline earnings compounders as firms that we consider can develop income by at the least mid-single digits and compound earnings at double-digit charges over the long run. We outline high-growth shares as firms we count on to generate double-digit or higher income development. They might not be worthwhile immediately, however we consider they are often extremely worthwhile sooner or later. We count on the portfolio to have a mixture of earnings compounders, high-growth, and biotechnology firms.

We could put money into shares of any market capitalization and should maintain each home and worldwide shares. As of September 30, 2023, we held 38 shares. This compares with 528 shares within the Benchmark. Worldwide shares represented 14.5% of the Fund’s web belongings. The Fund’s 10 largest holdings represented 49.8% of web belongings. In contrast with the Benchmark, the Fund was chubby in life sciences instruments & providers, well being care provides, well being care distributors, and well being care know-how and underweight in prescription drugs, well being care providers, biotechnology, and well being care gear. The market cap vary of the investments within the Fund was $150 million to $510 billion with a weighted common market cap of $156 billion. That is in contrast with the Benchmark’s weighted common market cap of $193 billion.

We proceed to put money into a number of secular development themes in Well being Care, resembling genomics/genetic testing/genetic medication, technology-enabled drug growth/discovery, minimally invasive surgical procedure, diabetes units and therapeutics, anti-obesity medicines, picks and shovels life sciences instruments suppliers, the shift to lower-cost websites of care, value-based well being care, development of Medicare Benefit, and animal well being, amongst others. To be clear, this listing just isn’t exhaustive: we personal shares within the portfolio that don’t match neatly into these themes and there are different themes not talked about right here which might be within the portfolio. We consider every inventory by itself deserves.

Desk IV.

Prime 10 holdings as of September 30, 2023

	12 months Acquired	Market Cap When Acquired (billions)	Quarter Finish Market Cap (billions)	Quarter Finish Funding Worth (tens of millions)	P.c of Internet Belongings
UnitedHealth Group Integrated	2018	$227.2	$467.0	$18.9	9.50%
Eli Lilly and Firm	2021	187.4	509.9	18.6	9.3
argenx SE	2018	2.8	28.8	9.1	4.6
Merck & Co., Inc.	2022	205.6	261.2	9	4.5
Thermo Fisher Scientific Inc.	2019	117.4	195.4	9	4.5
Intuitive Surgical, Inc.	2018	49.9	102.7	8.8	4.4
Vertex Prescription drugs Integrated	2022	61.4	89.7	8	4
DexCom, Inc.	2018	8.3	36.2	6.3	3.2
Boston Scientific Company	2023	73.4	77.3	5.9	3
Zoetis Inc.	2019	55.8	80.1	5.5	2.8

Desk V.

Fund investments in GICS sub-industries as of September 30, 2023

	P.c of Internet Belongings
Prescription drugs	19.3%
Life Sciences Instruments & Providers	17.4
Biotechnology	17.1
Well being Care Gear	16.9
Managed Well being Care	12.5
Well being Care Provides	3.7
Well being Care Distributors	2.4
Well being Care Services	2.3
Well being Care Know-how	2.0
Money and Money Equivalents	6.4
Complete	100.0%*

* Particular person weights could not sum to the displayed complete as a consequence of rounding.

Current Exercise

In the course of the third quarter, we didn’t add any new positions and exited 4 positions. Beneath we talk about a few of our prime web purchases and gross sales.

Desk VI.

Prime web purchases for the quarter ended September 30, 2023

	Quarter Finish Market Cap (billions)	Quantity Bought (tens of millions)
argenx SE	$ 28.8	$3.6
Shockwave Medical, Inc.	7.3	2.0
Boston Scientific Company	77.3	1.8
Legend Biotech Company	11.4	1.0
Danaher Company	183.2	0.9

We added to our place in argenx SE, a commercial-stage biopharmaceutical firm targeted on growing and commercializing therapies for uncommon autoimmune ailments. In July, argenx reported constructive knowledge from a research of Vyvgart Hytrulo in adults with CIDP. The research met its major endpoint demonstrating a considerably decrease threat of relapse with Vyvgart Hytrulo versus a placebo. This constructive knowledge provides to the business alternative for Vyvgart, which is within the early phases of business launch for the therapy of myasthenia gravis (MG). We estimate CIDP represents an extra $3 billion income alternative. We consider Vyvgart and the subcutaneous model Vyvgart Hytrulo have the potential to generate at the least $7 billion in peak gross sales in MG, CIDP, major immune thrombocytopenia, and pemphigus vulgaris. Plus, the corporate is learning Vyvgart in different autoimmune ailments and the last word peak gross sales potential for the franchise might be a lot greater. We proceed to consider argenx is a singular development firm with robust administration.

We added to our place in Shockwave Medical, Inc. (SWAV), a medical machine firm that sells merchandise for the therapy of peripheral artery illness and coronary artery illness. The corporate’s catheters emit sonic waves to crack calcium within the plaque and open up the arteries (known as intravascular lithotripsy or IVL). Shockwave is the one participant in the marketplace immediately with IVL catheters. Competing units embody plain balloons to push out plaque, and atherectomy, which makes use of blades or lasers to scrape away plaque. Plain balloons have issue eradicating onerous, calcified plaque, and each of those different strategies carry dangers of damaging the artery. In distinction, IVL makes use of sonic waves to selectively goal calcium plaque whereas leaving arteries undamaged. IVL additionally permits penetration deep into artery partitions to crack hidden calcium. Based on physicians, IVL is secure and simple to make use of, and adoption has been speedy, which has pushed robust income development for Shockwave. There’s some uncertainty in regards to the degree of Medicare charges for IVL coronary artery procedures within the outpatient setting when a short lived add-on fee expires subsequent yr, however lately Medicare created new reimbursement codes particularly for IVL for the inpatient setting, which is encouraging. In the meantime, Shockwave continues to advance its new product pipeline and increase in worldwide markets. We expect the corporate can develop income by 20% or higher for at the least the subsequent few years. The corporate is already extremely worthwhile with greater than 20% working margins and room to increase additional.

We added to our place in Boston Scientific Company (BSX),a world developer, producer, and marketer of medical units which might be utilized in a broad vary of interventional medical specialties. We wrote about Boston Scientific final quarter. We consider Boston Scientific can develop income within the excessive single digits, pushed by differentiated merchandise used to deal with atrial fibrillation, amongst others. The corporate held an Investor Day in the course of the quarter at which administration established monetary targets for the 2024- 2026 interval calling for an natural gross sales CAGR of 8% to 10%, 150 foundation factors of margin growth, and robust double-digit adjusted EPS development, and improved free-cash-flow conversion. We expect this development profile makes Boston Scientific a compelling identify inside the massive medical machine universe.

We added to Legend Biotech Company (LEGN), a biotechnology firm growing cell therapies for most cancers. The corporate’s lead product is Carvykti, a cell remedy for the therapy of a number of myeloma, a blood most cancers affecting over 200,000 individuals within the U.S. alone. We wrote about Legend Biotech final quarter and retained conviction within the funding thesis.

We added to Danaher Company (DHR), which lately accomplished the spinoff of its non-life sciences companies to develop into a pure-play life sciences instruments firm. Though near-term tendencies within the bioprocessing market stay difficult, we just like the long-term development drivers on this enterprise and assume Danaher is well-positioned.

Desk VII.

Prime web gross sales for the quarter ended September 30, 2023

	Quantity Bought (tens of millions)
Abbott Laboratories	$2.5
Actual Sciences Company	1.3
Humana Inc.	1.1
Elevance Well being, Inc.	1.1
Moderna, Inc.	1.0

We bought Abbott Laboratories (ABT) to boost money for potential new concepts with greater development potential. We diminished our positions in Humana Inc. (HUM) and Elevance Well being, Inc. (ELV) to decrease our total publicity to managed care. We trimmed our place in Actual Sciences Company as mentioned earlier. We took a tax loss in Moderna, Inc. (MRNA).

Outlook

One of many greatest development classes in well being care is the adoption of GLP-1 medicines to deal with Kind 2 diabetes and weight problems. GLP-1 medicines work by stimulating insulin manufacturing, reducing glucagon secretion, slowing gastric emptying, and rising satiety. This ends in improved glucose management and weight reduction. Though GLP-1s have been used to deal with Kind 2 diabetes for a few years, the most recent technology of GLP-1s (Ozempic, Wegovy, Mounjaro) are more practical and may also help individuals lose 15% to twenty% or extra of their physique weight.

The announcement of Novo Nordisk’s SELECT trial ends in early August demonstrated that these newer GLP-1s do not simply deal with Kind 2 diabetes and trigger weight reduction, in addition they profit sufferers’ cardiovascular well being. GLP-1s are being studied in different outcomes trials to show whether or not they produce other well being advantages. If these trials learn out positively, we might be coming into a brand new period with improved public well being and decrease downstream medical prices. The SELECT information despatched shockwaves all through the market as traders digested the potential impression of widespread adoption of GLP-1s on well being care firms, meals and beverage producers, eating places, retailers, and even tobacco and gaming firms.

When desirous about how large the marketplace for GLP-1s might be, the numbers get massive. There are roughly 100 million individuals within the U.S. who’ve weight problems with out diabetes and one other roughly 33 million recognized adults with Kind 2 diabetes. One potential precedent is the marketplace for ldl cholesterol and blood strain medicines which might be roughly 50% penetrated on a compliance-adjusted foundation. If we assume 40% of the non-diabetic overweight inhabitants plus 60% of the Kind 2 adults inhabitants take and keep on a GLP-1 medication (a key variable since some sufferers could cycle on and off remedy), that suggests roughly 60 million individuals taking GLP-1s sooner or later on this nation alone.

We now have positioned the Fund to profit from this pattern by sustaining a big place in Eli Lilly and Firm, which we consider will stay a pacesetter within the discipline with its drug Mounjaro and its deep pipeline of next-generation GLP-1 medicines. Analysts now estimate the GLP-1 drug class may surpass $100 billion in income by the tip of the last decade and we count on Lilly to carry a significant share of that market. We even have positions in West Pharmaceutical Providers, Inc. (WST) and Stevanato Group S.p.A (STVN), each of that are beneficiaries of GLP-1 injectable medication uptake. West makes syringe plungers which might be utilized in injection units and Stevanato makes glass syringes and cartridges that go into pens and autoinjectors. McKesson Company, one other Fund holding, additionally advantages from the distribution of GLP-1 medicines and prior authorization know-how providers associated to GLP-1 medicines.

Shifting past the GLP-1 dialogue and turning to managed care, the second quarter’s scare about medical value tendencies has dissipated as latest commentary by managed care firms has famous comparatively secure tendencies. Though managed care shares have confronted a difficult 2023 as a consequence of heightened political and regulatory scrutiny of the Medicare Benefit program and the pharmacy profit administration {industry}, much less favorable Medicare Benefit charges for 2024, and an uptick in medical value tendencies, we proceed to consider the managed care shares we personal are nicely positioned for long-term development.

In the course of the quarter, the Heart for Medicare and Medicaid Providers launched the listing of the primary 10 medication that will probably be topic to cost negotiation below the Medicare Drug Value Negotiation Program (the Program) that Congress established as a part of the Inflation Discount Act. For probably the most half, the listing didn’t shock traders, and lots of the medication on the listing will probably be near patent expiration across the time they develop into topic to negotiation. We proceed to trace litigation difficult the constitutionality of the Program. We’re additionally monitoring whether or not the Program results in an total change in biopharmaceutical R&D spending or a shift in spending in the direction of massive molecule biologics and away from small molecules due to the totally different therapy of those medication within the laws (13-year interval with out Medicare drug value negotiation for biologics vs. 9 years for small molecules).

In biotechnology, we proceed to concentrate on choose biotechnology firms that we consider have revolutionary merchandise and are well-funded and well-positioned in a harder pricing surroundings. Examples embody argenx SE, a developer of therapeutic antibodies for extreme autoimmune ailments; Rocket Prescription drugs, Inc., a developer of gene therapies for uncommon, undertreated ailments; and Legend Biotech Company, a developer of cell therapies for blood cancers resembling a number of myeloma.

After benefiting throughout COVID after which having a difficult 2022, life sciences instruments shares proceed to face a number of headwinds in 2023, together with a pullback in spending by pharmaceutical clients, decrease funding for biotechnology clients, a development slowdown in China, and stock destocking by biotechnology drug producers. Though market situations in China deteriorated within the third quarter, we consider the headwinds are momentary. We stay invested in a number of life sciences instruments firms with secular development drivers, pricing energy, recurring revenues, excessive margins, and low capital depth.

General, our long-term outlook for Well being Care stays bullish. Innovation within the sector and the themes through which we have now been investing are very a lot intact. We consider the Fund holds competitively advantaged development firms with pricing energy, robust administration, and glorious steadiness sheets.

As at all times, I want to thank my colleague Josh Riegelhaupt, Assistant Portfolio Supervisor of Baron Well being Care Fund, for his invaluable contributions to the Fund.

Thanks for investing in Baron Well being Care Fund. I stay an investor within the Fund, alongside you.

Sincerely,

Neal Kaufman

Portfolio Supervisor

Traders ought to contemplate the funding aims, dangers, and expenses and bills of the funding rigorously earlier than investing. The prospectus and abstract prospectus include this and different details about the Funds. It’s possible you’ll receive them from the Funds’ distributor, Baron Capital, Inc., by calling 1-800-99-BARON or visiting Baron Funds – Asset Management for Growth Equity Investments. Please learn them rigorously earlier than investing.

Dangers: Along with normal market situations, the worth of the Fund will probably be affected by investments in well being care firms that are topic to a variety of dangers, together with the hostile impression of legislative actions and authorities laws. The Fund is non-diversified, which implies it might have a larger share of its belongings in a single issuer than a diversified fund. The Fund invests in small and medium-sized firms whose securities could also be thinly traded and harder to promote throughout market downturns.

Portfolio holdings are topic to vary. Present and future portfolio holdings are topic to threat.

The discussions of the businesses herein should not supposed as recommendation to any particular person concerning the advisability of investing in any explicit safety. The views expressed on this report replicate these of the respective portfolio supervisor solely by means of the tip of the interval acknowledged on this report. The portfolio supervisor’s views should not supposed as suggestions or funding recommendation to any particular person studying this report and are topic to vary at any time primarily based on market and different situations and Baron has no obligation to replace them.

This report doesn’t represent a suggestion to promote or a solicitation of any provide to purchase securities of Baron Well being Care Fund by anybody in any jurisdiction the place it could be illegal below the legal guidelines of that jurisdiction to make such provide or solicitation.

Free money stream (FCF) represents the money that an organization generates after accounting for money outflows to assist operations and keep its capital belongings.

BAMCO, Inc. is an funding adviser registered with the U.S. Securities and Trade Fee (SEC). Baron Capital, Inc. is a broker-dealer registered with the SEC and a member of the Monetary Business Regulatory Authority, Inc. (FINRA).

† The Fund’s 3-year historic efficiency was impacted by positive factors from IPOs and there’s no assure that these outcomes will be repeated or that the Fund’s degree of participation in IPOs would be the identical sooner or later.

1 The Russell 3000® Well being Care Index is an unmanaged index consultant of firms concerned in medical providers or well being care within the Russell 3000 Index, which is comprised of the three,000 largest U.S. firms as decided by complete market capitalization. The S&P 500 Index measures the efficiency of 500 extensively held massive cap U.S. firms. All rights within the FTSE Russell Index (the “Index”) vest within the related LSE Group firm which owns the Index. Russell® is a trademark of the related LSE Group firm and is utilized by another LSE Group firm below license. Neither LSE Group nor its licensors settle for any legal responsibility for any errors or omissions within the indexes or knowledge and no get together could depend on any indexes or knowledge contained on this communication. The Fund contains reinvestment of dividends, web of withholding taxes, whereas the Russell 3000® Well being Care Index and S&P 500 Index embody reinvestment of dividends earlier than taxes. Reinvestment of dividends positively impacts the efficiency outcomes. The indexes are unmanaged. Index efficiency just isn’t Fund efficiency; one can not make investments instantly into an index.

2 The efficiency knowledge within the desk doesn’t replicate the deduction of taxes {that a} shareholder would pay on Fund distributions or redemptions of Fund shares.

3 Not annualized.

Original Post

Editor’s Notice: The abstract bullets for this text had been chosen by Searching for Alpha editors.

Editor’s Notice: This text discusses a number of securities that don’t commerce on a significant U.S. change. Please pay attention to the dangers related to these shares.

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