Core Insights - The Baron WealthBuilder Fund appreciated 3.20% in Q3 2025, underperforming the S&P 500 Index (up 8.12%) and the MSCI ACWI Index (up 7.62%) [3] - Despite recent underperformance, the Fund's long-term annualized return since inception is 12.93%, which is below the S&P 500 Index's 14.44% but above the Global Index's 10.67% and peers' 8.08% [3][4] - The Fund's performance has been impacted by stock selection, style biases, and active industry exposures, particularly due to lower exposure to high-performing large-cap stocks [19][20] Performance Summary - QTD performance for various share classes: Retail Shares 3.17%, Institutional Shares 3.20%, S&P 500 Index 8.12% [4] - YTD performance: Fund Institutional Shares 5.00%, S&P 500 Index 14.83% [4] - 1-Year performance: Fund Institutional Shares 10.81%, S&P 500 Index 17.60% [4] Sector and Stock Contributions - Significant contributions to performance came from Tesla, Inc. (TSLA) and SpaceX, with Tesla's share price increasing by 40% due to strong automotive business and AI initiatives [10][12] - The Baron Real Estate Fund and Baron Emerging Markets Fund also contributed positively, with the former benefiting from non-REIT real estate-related companies [14][15] - The semiconductor sector, particularly stocks like NVIDIA and Taiwan Semiconductor Manufacturing Company, showed strong performance, driven by robust earnings and AI growth [16] Challenges and Underperformance - The Fund's underperformance relative to the S&P 500 was attributed to stock-specific weaknesses, particularly in the "Magnificent Seven" tech stocks [19] - The Fund's exposure to small- and mid-cap stocks was costly, as these segments lagged behind large-cap stocks during the period [20][25] - Active industry exposures, particularly in lagging sectors like Hotels and Leisure, negatively impacted performance [21] Investment Strategy - The Fund employs a strategy focused on small- and mid-cap growth stocks, which represent 61.3% of the Fund compared to 19.2% for the S&P 500 Index [25] - The investment philosophy emphasizes long-term business fundamentals rather than short-term market fluctuations [24] - The Fund's structure as a fund of funds allows for broad equity exposure while maintaining a consistent investment approach across underlying Baron Funds [24]