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Dear Baron Emerging Markets Fund Shareholder
Baron Emerging Markets Fund® (MUTF:BEXIX, the Fund) gained 4.18% (Institutional Shares) during the second quarter of 2024, while its primary benchmark index, the MSCI Emerging Markets Index (the Benchmark), was up 5.00%. The MSCI Emerging Markets IMI Growth Index (the Proxy Benchmark) also gained 5.00% for the quarter. The Fund modestly underperformed both the Benchmark and the Proxy Benchmark during a solid quarter for global equity returns.
Table I. Performance Annualized for periods ended June 30, 2024
| Baron Emerging Markets Fund Retail Shares1,2 | Baron Emerging Markets Fund Institutional Shares1,2 | MSCI Emerging Markets Index1 | MSCI Emerging Markets IMI Growth Index1 | |
|---|---|---|---|---|
| Three Months3 | 4.14% | 4.18% | 5.00% | 5.00% |
| Six Months3 | 6.60% | 6.78% | 7.49% | 8.12% |
| One Year | 8.15% | 8.47% | 12.55% | 11.83% |
| Three Years | (8.60)% | (8.36)% | (5.07)% | (7.59)% |
| Five Years | 1.69% | 1.96% | 3.10% | 4.01% |
| Ten Years | 2.04% | 2.31% | 2.79% | 3.59% |
| Since Inception (December 31, 2010) | 3.30% | 3.56% | 2.04% | 2.87% |
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Performance listed in the above table is net of annual operating expenses. Annual expense ratio for the Retail Shares and Institutional Shares as of December 31, 2023 was 1.37% and 1.11%, 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. The Adviser may waive or reimburse certain Fund expenses pursuant to a contract expiring on August 29, 2034, unless renewed for another 11-year term and the Fund’s transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, 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 BaronCapitalGroup.com or call 1-800-99-BARON. (1)The MSCI Emerging Markets Index Net (‘USD’) is designed to measure equity market performance of large and mid-cap securities across 24 Emerging Markets countries. The MSCI Emerging Markets IMI Growth Index Net (‘USD’) is a free float-adjusted market capitalization index designed to measure equity market performance of large, mid and small-cap securities exhibiting overall growth characteristics across 24 Emerging Markets countries. MSCI is the source and owner of the trademarks, service marks and copyrights related to the MSCI Indexes. The indexes and the Fund include reinvestment of dividends, net of foreign withholding taxes, which positively impact the performance results. The indexes are unmanaged. Index performance is not Fund performance. Investors cannot invest directly in an index.(2)The performance data does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.(3)Not annualized. |
During the second quarter, inflation readings failed to slow sufficiently to clearly warrant the initiation of a Federal Reserve (the Fed) easing cycle, while global growth and employment conditions offered mixed signals. As a result, equity market breadth and leadership continued to narrow as the uncertain macro environment, contrasted by strong near-term fundamentals for the so-called Magnificent Seven and associated AI proxies and beneficiaries worldwide, ensured that such AI proxies drove the lion’s share of second quarter returns. Beneath this surface level, we note that in contrast to the first quarter, the momentum of U.S. and global growth and employment conditions seemed to peak early in the quarter and moderate, with consumption clearly weakening late in the quarter. This allowed bond yields, and more importantly real yields, to moderate through the quarter, ending notably below the April highs and well below the recent peak levels of October 2023, which preceded the Fed’s subsequent pivot. Our current bias is that recent moderating trends will trigger a Fed easing cycle sooner rather than later, a development which would likely warrant a mean-reverting inflection point for many market underperformers including emerging markets (‘EM’) equities. Interestingly, we point out that despite the year-to-date rise in bond yields and the U.S. dollar, the Benchmark slightly outperformed the S&P 500 Index (SP500, SPX) during the second quarter, while strongly outperforming the Dow Jones Industrial Average, the equal-weighted S&P 500 Index, and the Russell 2000 Index (RTY). We find this performance particularly admirable and perhaps a foreshadowing in the face of widespread skepticism and capital outflows.
As we referenced in our previous letter, a portion of this surprisingly solid showing can be attributed to the broadening recognition of AI-related equities in the Benchmark. Further, as AI enthusiasm has spread from the “GPU/ data center arms race” to the notion of “edge AI,” or AI on server/PC/handset, many more individual companies can be seen as at least cyclical beneficiaries as edge AI would necessitate a significant and long-deferred replacement cycle for such edge devices. As the second quarter progressed, updates from Apple (AAPL), Taiwan Semiconductor (TSM), Dell (DELL), Lenovo (OTCPK:LNVGY) and others drove growing interest in the many companies in the hardware/handset ecosystem – a substantial portion of which reside in EM jurisdictions, in addition to the well-recognized semiconductor and high-bandwidth memory leaders, and, in our view, this phenomenon helped drive solid EM relative performance. We remain confident that EM equities currently offer an attractive long-term entry point, with valuations and relative earnings expectations near multi- decade lows, high investor skepticism, and fundamental catalysts that we view as underappreciated by investors and allocators. As always, we remain confident that our diversified portfolio of well-positioned and well-managed companies can capitalize on their potential over the coming years regardless of the external environment.
For the second quarter of 2024, we modestly underperformed the Benchmark as well as our all-cap EM growth Proxy Benchmark. From a sector or theme perspective, poor stock selection effect in the Financials sector, primarily attributable to our investments in XP Inc. (XP), PT Bank Rakyat Indonesia (Persero) Tbk (OTCPK:BKRKY), and BDO Unibank, Inc. (OTCPK:BDOUF), was the largest detractor to relative performance this quarter, in our view, associated with the pushing out of central bank easing expectations and upward pressure on global bond yields. In addition, adverse stock selection in the Materials sector, owing largely to a single investment in Suzano S.A. (SUZ), was also a secondary detractor to relative results. Partially offsetting the above was favorable allocation effect together with solid stock selection in the Communication Services sector, primarily attributable to our India digitization investments (Indus Towers Limited and Bharti Airtel Limited). Positive stock selection effect in the Health Care (Max Healthcare Institute Limited) and Consumer Discretionary (Trent Limited, Mahindra & Mahindra Limited, and Coupang, Inc.) sectors also bolstered relative performance.
From a country perspective, weak stock selection effect in China, largely a result of our consumer and software-related holdings (Kingdee International Software Group Company Limited, Baidu, Inc., Kweichow Moutai Co., Ltd., Yum China Holdings Inc., and China Mengniu Dairy Co. Ltd.), was the largest detractor to relative performance this quarter. While Chinese equities staged a recovery during the period and outperformed the broader EM universe, private sector, growth-oriented businesses in China continued to lag mega-cap banks and SOEs. While we are disappointed with the pace of consumption growth in China, we are encouraged by early signs of stabilization, driven by recent government stimulus measures along with easing monetary and regulatory policies. While we acknowledge the negative investor sentiment regarding China, we continue to believe that many of our China holdings trade well below fundamental intrinsic value, providing favorable risk reward at current market prices. Our overweight positioning together with adverse stock selection effect in Brazil and the Philippines were also detractors to relative performance this quarter. In our view, this is largely attributed to a delay in central bank easing as well as concerns over Brazil’s commitment to fiscal discipline. Partially offsetting the above was solid stock selection in Korea, primarily attributable to select holdings in our sustainability (HD Korea Shipbuilding & Offshore Engineering Co., Ltd. and HD Hyundai Heavy Industries Co., Ltd.) and digitization (Coupang, Inc. and SK hynix Inc.) themes. Positive stock selection together with our large overweight in India also bolstered relative results. We remain excited about our investments in India and are encouraged by the recent reelection of Prime Minister Modi to a historic third term, which bodes well for policy continuity and further implementation of productivity enhancing economic reforms. In our view, India has become a standout investment destination within EM and has entered a multi-year virtuous investment cycle.
Top contributors to Performance
Table II. Top contributors to performance for the quarter ended June 30, 2024
| Percent Impact | |
|---|---|
| Taiwan Semiconductor Manufacturing Company Limited | 1.95% |
| Tencent Holdings Limited | 0.98 |
| HD Korea Shipbuilding & Offshore Engineering Co., Ltd. | 0.56 |
| Trent Limited | 0.50 |
| Indus Towers Limited | 0.49 |
Semiconductor giant Taiwan Semiconductor Manufacturing Company Limited (TSMC) contributed in the second quarter due to expectations for a continued strong cyclical recovery in semiconductors and significant incremental demand for AI chips. We retain conviction that TSMC’s technological leadership, pricing power, and exposure to secular growth markets, including high-performance computing, automotive, 5G, and IoT, will allow the company to sustain strong double-digit earnings growth over the next several years.
Tencent Holdings Limited (OTCPK:TCEHY) operates the leading social network and messaging platforms (QQ, WeChat), the largest online entertainment and media business, and the largest online gaming business in China. Shares were up this quarter, given better-than-expected domestic games growth and continued strength in recent game releases. We continue to believe in Tencent’s ability to compound earnings, given its growth structure, massive scale, and focus on efficient operations. Although on the earlier side, we also believe Tencent could be the largest generative AI beneficiary in China, given its ability to improve existing products and enter adjacent markets with massive scale and distribution. We continue to monitor the regulatory environment.
HD Korea Shipbuilding & Offshore Engineering Co., Ltd. is the holding company of Hyundai Heavy, the largest global shipbuilder based on orderbook size and the global leader in high-end vessels including liquified natural gas (LNG)-powered ships. Shares contributed on strong quarterly results at subsidiary Hyundai Samho, which delivered better-than-expected margins on higher pricing. In addition, year-to-date newbuild ship order demand and pricing for the group was better than expected. We retain conviction. Korean shipbuilders have an oligopoly in LNG carrier shipbuilding, LNG dual-fueled container ships, and tankers. The tightening regulation on carbon emission, which will be fully adopted by the International Maritime Organization (‘IMO’) by 2030, should drive higher demand for LNG dual-fueled ships as well as carbon-free ammonia-fueled ships. We expect a structural shortage of compliant ships to emerge as the IMO deadline nears, which should benefit HD Korea Shipbuilding given its leading position.
Top Detractors from Performance
Table III. Top detractors from performance for the quarter ended June 30, 2024
| Percent Impact | |
|---|---|
| PT Bank Rakyat Indonesia (Persero) Tbk | -0.51% |
| Suzano S.A. | -0.51 |
| XP Inc. | -0.45 |
| Localiza Rent a Car S.A. | -0.44 |
| BDO Unibank, Inc. | -0.27 |
PT Bank Rakyat Indonesia (Persero) Tbk is a lender serving Indonesia’s micro, consumer, and small-to-medium-enterprise segments. Shares declined after the company reported higher-than-expected credit costs driven by the impact of rising inflation on clients’ repayment capacity. Management decided to tighten underwriting standards to prioritize asset quality over loan growth. While this decision is having a negative impact on near-term earnings expectations, it does not alter our thesis of increasing credit penetration within the segments Bank Rakyat serves. We expect Bank Rakyat to deliver above-industry returns in a growing segment for credit in Indonesia.
Suzano S.A. is the world’s largest and lowest-cost producer of pulp, which is primarily used in paper, tissue, and packaging. Shares declined after reports that the company was looking to acquire one of the largest integrated paper producers, International Paper, at a premium to market price, and would take on significant debt to finance the transaction. The company later dropped the bid, but some investors still had concerns about its international expansion plans. We continue to like shares of Suzano. The company is expanding into new, higher-margin markets for pulp with fossil-to-fiber substitution for textiles, plastics, fuels, and chemicals. The company’s pulp production removes more greenhouse gas emissions from the atmosphere than it emits. Suzano has a goal to remove 40 million tons of CO2 over the next five years, and we see an opportunity to monetize these carbon credits. In addition to our positive view on pulp prices, we expect sustainability/ESG factors to drive multiple positive re-ratings for Suzano. Finally, Suzano is starting production at its Cerrado project, which should significantly improve free cash flow generation.
XP Inc. is the leading independent financial investments platform in Brazil. Shares declined during the quarter, reflecting weaker-than-expected top line growth. Investors have been waiting for a monetary easing cycle to drive faster growth assets and a change in client investment mix. However, higher inflation expectations in Brazil have pushed out the timeline for further rate cuts and delayed the positive impact of these changes for XP. We believe XP is uniquely positioned to benefit from the deepening of the capital markets in Brazil and a shift in allocation of household assets away from plain-vanilla savings products into higher-return assets. We retain conviction in XP as a high-quality, long-term investment.
Portfolio Structure
Table IV. Top 10 holdings as of June 30, 2024
| Percent of Net Assets | |
|---|---|
| Taiwan Semiconductor Manufacturing Company Limited | 9.7% |
| Tencent Holdings Limited | 4.7 |
| Samsung Electronics Co., Ltd. | 4.5 |
| Bharti Airtel Limited | 2.7 |
| Indus Towers Limited | 2.6 |
| Bundl Technologies Private Limited | 2.6 |
| HD Korea Shipbuilding & Offshore Engineering Co., Ltd. | 2.4 |
| Reliance Industries Limited | 2.1 |
| InPost S.A. | 2.0 |
| Alibaba Group Holding Limited | 1.8 |
Table V. Percentage of securities by country as of June 30, 2024
| Percent of Net Assets | |
|---|---|
| India | 31.5% |
| China | 21.3 |
| Korea | 13.2 |
| Taiwan | 12.7 |
| Brazil | 6.0 |
| Poland | 2.8 |
| Mexico | 2.1 |
| Philippines | 1.5 |
| Hong Kong | 1.4 |
| South Africa | 1.3 |
| Indonesia | 1.2 |
| Peru | 1.1 |
| Japan | 0.5 |
| Spain | 0.4 |
| Russia | 0.0* |
| * The Fund’s exposure to Russia was less than 0.1%. |
Exposure by Market Cap: The Fund may invest in companies of any market capitalization, and we have generally been broadly diversified across large-, mid-, and small-cap companies, as we believe developing world companies of all sizes can exhibit attractive growth potential. At the end of the second quarter of 2024, the Fund’s median market cap was $14.7 billion, and we were invested 51.3% in giant-cap companies, 34.1% in large-cap companies, 11.3% in mid-cap companies, and 0.4% in small- and micro-cap companies, as defined by Morningstar, with the remainder in cash.
Recent Activity
During the second quarter, we added several new investments to our existing themes, while also increasing exposure to various positions that we established in earlier periods. We continue our endeavor to add to our highest conviction ideas.
We were most active in adding to our global security/supply chain diversification theme by initiating positions in Power Grid Corporation of India Limited, Cummins India Limited, SRF Limited, and WEG S.A. (OTCPK:WEGZY) Power Grid is a leading power utilities company in India, controlling approximately 85% of the country’s inter-state power transmission capacity. Being majority owned by the Government of India, the company is deemed a sovereign entity, which serves as a competitive moat from a cost and access to capital perspective. In our view, given India’s robust economic growth and accelerating industrial capacity expansion, significant investment in power generation and transmission infrastructure will be required, creating a multi- year growth opportunity for Power Grid. Additionally, as India targets to achieve 50% of electricity generation capacity through non-fossil fuel sources by 2030, Power Grid will be a key enabler of the country’s power transition toward renewable energy. We expect the company to deliver low-teens total shareholder returns over the next three to five years alongside an attractive dividend yield.
Cummins India, a subsidiary of U.S. based Cummins Inc., is a leading power generation engine manufacturer in India. The company is a dominant player in power generators, with over 50% market share in the highly profitable medium and high horsepower ranges. The company also has a distribution and aftermarket vertical along with an export division that caters to regions including North America, Europe, Middle East, and Africa. In our view, the company’s key competitive advantages include best-in-class technology and product quality, wide product range across categories, high penetration with channel partners, and leading aftermarket services. We believe Cummins India is well positioned to benefit from the rising demand for backup power supply in India, driven by higher capital expenditure by the government and private sector companies in segments such as infrastructure and manufacturing. In addition, Cummins India’s dominance in the high horsepower range positions the company in new growth verticals such as data centers. We expect the company to generate mid-teens EBITDA growth over the next three to five years.
SRF is an Indian multi-national that manufactures specialty chemicals, refrigerant gases, packaging film, and technical textiles. The company serves various end markets, including automotive, agrochemicals, pharmaceuticals, air conditioning (‘AC’) & refrigeration, and fast-moving consumer goods. In our view, SRF’s key competitive advantage is its R&D/innovation capabilities. The company invests about 3% of its specialty chemical revenue in R&D, the highest among peers. SRF is also the leader in R-32 manufacturing in India. R-32 is currently the most efficient refrigerant for ACs and has low global warming potential (‘GWP’). We view SRF as a key beneficiary of global customers phasing out of high GWP refrigerants to lower their carbon footprint and greenhouse gas emissions. With planned capex investment over the medium term, we believe SRF is well positioned to scale up its specialty chemicals business and deliver mid-teens earnings growth over the next three to five years.
WEG, a leading Brazilian industrial conglomerate, is one of the world’s largest manufacturers of industrial electric motors and related equipment. Compared to most global peers, WEG has a vertically integrated business model with large scale manufacturing facilities. This, in our view, is a key competitive advantage, creating cost efficiency, product customization, and on-time customer deliveries. WEG has a strong track record in generating high teens compounded revenue growth over past decades, while maintaining high double-digit return on invested capital and EBITDA margins. Sales should continue to benefit from significant market share gains globally in electric motors, drives, and gear boxes, in addition to the megatrend of greater energy efficiency. WEG also has a strong presence in the energy generation, transmission, and distribution segment, where it offers solutions from wind turbines, solar, energy storage, to EV charging stations and benefits from rising penetration of renewable energy and e-mobility. Finally, we see an emerging opportunity in the power transformer and substation markets, particularly in North America, where WEG should capitalize on recent investments in production capacity in the U.S. and Mexico.
During the quarter, we also increased exposure to our digitization theme by initiating a position in ASPEED Technology Inc., a Taiwanese semiconductor design company and the dominant global supplier of Baseboard Management Controllers (‘BMC’), a mission-critical chip used to remotely monitor and manage the key components in a server, such as the processor, memory, and power supply. We expect the company to maintain a 70%-plus market share in BMCs, given its superior technology, scale advantage, and strong relationships with key Taiwanese server manufacturers and U.S. hyperscale customers. AI servers have significantly higher BMC content than traditional servers, and we expect surging demand for AI servers to drive a dramatic acceleration in demand for BMCs. ASPEED’s growth will be further boosted by the transition to its new-generation BMC, which is priced at a significant premium, reflecting major advancements in performance and functionality. We are also optimistic that the company will leverage its customer relationships and strong design capabilities to successfully expand into new products, including a Platform Firmware Resilience chip which prevents malware attacks. In our view, ASPEED is uniquely positioned as a long-term AI beneficiary, and we expect the company to maintain industry-leading top-line growth and profit margins over the next five years.
We added to several of our existing positions during the quarter, including Indus Towers Limited, PDD Holdings Inc. (PDD), Dino Polska S.A. (OTCPK:DNOPY), eMemory Technology Inc., Kaynes Technology India Limited, Banco BTG Pactual S.A., and Kingdee International Software Group Company Limited. (OTCPK:KGDEF)
During the quarter, we also exited our positions in B3 S.A. – Brasil, Bolsa, Balcao (OTCPK:BOLSY), Venustech Group Inc., Max Financial Services Limited, Pernod Ricard SA (OTCPK:PDRDF), Aarti Pharmalabs Limited, Lufax Holding Ltd (LU), and Divi’s Laboratories Limited, as we continue our endeavor to allocate capital to our highest convictions ideas.
Outlook
In many ways, we see the evolution of market behavior in the second quarter 2024 as an extension of the first quarter: inflation readings failed to slow sufficiently to clearly warrant the initiation of a Fed easing cycle, while global growth and employment conditions offered mixed signals, and equity market breadth and leadership continued to narrow into nearly the exclusive confines of the Magnificent Seven and associated AI proxies and beneficiaries worldwide. Under the hood, we observe that the details are more nuanced. First, in contrast to Q1, the momentum of U.S. and global growth and employment conditions seemed to peak early in the quarter and moderate, with consumption clearly weakening into late Spring/early Summer. This allowed bond yields, and more importantly real yields, to moderate through the quarter, ending notably below the April highs and well below the recent peak levels of October 2023, which preceded the Fed’s pivot. We will be carefully following ongoing employment and consumption indicators, and the related implications for growth and inflation expectations, as our current bias is that recent moderating trends will trigger a Fed easing cycle sooner rather than later. Such a development would likely warrant a mean-reverting inflection point for many market underperformers – much as we experienced during the final quarter of 2023; though, if viewed as a more lasting economic inflection point, we would expect any associated leadership change to be more durable. Interestingly, we point out that despite the year-to-date rise in bond yields and the U.S. dollar, the MSCI Emerging Markets Index slightly outperformed the S&P 500 Index during the second quarter, while strongly outperforming the Dow Jones Industrial Average, the equal-weighted S&P 500 Index, and the Russell 2000 Index, and year-to-date, stands ahead of all of the above, excluding the S&P 500 Index, which is skewed by the dominant performance of NVIDIA and other members of the Magnificent Seven. We find this performance particularly admirable in the face of widespread skepticism and capital outflows.
A portion of this surprisingly solid showing can be attributed to the considerable weighting and number of AI-related equities in the Benchmark, which we highlighted in our previous letter. More recently, as AI enthusiasm has broadened and spread from the “GPU/data center arms race” to the notion of “edge AI,” or AI on server/PC/handset, many more individual companies can be seen as at least cyclical beneficiaries as edge AI would necessitate a significant and long-deferred replacement cycle for such edge devices. As the second quarter progressed, updates from Apple, Taiwan Semiconductor, Dell, Lenovo and others drove growing interest in the many companies in the hardware/handset ecosystem – a substantial portion of which reside in EM jurisdictions, in addition to the well-recognized semiconductor and high-bandwidth memory leaders, and, in our view, this phenomenon helped drive solid EM relative performance. This nuance, we believe, has potential implications going forward for the traditional AI/ Magnificent Seven plays; while the long-term opportunity appears compelling (and consensus), given current valuations, any pause in the momentum of the GPU arms race in the transition from training to inference, or from data center capex to the rollout of software-driven AI applications at scale, would likely spark a major inflection in market leadership. In other words, it is possible or even likely that it will take time to utilize the vast expansion in AI processing capacity that is building up at the hyperscale/data center level in the pursuit of productivity promise of AI, notwithstanding a potentially imminent global handset/server/PC upgrade cycle. In such a scenario, we would expect to see a notable change in Magnificent Seven/U.S. equity dominance with improved relative performance for non-U.S. and EM equities.
A word on recent elections and political catalysts throughout EM: during the quarter, we witnessed surprising outcomes in closely watched elections in Mexico and India, while in Brazil, President Lula offered disturbing rhetoric regarding fiscal balance and BCB independence. We see the final election result in India, and ensuing government/ministerial makeup, as supportive of a healthy and quite positive status quo, while developments in Latin America appear more populist and potentially adverse to the interests of capital owners. We note that in Latin America, a quite small percentage of EM Benchmark weight even in the aggregate, left-leaning ideology and political rhetoric is notoriously over-discounted on surface, while in the intermediate term, political and market “breakers” tend to materially dilute the feared impact, allowing elevated risk-premium to recede. While the process can be frustrating and volatile, we suspect this pattern is likely to prevail, and while we have modestly reduced exposure in both Brazil and Mexico out of caution, we believe patience is warranted and likely to be rewarded.
Thank you for investing in the Baron Emerging Markets Fund.
Sincerely,
Michael Kass, Portfolio Manager
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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. The Adviser waives and/or reimburses or may waive or reimburse certain Funds expenses pursuant to a contract expiring on August 29, 2034, unless renewed for another 11-year term and the Funds’ transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, 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 BaronCapitalGroup.com or call 1-800-99-BARON. Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary prospectuses contain this and other information about the Funds. You may obtain them from the Funds’ distributor, Baron Capital, Inc., by calling 1-800-99-BARON or visiting BaronCapitalGroup.com. Please read them carefully before investing. Risks: All investments are subject to risk and may lose value. Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary prospectus contain this and other information about the Funds. You may obtain them from its distributor, Baron Capital, Inc., by calling 1-800-99-BARON or visiting BaronCapitalGroup.com. Please read them carefully before investing. Risks: In addition to the general stock market risk that securities may fluctuate in value, investments in developing countries may have increased risks due to a greater possibility of: settlement delays; currency and capital controls; interest rate sensitivity; corruption and crime; exchange rate volatility; and inflation or deflation. The Fund invests in companies of all sizes, including small and medium sized companies whose securities may be thinly traded and more difficult to sell during market downturns. The Fund may not achieve its objectives. Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk. The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the respective portfolio manager only through the end of the period stated in this report. The portfolio manager’s views are not intended as recommendations or investment advice to any person reading this report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them. This report does not constitute an offer to sell or a solicitation of any offer to buy securities of Baron Emerging Markets Fund by anyone in any jurisdiction where it would be unlawful under the laws of that jurisdiction to make such offer or solicitation. Free cash flow (‘FCF’) represents the cash that a company generates after accounting for cash outflows to support operations and maintain its capital assets. BAMCO, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Baron Capital, Inc. is a broker-dealer registered with the SEC and member of the Financial Industry Regulatory Authority, Inc. (FINRA). |
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