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| # | Fund | Strategy | Style | Geography | AUM | Latest Letter |
|---|---|---|---|---|---|---|
As of Oct 14, 2026
During the third quarter of 2026, Baron Health Care Fund advanced 4.02% net of fees for Institutional Shares (and 3.91% net for Retail Shares), trailing the Russell 3000 Health Care Index return of 6.19% while outperforming the broad-market Russell 3000 Index return of 1.40%. Year-to-date, the Fund has gained 8.38% net of fees versus 11.61% for the health care benchmark. Relative performance was weighed down by stock selection in biotechnology, which detracted 235 basis points, driven by the absence of Moderna and clinical setbacks in Xenon Pharmaceuticals and Cytokinetics. Conversely, the Fund benefited substantially from a large overweight in life sciences tools and services, which added 190 basis points to relative performance as end-market demand rebounded. Cash and cash equivalents stood at 3.0% of net assets at quarter-end. The macroeconomic and sector backdrop reflected diverging dynamics across sub-industries. Life sciences tools staged a broad recovery supported by an inflection in biopharma funding, expanding clinical pipelines, lab-instrument replacement cycles, and recovering demand in China following a new five-year pharmaceutical development plan. Meanwhile, managed care and biopharmaceutical sectors contended with headwinds, including mid-term election policy overhangs, Medicare Advantage Star Rating uncertainties, and high-profile cardiovascular clinical trial failures, even as underlying demand for health care innovation and reshoring of domestic manufacturing remain robust. Portfolio turnover was pronounced during the quarter as the manager initiated 4 new holdings and fully exited 14, bringing the total position count to 33. The Fund established new long stakes in biopharmaceutical turnaround Biogen and pure-play Medicare Advantage insurer Humana, citing attractive risk-reward asymmetric recovery potential. The Fund also scaled positions in large-cap pharmaceutical leaders Johnson & Johnson, Merck, and Vertex Pharmaceuticals, while divesting AstraZeneca, Xenon Pharmaceuticals, Gilead Sciences, and Madrigal Pharmaceuticals to mitigate regulatory and competitive risks.
Invest for the long term in competitively advantaged, secular growth companies across health care sub-sectors that solve critical industry challenges by lowering costs, enhancing efficiency, and improving patient outcomes.
The manager remains confident in the health care sector over the coming decade, underpinned by non-cyclical secular growth drivers including an aging global population, rising chronic disease prevalence, and continuous advances in biotechnology, medical devices, and diagnostics. While mid-term elections introduce potential legislative friction regarding drug pricing reform and Medicaid requirements, active management and ownership of competitively advantaged companies with durable pricing power should drive sustained outperformance across shifting regulatory landscapes.
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