| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 12.81% | 11.84% | 5.74% |
Baron Real Estate Fund delivered strong Q2 2026 results, increasing 11.89% and outperforming its benchmark. The manager believes public real estate is in the early stages of a multi-year recovery, supported by eight key themes: real estate has lagged the broader market for years; valuations remain attractive with many companies trading at discounts to private market values; privatizations are accelerating with three Fund holdings receiving acquisition bids in Q2; supply-demand dynamics favor real estate with construction at decade lows; balance sheets are healthy and the debt environment is improving; real estate is increasingly an AI beneficiary as HALO businesses; many investors remain underweight the sector; and the manager sees a path to double-digit annual returns. The Fund maintains a diversified approach across REITs (29.0% of assets) and non-REIT real estate companies (66.9%), with particular emphasis on residential-related (33.7%), travel-related (19.1%), and building products companies. Near-term headwinds include elevated interest rates and housing affordability pressures, but the manager remains firmly bullish on long-term prospects. Key portfolio actions included initiating Meritage Homes, participating in the Blackstone Digital Infrastructure Trust IPO, and trimming positions where valuations extended or visibility declined. The manager believes this is an attractive time to invest in real estate.
Public real estate is in the early stages of a multi-year recovery, with the sector offering compelling relative value as many REITs and real estate companies trade at meaningful discounts to private market values despite favorable supply-demand dynamics and healthy balance sheets.
The manager maintains a constructive outlook for the broader equity market, public real estate, and the Fund. Research points to broadly stable economic conditions ahead supported by policy tailwinds including reduced trade uncertainty, lower taxes, enhanced depreciation incentives, deregulation, and a more permissive M&A environment. AI-driven productivity gains represent a meaningful catalyst with potential to moderate inflation, compress long-term interest rates, and expand profit margins. For real estate specifically, the manager believes conditions are in place for the sector to perform well over the next few years, with demand remaining steady and growth expected to improve while new supply has declined significantly. The combination of cash flow growth, dividends, and potential for multiple expansion could generate double-digit annual returns in the years ahead. The manager views this as an attractive time to invest in real estate and remains positive about the outlook for the Baron Real Estate Fund.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 21 2026 | 2026 Q2 | AAON, BLDR, BN, BX, CZR, EQIX, GDS, H, HD, HLT, LOW, MAC, MTH, PHM, PLD, SITE, TMHC, TOL, VTR, WELL, WYNN | AI, Data centers, Homebuilders, M&A, real estate, REITs, Travel, Valuations | - | Baron Real Estate Fund is positioned for a multi-year real estate recovery. Public real estate trades at significant discounts to private market values despite favorable supply-demand dynamics and decade-low construction activity. Three portfolio companies received takeover bids in Q2 at substantial premiums, validating the valuation disconnect. The Fund's diversified approach across REITs and non-REIT real estate companies, combined with compelling valuations and improving fundamentals, supports a path to double-digit annual returns. |
| Apr 22 2026 | 2026 Q1 | ABNB, BN, BX, CBRE, CSGP, CZR, DLR, EQIX, JLL, PSA, SITE, TOL, WELL, WYNN | AI, Commercial real estate, Data centers, Homebuilders, real estate, REITs, Travel, valuation | - | Baron Real Estate Fund underperformed in Q1 2026 but manager sees compelling multi-year opportunity as real estate trades at attractive discounts. Strong conviction in data centers and travel-related companies, cautious on housing near-term but bullish long-term. Believes favorable demand-supply dynamics, potential rate cuts, and market rotation could drive double-digit returns ahead. |
| Jan 23 2026 | 2025 Q4 | AMH, AMT, BX, CSGP, DHI, FBIN, GDS, GMG.AX, H, HLT, IRM, JLL, PLD, RKT, SKY, TMHC, TREX, VNO, VTR, WELL | Commercial, Data centers, Housing, Industrial, real estate, REITs, Travel |
JLL PLD H CSGP SKY FBIN WELL VTR IRM |
Baron Real Estate Fund's Jeff Kolitch sees real estate at a positive inflection point with compelling risk/reward as key concerns are priced in. The fund's growth-oriented approach targets faster-growing real estate companies beyond traditional REITs, focusing on commercial services, data centers, travel, and housing themes. With supply collapsed and strong balance sheets, double-digit returns are expected ahead. |
| Oct 21 2025 | 2025 Q3 | AAON, ABNB, AMH, AMT, BN, BX, CBRE, CRH, CSGP, EQIX, FND, HLT, IRM, IRT, JLL, TOL, VMC, VNO, WELL, WYNN | Commercial, Data centers, Homebuilders, real estate, Recovery, REITs, Travel, value |
WYNN AAON FND WYNN AAON FND |
Baron Real Estate Fund posted strong Q3 returns of 10.25% while maintaining exceptional long-term performance rankings. Manager sees real estate at pivotal inflection point with improving fundamentals, attractive valuations, and favorable supply-demand dynamics. Portfolio positioned across high-conviction themes including REITs, homebuilders, travel, and commercial services, with Federal Reserve rate cuts and private capital providing additional catalysts for compelling returns ahead. |
| Aug 22 2025 | 2025 Q2 | ABNB, AMH, AMT, AVB, BAM, BN, BXP, CBRE, CHDN, CSGP, EQIX, EQR, EXR, GDS, IRT, JLL, LPX, PLD, SITE, SPG, TOL, WELL, WYNN | Data centers, Homebuilders, real estate, Recovery, REITs, Travel, Valuations | - | Baron Real Estate Fund manager sees compelling opportunity in real estate trading below replacement cost with improving demand-supply dynamics. Fund returned 3.61% in Q2 2025 with diversified exposure across REITs and non-REIT categories. Key themes include residential real estate benefiting from structural underinvestment, travel recovery, and data center growth from AI demand. Manager remains optimistic despite near-term headwinds. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
Commercial Real EstateThe manager sees a multi-year recovery in real estate beginning to take shape. Public real estate remains attractively valued, with many REITs and real estate companies trading at meaningful discounts to private market values. Supply-demand dynamics favor real estate, with construction activity at decade lows while demand continues to outpace supply. The manager believes conditions are in place for real estate to perform well over the next few years, with potential for double-digit annual returns through cash flow growth, dividends, and multiple expansion. |
REITs Valuations Supply-Demand M&A Recovery |
HomebuildersThe manager acknowledges near-term housing market headwinds including affordability pressures and buyer-seller standoffs, but remains firmly bullish long-term. Housing is positioned as an early cycle beneficiary with secular tailwinds from millennial household formation and a structural shortage of over 4 million homes. The manager added exposure in Q2 where valuations became compelling, with select homebuilders trading near 1x book value versus historical norms of 1.3-1.5x, implying 30-50% upside. Three public homebuilders received acquisition offers at significant premiums in 2026. |
Housing Shortage Affordability Valuations M&A Millennial Formation | |
TravelThe manager believes several travel-related real estate companies are well positioned to benefit from a favorable trifecta of cyclical, secular, and 2026-specific tailwinds. Cyclical tailwinds include potential economic acceleration, while secular tailwinds reflect consumers allocating more discretionary spending to travel rather than durable goods. 2026 tailwinds include the World Cup, America's 250th anniversary, and other major events. The manager highlights several attractively valued travel companies including Hyatt, Wynn, Red Rock, and Airbnb. Two Fund holdings in travel (Caesars and MGM) received takeover bids in H1 2026. |
Hotels Casinos Valuations Events M&A | |
Data CentersThe manager participated in the IPO of Blackstone Digital Infrastructure Trust, a newly listed vehicle focused on acquiring stabilized, fully leased data centers underpinned by long-term non-cancellable leases to hyperscalers. The opportunity is compelling given the absence of large-scale capital dedicated to acquiring stabilized data center assets, leaving institutional-quality assets available at attractive prices with limited competition. Blackstone's sponsorship brings an unparalleled sourcing advantage with a near-term actionable pipeline of $25 billion. The manager also holds positions in data center REITs representing 6.5% of net assets. |
Hyperscalers Leases Valuations Infrastructure AI | |
AIThe manager views real estate as increasingly an AI beneficiary, describing REITs, homebuilders, and other real estate companies as HALO (Heavy Assets, Low Obsolescence) businesses. These businesses offer greater near-term earnings visibility and lower risk of AI-driven disruption compared to many segments of the digital economy. The manager sees AI-driven productivity gains as a meaningful catalyst with potential to moderate inflation, compress long-term interest rates, and expand profit margins. Several REITs are relatively insulated from potential AI-related disruption, benefiting from tangible assets, well-covered dividends, and contracted cash flows. |
Disruption HALO Productivity Inflation Rates | |
Private CreditShares of Blackstone declined in Q2 as mounting redemption pressures at Blackstone's Private Credit vehicle (BCRED) and sector-wide liquidity fears overwhelmed an otherwise constructive fundamental backdrop. Redemption requests reached 8% of NAV in Q1 followed by 10% in Q2, requiring Blackstone to cap withdrawals at the standard 5% limit for the first time. Broader sector sentiment was further pressured when other alternative asset managers announced withdrawal restrictions, reigniting broad private market liquidity fears. |
Redemptions Liquidity BCRED Withdrawals Sentiment | |
Building ProductsBuilding products companies represent 20.8% of the Fund's net assets, the largest non-REIT category. The manager highlights AAON as a top contributor, with shares rising following exceptionally strong earnings driven by drastically faster growth in its data center business (BasX), up 26% sequentially and 72% year-over-year. With the new Memphis facility ramping production, AAON can now satisfy elevated levels of demand with over $2 billion of BasX revenue capacity. The HVAC business also performed well with accelerated market share gains. The manager believes AAON is well positioned to continue compounding well above peers. |
HVAC Data Centers Market Share Growth Capacity | |
RatesThe manager views lower interest rates as a potential catalyst for the real estate sector. Should long-term interest rates decline—driven by deflationary effects of AI, moderating shelter inflation, or a more accommodative Federal Reserve over time—borrowing costs could fall. Lower rates would likely support higher real estate valuations, stimulate housing market activity, and accelerate M&A. The manager notes that moderating shelter inflation and productivity gains from AI could contribute to lower long-term interest rates. A new Federal Reserve Chief may become more dovish should inflation move towards its targeted rate of 2%, which would be a major beneficiary for the housing market through lower mortgage rates. |
Fed Mortgage Rates Valuations Housing M&A | |
| 2026 Q1 |
Commercial Real EstateManager sees compelling opportunities in commercial real estate services companies like CBRE and JLL despite AI-related concerns. Believes these companies are well-positioned to benefit from outsourcing trends and market share gains in a fragmented industry. Expects mid-to-high-teens annual earnings growth over the next few years. |
CBRE JLL Outsourcing Market Share AI |
Data CentersStrong conviction in data center operators like Equinix and Digital Realty Trust. Manager added significantly to Equinix position as shares became discounted, supported by emerging inference AI use cases and strong execution by management. Views data centers as beneficiaries of AI and cloud computing growth. |
Equinix Digital Realty AI Cloud Inference | |
HomebuildersCautious near-term due to housing affordability pressures but remains long-term bullish. Sees homebuilders trading at attractive valuations around 1 times book value versus typical 1.5 times. Believes housing is an early cycle beneficiary and supported by structural shortage of 4 million homes. |
Toll Brothers Book Value Housing Shortage Early Cycle | |
TravelBelieves travel-related real estate companies are well positioned to benefit from cyclical, secular, and 2026-specific tailwinds including World Cup and America's 250th anniversary. Sees companies like Wynn Resorts and Hyatt Hotels trading at attractive valuations with significant upside potential. |
Wynn Hyatt World Cup Cyclical Secular | |
AIViews AI as both opportunity and risk. Sees certain real estate companies as AI beneficiaries due to their tangible assets and lower disruption risk. However, acknowledges AI-related concerns for commercial real estate services companies. Overall frames real estate as relatively insulated from AI disruption. |
Disruption Tangible Assets HALO Insulation | |
| 2025 Q4 |
PharmaceuticalsHealth care holdings including pharmaceutical and biotechnology companies added meaningfully to returns. Holdings such as Roche, Novartis, and Ionis Pharmaceuticals benefited from new drug approvals, steady and growing earnings, and business models that continue to generate cash through a wide range of economic conditions. |
Pharmaceuticals Biotechnology Healthcare |
Defense SpendingDefense-related holdings such as BAE Systems and Rheinmetall had been standout performers for much of the year but fell back in Q4. While these businesses currently benefit from secular growth in defense spending around the world, share prices have moved ahead of underlying fundamentals, prompting modest trimming. |
Defense Military Aerospace | |
ValuationThe manager expresses concern about high valuations across most asset categories, particularly US equities. They note that despite international equity outperformance, the gap in valuation between US and non-US equities remains quite significant and should serve them well given their non-US-centric postures. |
Valuation Value Pricing | |
AIThe manager references excitement around artificial intelligence and its ability to dramatically impact productivity as potentially driving market exuberance. However, they cite a Bloomberg article noting that even the most profound technological revolutions aren't one-way streets to prosperity, suggesting caution about AI expectations. |
AI Technology Productivity | |
| 2025 Q3 |
Commercial Real EstateFund believes commercial real estate services companies like CBRE and JLL will benefit from structural tailwinds including outsourcing and institutionalization of commercial real estate. Early days of rebound in sales and leasing activity expected with potential for 20%+ annual earnings growth. |
Services Outsourcing Leasing Sales Recovery |
HomebuildersStructural underinvestment in housing relative to demographic needs creates long-term opportunity. Cyclical tailwinds include pent-up demand and low inventory, while secular tailwinds include flexible work arrangements favoring suburban living and lock-in effect from higher mortgage rates. |
Housing Demographics Suburban Inventory Construction | |
TravelMulti-year tailwinds expected from shift in consumer preferences toward experiences over goods, growing middle class, and demographic trends. Private equity's history in travel may serve as catalyst to surface value that public markets are discounting. |
Experiences Demographics Hospitality Gaming Leisure | |
Data CentersData center operators like GDS Holdings offer compelling long-term growth prospects. Iron Mountain's evolving data center segment provides visibility to more than triple operational capacity from current base, supporting strong growth outlook. |
Cloud Storage Infrastructure Capacity Growth | |
| 2025 Q2 |
Commercial Real EstateFund invests across REITs and non-REIT real estate categories with focus on demand exceeding supply dynamics. Manager sees compelling valuations with many properties trading below replacement cost and expects transaction market recovery. |
REITs Valuations Supply Demand Recovery |
HomebuildersLong-term bullish despite near-term caution due to elevated mortgage rates and consumer uncertainty. Structural underinvestment in housing relative to demographic needs supports multi-year growth prospects with cyclical and secular tailwinds. |
Housing Demographics Mortgage Construction Tailwinds | |
TravelMulti-year tailwinds expected from favorable consumer preference shifts toward experiences over goods, growing middle class, and demographic trends including delayed household formation and work-from-home arrangements enabling increased travel. |
Hotels Experiences Demographics Leisure Recovery | |
Data CentersCompelling long-term growth prospects driven by expanding demand from AI, edge computing, and increased data consumption. Equinix positioned as premier global operator with network-dense, carrier-neutral facilities across 36 countries. |
AI Edge Computing Colocation Growth Infrastructure |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jan 23, 2026 | Fund Letters | Jeffrey Kolitch | JLL | Jones Lang LaSalle Incorporated | Real Estate | Real Estate Services | Bull | New York Stock Exchange | commercial real estate, Earnings-recovery, Outsourcing, services, valuation | Login |
| Jan 23, 2026 | Fund Letters | Jeffrey Kolitch | PLD | Prologis Inc. | Real Estate | Industrial REITs | Bull | New York Stock Exchange | data centers, Industrial REITs, Logistics, Rent growth, secular growth | Login |
| Jan 23, 2026 | Fund Letters | Jeffrey Kolitch | H | Hyatt Hotels Corporation | Consumer Discretionary | Hotels & Resorts | Bull | New York Stock Exchange | asset-light, capital returns, Hotels, Travel, Unit growth | Login |
| Jan 23, 2026 | Fund Letters | Jeffrey Kolitch | CSGP | CoStar Group Inc. | Real Estate | Real Estate Services | Bear | NASDAQ | Capital Spending, Competition, Data, proptech, valuation | Login |
| Jan 23, 2026 | Fund Letters | Jeffrey Kolitch | SKY | Champion Homes Inc. | Consumer Discretionary | Homebuilding | Bull | New York Stock Exchange | affordability, Capacity, Housing policy, Manufactured housing, valuation | Login |
| Jan 23, 2026 | Fund Letters | Jeffrey Kolitch | FBIN | Fortune Brands Innovations Inc. | Industrials | Building Products | Bull | New York Stock Exchange | brands, Building Products, housing cycle, Margins, Pricing power | Login |
| Jan 23, 2026 | Fund Letters | Jeffrey Kolitch | WELL | Welltower Inc. | Real Estate | Health Care REITs | Bull | New York Stock Exchange | Demographics, NOI, Occupancy, senior housing, Supplyconstraints | Login |
| Jan 23, 2026 | Fund Letters | Jeffrey Kolitch | VTR | Ventas Inc. | Real Estate | Health Care REITs | Bull | New York Stock Exchange | Demographics, Occupancy, operating leverage, Rent growth, senior housing | Login |
| Jan 23, 2026 | Fund Letters | Jeffrey Kolitch | IRM | Iron Mountain Incorporated | Real Estate | Specialized REITs | Bull | New York Stock Exchange | cashflow, data centers, infrastructure, Mix shift, REITs | Login |
| Oct 21, 2025 | Fund Letters | Jeffrey Kolitch | WYNN | Wynn Resorts Limited | Consumer Discretionary | Casinos & Gaming | Bull | NASDAQ | Casinos, growth, Macau, resorts, Tourism, uae, valuation | Login |
| Oct 21, 2025 | Fund Letters | Jeffrey Kolitch | AAON | AAON Inc. | Industrials | Building Products | Bull | NASDAQ | data centers, efficiency, growth, HVAC, Industrials, innovation, Margins | Login |
| Oct 21, 2025 | Fund Letters | Jeffrey Kolitch | FND | Floor & Decor Holdings Inc. | Consumer Discretionary | Home Improvement Retail | Bull | NYSE | earnings, expansion, Housing, Margins, Remodeling, retail, valuation | Login |
| Oct 21, 2025 | Fund Letters | Jeffrey Kolitch | WYNN | Wynn Resorts Limited | Consumer Discretionary | Casinos & Gaming | Bull | NASDAQ | Casinos, growth, Macau, resorts, Tourism, uae, valuation | Login |
| Oct 21, 2025 | Fund Letters | Jeffrey Kolitch | AAON | AAON Inc. | Industrials | Building Products | Bull | NASDAQ | data centers, efficiency, growth, HVAC, Industrials, innovation, Margins | Login |
| Oct 21, 2025 | Fund Letters | Jeffrey Kolitch | FND | Floor & Decor Holdings Inc. | Consumer Discretionary | Home Improvement Retail | Bull | NYSE | earnings, expansion, Housing, Margins, Remodeling, retail, valuation | Login |
| TICKER | COMMENTARY |
|---|---|
| MAC | The Macerich Company, a high-quality retail mall REIT, contributed positively to performance in the second quarter, driven by management's continued strong execution. Key highlights included nearing full achievement of the leasing targets outlined in its Path Forward Plan, a growing pipeline of accretive acquisitions, and an opportunistic equity raise that further strengthened balance sheet flexibility. We remain optimistic about Macerich's prospects over the next several years. The fundamental backdrop for high-quality mall real estate remains favorable: tenant demand is robust, desirable retail space is scarce (occupancy is high with little new mall development), and the resulting demand/supply imbalance is giving landlords meaningful pricing power. We continue to engage with CEO Jackson Hsieh, a well-regarded outsider who is bringing a fresh, analytical lens to the company's real estate portfolio. We believe he will continue to unlock significant value by divesting non-core properties and reducing debt. Our conviction has grown that the company can generate over $2.00 in FFO over the next couple of years, which we believe would be a meaningful catalyst for share price appreciation from current levels. |
| H | Shares of Hyatt Hotels Corporation appreciated materially following strong first quarter results and an Investor Day in May that outlined strong long-term growth targets. Hyatt franchises and manages a portfolio of luxury hotel brands across over 1,500 properties in 83 countries. The company is in the final stages of transforming its earnings mix primarily to an asset-light fee stream while growing its development pipeline to record levels, enabling sector-leading unit growth, double-digit fee revenues, and mid-teens EBITDA and free cash flow growth. This translates to over 50% cumulative cash flow growth over the next three years with an increasing portion returned to shareholders via buybacks. |
| AAON | Shares of AAON, Inc. rose during the quarter following an exceptionally strong earnings report which saw the company see drastically faster growth in its data center business, BasX, than expected. Up 26% sequentially and 72% over the past year, BasX has positioned itself as a true best-in-class cooling solutions provider with a focus on customized offerings vs. peers' off-the-shelf products. With the new Memphis facility ramping production, the company can now satisfy elevated levels of demand with over $2 billion of BasX revenue capacity. The HVAC business performed well, as the company accelerated market share gains following strong heat pump and national accounts driven growth. We believe AAON is well positioned to continue to compound well above peers for the foreseeable future. |
| MTH | During the quarter, we initiated a position in Meritage Homes Corporation, the fifth-largest homebuilder in the U.S., with operations across the West, Central, and East regions. In 2025, the company delivered approximately 15,000 single-family homes to entry-level and first move-up buyers at an average selling price of $390,000. We are optimistic about our investment in Meritage Homes for several reasons: We are optimistic about the medium-term outlook for U.S. single-family housing. New home construction remains depressed relative to population growth, the housing shortage is acute — estimated at over 2 million units according to Freddie Mac — and secular demand is accelerating, driven by rising millennial household formation and a growing preference for new homes over existing ones. Fundamentals appear to be bottoming, with a return to growth on the horizon. Depressed construction activity and a potential peak in builder concessions may set the stage for improving sales and margins beginning in 2027. Meritage Homes has a credible path to substantial long-term growth. Management targets 20,000 annual deliveries over time — a roughly 40% increase from current levels — driven by double-digit growth in community count. As volumes scale and elevated incentives normalize, operating margins could expand by 600 basis points or more. Together, these drivers could support earnings per share growth of 250% or more over time. The homebuilding industry has seen a rising wave of consolidation, with several U.S. builders taken private in recent years. Further M&A activity would not be surprising, and Meritage Homes' scale and operational track record could make it an attractive candidate. Valuation is attractive. The stock currently trades at a discount to book value; despite the premium it has historically commanded at times. Recent take-private transactions in the sector have been completed at 1.2 to 1.3 times book value, underscoring the potential upside from current levels. |
| TOL | Toll Brothers, Inc. was a top contributor to performance in the quarter. |
| GDS | Despite solid operating results and after strong share price performance to start the year, shares of GDS Holdings Limited declined in the second quarter. Several items weighed on performance including management communication about full-year guidance components, a material step-up in capital expenditure over the next few years and a slight delay in timing when the company is expected to see a growth inflection in its underlying results. While we continue to see evidence of the building of the AI wave in China through significant bookings growth and see material under-appreciated value in GDS' stake in its spun-out international subsidiary (DayOne), we trimmed our position and reallocated capital to companies where we have a higher degree of visibility and lower exogenous risks such as the current geopolitical environment. |
| SITE | SiteOne Landscape Supply, Inc. is the largest distributor of wholesale landscape supplies in North America. SiteOne sells irrigation, hardscapes, agronomics, and nursery products to professional contractors through its branch network for maintenance, upgrade/repair, and new construction applications. Shares fell during the quarter as investors worried about the impacts of the Iran War and a potential reduction in demand given rising commodity prices. Despite this, we believe the company remains well positioned to continue outgrowing its markets and expand margins as it harvests benefits from its ongoing initiatives and investments in improving underperforming branches, operational efficiency, technology, and product category management to continue differentiating itself from the fragmented wholesale landscape supplies distribution industry. Our belief was reinforced by a positive Analyst Day held by SiteOne at the end of the quarter highlighting the progress the company has made on each of these fronts. The event highlighted the depth of SiteOne's talent and a clear pathway toward above-market organic growth, EBITDA margin expansion (toward 13%-plus target by 2030), and continued consolidation of the market driving an expected high-teens EBITDA growth rate out to 2030. As the underlying market begins to recover and SiteOne continues to execute on what is can control, we believe the multiple should re-rate which combined with rapidly growing earnings can deliver strong stock upside over time. |
| BX | Shares of Blackstone Inc. continued to be volatile and were a drag on performance in the second quarter as mounting redemption pressures at Blackstone's Private Credit vehicle (BCRED) and sector-wide liquidity fears overwhelmed an otherwise constructive fundamental backdrop. The first quarter saw elevated redemption requests at approximately 8% of NAV followed by 10% in the second quarter, requiring Blackstone to cap withdrawals at the standard 5% limit for the first time. Broader sector sentiment was further pressured when other alternative asset managers announced withdrawal restrictions, reigniting broad private market liquidity fears and dragging the entire sector lower. Blackstone Inc. is the world's largest alternative asset manager with over $1.3 trillion in assets under management and the largest real estate manager in the world according to management. As we noted in our first quarter letter, while we consolidated our positions in the alternative asset manager space, Blackstone remained high on our list to revisit. Given severe multiple compression across the sector with all alternative managers being painted with a broad brush and extreme investor negativity, we took advantage of the volatility to reinitiate a position in the company at what we deemed to be highly compelling valuation levels. While the liquidity narrative dominates headlines, underlying fundamentals continue to be strong. We retain long-term conviction in Blackstone due to its premier brand, global franchise, loyal customers, exceptional balance sheet, and an excellent management team. At current share price levels, we believe the company is well positioned to benefit as the liquidity narrative fades and realization activity accelerates. |
| BLDR | Builders FirstSource, Inc. was a detractor from performance in the quarter. |
| LOW | Lowe's Companies, Inc. was a detractor from performance in the quarter. |
| HD | We purchased shares of The Home Depot, Inc. during the quarter. |
| PHM | We purchased shares of PulteGroup, Inc. during the quarter. |
| WYNN | We recently trimmed the Fund's investment in Wynn Resorts, Limited, a global luxury owner and operator of integrated resorts (hotels and casino resorts), in part due to the delay in the opening of its new UAE resort. We may increase the Fund's ownership of Wynn at a later date. Wynn Resorts, Limited is a leading hotel and gaming company, currently valued at just 8.4 times 2027 estimated cash flow compared with its historical range of 13 to 15 times. The company could become one of the most compelling travel-related growth stories with the opening of its UAE resort in 2027, which could be worth $40/share versus its recent market value of only $97 per share. |
| EQIX | Following a 40% increase in the shares of Equinix, Inc., a leading global operator of data centers, we trimmed the Fund's large position in the company but remain bullish about the company's long-term business prospects. |
| TMHC | Following the announcement of Berkshire Hathaway's agreement to acquire Taylor Morrison Home Corporation, a leading national homebuilder, we exited the Fund's investment in the company. Taylor Morrison Home Corporation — Berkshire Hathaway announced an agreement to acquire Taylor Morrison, a leading national homebuilder, at a 24% premium to its May 29, 2026, closing price. |
| VTR | We sold shares of Ventas, Inc. during the quarter. |
| PLD | We sold shares of Prologis, Inc. during the quarter. |
| WELL | Welltower Inc. is the Fund's largest position at 5.9% of net assets as of quarter end. |
| BN | Brookfield Corporation, a global owner and operator of real assets, trades at $43 per share, well below management's estimated liquidation value of $67 per share – approximately 55% higher than the current share price. |
| HLT | Hilton Worldwide Holdings Inc. is a top 10 holding representing 3.0% of net assets as of quarter end. |
| CZR | Caesars Entertainment, Inc. — Caesars, the largest gaming company in the U.S., according to management, announced an agreement to be acquired by Fertitta Entertainment at a 49% premium to its unaffected share price as of February 25, 2026. |
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