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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Baron Emerging Markets Fund 2026 Q3 Investor Letter | Buyside Digest

Back to Fund Profile (Baron Emerging Markets Fund)

Primary Source Intelligence • Q3 2026 Letter Analysis

Baron Emerging Markets Fund Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Baron Emerging Markets Fund. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD-3.46%

YTD+15.89%

Annualized+5.85%

Positioning StanceCONSTRUCTIVE

Market CapAll Cap

GeographyEmerging markets, Asia, LatAM

Digest Analysis

Quick Take

"Surging real bond yields and energy risk premiums have temporarily penalized growth equities, but post-election geopolitical stabilization and Latin American fiscal reforms establish favorable mean-reversion dynamics."

Executive Summary

Baron Emerging Markets Fund declined 3.39% net of fees (Institutional Shares) in the third quarter of 2026, underperforming its primary benchmark, the MSCI Emerging Markets Index, which retreated 0.37%, while performing roughly in line with the MSCI Emerging Markets IMI Growth Index (-3.10%). Year-to-date, the fund has returned 16.10% net of fees compared to 23.38% for the primary benchmark. Underperformance was largely driven by a rotation into value and commodity-oriented equities over growth amid spiking bond yields and energy prices, with stock selection in Information Technology and adverse positioning in Indian financials detracting from relative results. Cash and cash equivalents stood at 1.4% of net assets at quarter-end. The macroeconomic environment was characterized by the rising influence of artificial intelligence crowding out capital, resumed hostilities between the U.S. and Iran, and a breakout in nominal and real 10-year Treasury yields reaching 5.3%. The manager views the bond yield spike as overdone, noting that a reduction in geopolitical energy risk premiums post-U.S. elections could trigger a mean reversion benefiting growth assets. Furthermore, a decisive rightward political shift in Brazil's elections is viewed as an emerging fiscal anchor capable of unlocking aggressive monetary easing across Latin America. Portfolio activity was marked by initiating new positions in MediaTek, Zijin Gold International, and Data Patterns (India), alongside additions to Divi's Laboratories, Prio, and Astra Microwave Products. The fund monetized its previously written-down holding in Sberbank of Russia via licensed transactions and fully exited positions including SK Square, Kotak Mahindra Bank, Banco Bradesco, Tencent Music Entertainment, and Reliance Industries to concentrate capital in top ideas.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

72%

CautiousHigh

High Conviction (72%)

The portfolio features high conviction in core holdings such as TSMC at 16.3%, Samsung at 7.3%, and SK hynix at 5.6%, alongside detailed fundamental investment theses for new and existing holdings. However, conviction is tempered by broad geographic diversification spanning over 18 countries and an extensive list of minor portfolio positions.

Growth Outlook

65%

BearishBullish

Bullish (65%)

The manager remains optimistic regarding mean reversion in emerging market growth assets once bond yields peak and election-related geopolitical energy premiums normalize. Enthusiasm is balanced by acute awareness of AI market crowding, Middle East conflict risks, and real yields approaching 3%.

Risk Appetite

70%

DefensiveAggressive

Balanced (70%)

Capital remains predominantly deployed in high-beta emerging market growth equities, with cash levels kept minimal at 1.4%. The strategy is actively scaling exposure into growth sectors like custom AI silicon and defense electronics, offset by disciplined risk-based exits.

Capital Deployment

72%

De-riskingDeploying

Deploying (72%)

The fund maintained an active capital deployment posture, launching multiple new positions and scaling existing long stakes, funded by full liquidations of lower-conviction holdings and a low quarter-end cash position of 1.4%.

Forward Guidance

75%

CautiousExpansionary

Expansionary (75%)

The manager demonstrates a clear bias toward deploying capital into select emerging market themes, having added to nine portfolio holdings and initiated three major long pitches. Management explicitly expects bond yields to retrace and broad equity participation to widen.

Language Signal

62%

BearishBullish

Balanced (62%)

Language exhibits positive descriptors regarding long-term revenue visibility, operating margin expansions, and attractive earnings upgrade cycles in India and Brazil. This is balanced by warnings concerning bond market resistance breaches, Strait of Hormuz tensions, and elevated energy costs.

Perceived Risk

70%

Low RiskElevated

Elevated Risk (70%)

The letter details substantial macro risks including the 10-year Treasury yield hitting 5.3%, the resumption of hostilities with Iran, refinery strikes halting Russian fuel exports, and the potential distortion of capital flows caused by extreme AI debt issuance.

Opportunity Density

70%

ScarceAbundant

Abundant (70%)

A healthy set of new investment opportunities was identified during the quarter, spanning custom semiconductor ASICs in Taiwan, gold turnaround assets, and defense suppliers in India. Opportunities remain selectively concentrated around specific secular themes rather than broad market beta.

Time Horizon

75%

Short-TermLong-Term

Decade+ (75%)

The manager consistently frames company earnings power and compounding potential across a 3- to 5-year investment horizon, specifically projecting multi-year revenue visibility through 2027-2030 for key semiconductor, gold, and healthcare assets.