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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Baron First Principles ETF 2026 Q1 Investor Letter | Buyside Digest

Back to Fund Profile (Baron First Principles ETF)

Primary Source Intelligence • Q1 2026 Letter Analysis

Baron First Principles ETF Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Baron First Principles ETF. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD-8.51%

YTD-8.51%

Annualized-9.19%

Positioning StanceBULLISH

Market CapAll Cap

Digest Analysis

Quick Take

"Market fears surrounding artificial intelligence disruption and geopolitical tensions have created historically depressed valuations across high-growth platforms, irreplaceable real assets, and recurring-revenue financial data leaders poised for sustained cash-flow compounding."

Executive Summary

Baron First Principles ETF delivered a net decline of 8.51% on a NAV basis for the first quarter of 2026, modestly outperforming its benchmark, the Russell 3000 Growth Index, which dropped 9.54%. The fund operated with a highly concentrated structure of 24 investments, with the top 10 holdings representing 64.9% of net assets and cash positioned near fully invested at 0.1%. Asset allocation remained balanced across disruptive growth at 35.8%, core growth at 24.7%, financials at 23.9%, and irreplaceable real assets at 15.5%. Macroeconomic headwinds included escalating conflict in Iran, which heightened broader concerns regarding inflation, elevated interest rates, and consumer spending fragility. Simultaneously, widespread market anxiety concerning generative artificial intelligence induced indiscriminate valuation multiple compression across subscription software and information services. However, portfolio managers observe an expansive overhang of private equity capital waiting on the sidelines, which should catalyze private buyouts, strategic mergers, and multiple expansion as interest rates ease. During the quarter, the fund capitalized on multiple compression by increasing stakes across core holdings supported by corporate insider buying, including Verisk Analytics, Guidewire Software, and Gartner. Performance was buoyed by positive revaluations in private holdings SpaceX and xAI alongside strength in FIGS and Choice Hotels, counterbalancing market-driven pullbacks in Tesla, CoStar Group, and Spotify.

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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

76%

CautiousHigh

High Conviction (76%)

Management maintains a concentrated 24-stock portfolio where the top 10 positions account for 64.9% of net assets. Conviction is reinforced by buying into valuation declines alongside corporate insiders rather than trimming exposure.

Growth Outlook

72%

BearishBullish

Bullish (72%)

The outlook is constructive, emphasizing historically low valuations and a sharp divergence between equity trading prices and resilient business fundamentals. The team expects significant private equity dry powder and future interest rate cuts to catalyze upside.

Risk Appetite

78%

DefensiveAggressive

Aggressive (78%)

Capital positioning is aggressively tilted toward equities, holding cash at a nominal 0.1% while allocating 35.8% to disruptive high-growth names and 24.7% to core compounders without taking defensive cash positions.

Capital Deployment

82%

De-riskingDeploying

Deploying (82%)

The portfolio remained fully deployed with just 0.1% cash, actively expanding equity allocations in depressed high-conviction holdings across the quarter.

Forward Guidance

75%

CautiousExpansionary

Expansionary (75%)

Management demonstrated an explicit bias toward active capital deployment by leaning into existing positions and adding new holdings during first-quarter multiple compression.

Language Signal

71%

BearishBullish

Bullish (71%)

Directional language strongly emphasizes mispriced opportunities, insider buying support, strong competitive moats, and durable recurring revenue over market macro concerns.

Perceived Risk

56%

Low RiskElevated

Moderate Risk (56%)

The letter details specific external risks including Middle East conflict, inflation persistence, interest rate paths, and AI-related narrative compression, though managers consider fundamental risk within holdings to be low.

Opportunity Density

75%

ScarceAbundant

Abundant (75%)

The managers highlight an abundant opportunity set, citing historic valuation discounts across software and consumer segments that prompted multiple position increases and new additions.

Time Horizon

80%

Short-TermLong-Term

Decade+ (80%)

Investment horizons are explicitly framed around multi-year growth trajectories and the potential for holdings to double earnings and free cash flow over a four-to-five-year timeframe.