Baron Funds Publishes Q3 2025 Investor Letter for Fifth Avenue Growth Fund
Baron Funds has released its investor letter for the Baron Fifth Avenue Growth Fund, focusing on the third quarter of 2025. The report highlighted mixed performance compared to major market indices. The fund’s Institutional Shares grew by 5.7% during this period. This lagged behind the impressive gains of the Russell 1000 Growth Index, which was up by 10.5%, and the S&P 500 Index, recording an 8.1% increase.
Year-to-Date Performance Overview
For the year to date, the Baron Fifth Avenue Growth Fund has achieved a total increase of 14.4%. However, it still trails the Russell 1000 Growth Index’s 17.2% growth and the S&P 500 Index’s 14.8% rise.
Focus on Microsoft Corporation
One of the letter’s highlights was Microsoft Corporation (NASDAQ: MSFT), which has established itself as a key player in the tech industry. Despite a recent decline of 3.38% over the past month, Microsoft shares have rebounded by 12.02% over the last year.
- Current Share Price: $490.00 as of December 2, 2025
- Market Capitalization: $3.642 trillion
The investor letter noted Microsoft’s potential growth driven by the advancements in artificial intelligence. It emphasized how recent earnings reports highlight significant opportunities for productivity and revenue increases due to AI developments. Analyst comments, specifically from Truist, indicated a price target increase for Microsoft to $675, along with a reiterated buy rating.
Hedge Fund Popularity and Financial Performance
Furthermore, Microsoft is now the second most popular stock among hedge funds, with 312 portfolios holding shares by the end of the third quarter. This marks an increase from 294 portfolios in the previous quarter.
For the first quarter of fiscal year 2026, Microsoft reported remarkable revenue of $77.7 billion. This figure represents an 18% year-over-year growth, or 17% when adjusted for constant currency.
Investment Insights from Baron Funds
While Baron Funds acknowledged the advantages of investing in Microsoft, they also mentioned other AI-related stocks in their portfolio. These stocks may present better upside potential with reduced downside risk. The firm highlighted specific undervalued AI stocks likely to benefit from recent tariffs and the trend of onshoring.
Investors interested in further insights can access a complimentary report detailing promising AI stocks positioned for short-term gains.
