Review and Outlook
The Review and Outlook for period ending June 30, 2016 is not yet available
Top Contributors/Detractors to Performance
Quarterly Attribution Analysis
When reviewing performance attribution on our portfolio, please be aware that we construct the portfolio from the bottom up, one stock at a time. Each stock is included in the portfolio if it meets our rigorous investment criteria. To help manage risk, we are aware of our sector and security weights, but we do not include a holding to achieve a target sector allocation or to approximate an index. Our exposure to any given sector is purely a result of our stock selection process.
Baron Global Advantage Fund rose 1.05% in the second quarter and outperformed the MSCI ACWI Growth Index by 31 basis points, mainly due to stock selection.
On a country basis, stock selection in emerging markets added the most value, mainly due to outperformance of investments in China, Brazil, and South Africa. Larger exposure to outperforming equities in Brazil, South Africa, and Indonesia also contributed to relative results. These positive effects were somewhat offset by underperformance of developed market investments in the U.S. and Canada.
On a sector basis, outperformance of Consumer Discretionary and Financials investments contributed the most to relative results. Consumer Discretionary holdings contributed 339 basis points, driven by the outperformance of the Fund's largest sector holdings, Amazon.com, Inc., TAL Education Group, and Naspers Limited. Amazon and TAL were the two largest contributors on an absolute basis, while Naspers, a South Africa-based Internet and media platform operator, benefited from its large ownership position in Tencent Holdings Ltd., whose shares increased sharply in the quarter. Strength in Financials was mainly due to the outperformance of Cetip SA - Mercados Organizados, which administers over-the-counter markets in Brazil. Cetip’s stock price rose on good financial results, shareholder approval of the merger with BM&FBOVESPA, and appreciation of the Brazilian Real.
Information Technology (IT) and Health Care investments and lack of exposure to the outperforming Consumer Staples sector detracted the most from relative results. Within IT, underperformance of Internet software & service holdings, led by Alphabet, Inc. and Baidu, Inc., and significantly larger exposure to this lagging sub-industry hurt relative performance. Alphabet was the second largest detractor from absolute results, while shares of China-based Internet search engine Baidu fell sharply after the government launched an investigation into online medical advertisements following the death of a student who had sought cancer treatment at a hospital that had advertised on the search engine. Underperformance of ethernet company Mellanox Technologies Ltd. and the Fund’s systems software and IT consulting & other services investments, led by Check Point Software Technologies Ltd. and EPAM Systems, Inc., respectively, also weighed on relative results. Weakness in Health Care was mostly attributable to the underperformance of pharmaceutical holdings Pacira Pharmaceuticals, Inc. and Allergan plc. Pacira was the largest detractor on an absolute basis, while shares of Botox manufacturer Allergan declined after the U.S. Treasury disallowed the Pfizer-Allergan inversion. The Fund’s investment in DNA sequencing company Illumina, Inc. also hampered relative performance after the company reported Q1 revenue that missed Street expectations and lowered its forecast for 2016 due to weak sales of its HiSeq instrument line.
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