Baron International Growth Fund (BIGFX)
Fund Manager since
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Baron International Growth Fund invests primarily in non-U.S. growth companies.
Review and Outlook
The first quarter of 2016 witnessed a sharp sell-off and recovery across the global capital markets. We believe this market behavior reflects the fragility of confidence in forward-looking economic and financial conditions in an era of increasing policy intervention. The global markets have exhibited a high correlation, often reacting in unison to events in the U.S., Europe, Japan, and particularly China. We believe the interconnectedness of global markets is likely to remain high while growth remains subpar and stimulative policy intervention in one jurisdiction often triggers unintended consequences in another.
While we were pleased to see the equity, credit, and commodities markets strengthen through the end of the first quarter, we would prefer to see convincing evidence of underlying fundamental strength and an improvement in global imbalances, rather than what appears to be ongoing aggressive monetary and fiscal policy tweaks. In our opinion, the most important such tweak was the shift in rhetoric suggesting the deferral of interest rate hikes by the U.S. Federal Reserve. In addition to the revised Fed communiqué, the European Central Bank, Bank of Japan, and People’s Bank of China, as well as Chinese fiscal policymakers, all appeared to accelerate easing measures during the quarter, particularly shortly after the G20 gathering of finance ministers in late February. While measures of coincident and leading economic indicators have recently responded in kind with fairly broad-based improvement, in our opinion it is difficult to distinguish cause and effect. Are improving economic indicators driving the rally in capital and commodities markets, or are policy-driven markets leading to improved economic indicators via the channels of rising confidence and recovering financial conditions? We believe that fundamental, lasting confidence in the global economy and markets would be inspired by a successful normalization of interest rates, while confidence driven by ever more unconventional measures, such as the recently launched negative interest rate policies in Europe and Japan, will likely remain fragile.
Though we remain somewhat skeptical that the Fed will be able to hold its ground in the face of an anecdotal rise in wage pressures, as of now we respect the improvement in global indicators. While current conditions likely favor those markets where sentiment has been poor in recent quarters, the shift in Fed policy does raise the likelihood of increased pressure in Europe and Japan should recent dollar weakness and Euro and Yen strength persist; such is the challenge of the global monetary sweepstakes in a low-growth environment. While it is certainly possible that global equity markets, as well as commodities, have bottomed, we suspect that confidence will at some point likely be tested. We continue to believe that substantial investment opportunities lie ahead, and believe we are strategically and tactically prepared to take advantage.
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Quarterly Attribution Analysis
The Quarterly Attribution Analysis for period ending March 31, 2016 is not yet available
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The prospective performance of the companies discussed herein is based on our internal analysis and reflect our opinions only. We cannot promise future returns and our opinions are a reflection of our best judgement at the time of publication. Our views are not intended as recommendations or investment advise to any person and are subject to chage at any time based on market and other conditions and Baron has no obligation to update them. Investing in the stock market is always risky. Investing in the stock market is always risky. Current and future portfolio holdings in the Fund The prospective performance of the companies discussed herein is based on our internal analysis and reflect our opinions only. We cannot promise future returns and our opinions are a reflection of our best judgement at the time of publication. Our views are not intended as recommendations or investment advice to any person and are subject to change at any time based on market and other conditions and Baron has no obligation to update them. Investing in the stock market is always risky. Current and future portfolio holdings in the Fund are subject to risk.
Source: FactSet PA2.0 Performance Analytics Software.
Source: FactSet PA