August 3, 2020 BARRON’S 27
Umansky, now 49, had no plans to leave
Morgan Stanley, where he was happily man-
aging several prominent diversified growth
funds. “What happened? Ron Baron hap-
pened,” he says, referring to the legendary
investor and charismatic founder of New
York–based Baron Capital. “He is one of the
nicest guys you’ll ever meet, and he doesn’t
take no for an answer.” In 2011, Umansky
capitulated to Baron’s persistence and in
2012 launched the Baron Global Advantage
fund, which can invest in any size company,
anywhere in the world. “We designed this
fund to focus on big ideas,” says Umansky.
A classic example of a big-idea company
isAmazon.com(AMZN), which the fund
has owned since its 2012 inception. While
the e-commerce goliath is hardly a surprise
in the category of disruption, the company
continues to impress Umansky with its abil-
ity to turn seemingly far-fetched ideas into
new channels for growth. “When Amazon
first opened its platform to third-party sell-
ers, everyone thought it was crazy, because
it was essentially opening doors for its com-
petition,” he says. Today, third-party sellers
are more than half of Amazon’s e-commerce
business and have made the platform even
more ubiquitous. Meanwhile, Amazon Web
Services is the undisputed leader in cloud
computing, and even hosts one of its com-
petitors,Netflix(NFLX).
When it comes to disrupting advertising,
Alphabet(GOOGL) andFacebook(FB) are
big ideas, he says of two long-term holdings.
“Twenty-five years ago, all advertising was
analog, and now 50% of total advertising
budgets in the world are [for the] digital
form,” he says.
This theme of digital disruption is com-
mon across industries, including health care,
banking, agriculture, and transportation.
“The Industrial Revolution was about econ-
omies of scale, and the digital revolution is
about economies of networks,” he says. “Big
ideas are often platform businesses that can
build ecosystems that incentivize or force
competition and other businesses to plug in
and co-create value.”
That explains cloud computing’s strong
presence in the portfolio. In 2019, only 5%
of global computing happened in the cloud,
Umansky says, but share is growing expo-
nentially, particularly in light of Covid-19
and the surge in remote workers. “We’re
very early in the penetration curve, but we
think the final number is going to be over
90% of workloads.”
One way to ride the growth of cloud
computing is via high-performance data
centers.GDS Holdings(GDS) is the largest
in China, with such clients asAlibaba
Group Holding(BABA),Tencent Hold-
ings(TCEHY), andBaidu(BIDU). “This is
a pure play off the growth of cloud comput-
ing, only without having to predict the win-
ner,” says Umansky of the stock, which the
fund has held since early 2019.
The same can be said ofIllumina
(ILMN), which is the leading developer of
tools used to sequence genomes. The fund
invested in the company in 2012, when it
had a market capitalization of $3 billion and
sequencing a single human genome took
weeks and cost hundreds of thousands of
dollars. “Today, it costs less than $1,000 and
takes less than 24 hours,” says Umansky.
Illumina now has a market value of $58 bil-
lion, but he says there’s plenty of runway for
growth, as less than a tenth of a percent of
humans have been sequenced. “When the
cost is low enough, every single newborn
baby will get its genome sequenced,” he says.
It isn’t enough for companies to epitomize
a big idea. They must also pass scrutiny on
quality factors, including the strength of
their balance sheets and management. For
those reasons, one notable big idea—Tesla
(TSLA)—is absent from this concentrated
fund. In a departure from other managers at
Baron Funds, which is a top 10 shareholder
of Tesla, Umansky sold the stock late last
year. It has tripled in value so far in 2020,
bewildering much of Wall Street.
“I have no doubt that they have the win-
ning technology, but I was uneasy with the
balance sheet” and CEO Elon Musk’s behav-
ior, says Umansky. When he decided to sell,
Baron said he was making the biggest mis-
take of his career. “That appears to be the
case,” Umansky says, adding that Tesla is a
much stronger company today than it was a
year ago. “But this is a high-conviction fund,
and as the fiduciary, I need to have high con-
viction about every single holding.”B
Baron Global Advantage
Total Return
1-Yr 3-Yr 5-Yr
BGAFX 45.8% 30.1% 22.2%
MSCI ACWI 5.7 7.0 7.6
Top 10 Holdings
Company / Ticker % of Assets
Alibaba Group Holding / BABA 6.3%
Amazon.com / AMZN 6.0
Facebook / FB 4.0
Wix.com / WIX 3.2
MercadoLibre / MELI 3.0
TAL Education Group / TAL 2.9
GDS Holdings / GDS 2.8
Splunk / SPLK 2.7
Twilio / TWLO 2.6
Veeva Systems / VEEV 2.6
Total 36.1%
Note: Holdings as of June 30. Returns through July 28; three- and
five-year returns are annualized.
Sources: Morningstar;Baron Funds
Scoreboard: Rate Relief
(Stockstickedupslightlyonhopesformorefiscalandmonetarystimulus,withtheS&P500up0.33%.
Covidhashammeredrealestate,whichralliedastheFederalReservekeptratesnearzero.
OneWeek Year-to-Date
U.S.STOCKFUNDS 0.57% – 1.53%
TOPSECTOR/RealEstateFunds 3.76 – 10.17
BOTTOMSECTOR/NaturalResourcesFunds – 2.85 – 33.84
S&P500 0.33 0.48
U.S.BONDFUNDS 0.26 3.33
BloombergBarclaysAGGBond 0.22 7.79
THEWEEK'STOP25
Fund InvestmentObjective OneWeek Year-to-Date
LongleafPartnersSC/LLSCX Small-CapValue 51.68% 15.0%
GMOSpecOpptysFdVI/GSOFX AltGlobalMacro 8.35 110.6
MorgStanIIncIS/MFLLX Small-CapGrowth 5.83 59.3
NeedhamAggrGrowthRtl/NEAGX Small-CapGrowth 5.42 25.0
MorgStanIGlEndI/MSJIX GLSm/Mid-Cap 5.23 38.9
EventideExpoTechA/ETAEX Science&Tech 5.11 NA
DWSRREEFRESecInst/RRRRX RealEstate 4.97 – 11.4
JHancockIIRESecs1/JIREX RealEstate 4.97 – 11.3
ABRDynamicVolInst/ABRSX AltMgdFutures 4.78 – 13.1
AmerCentRealEstInv/REACX RealEstate 4.74 – 12.1
AberdeenRealtyI&GInst/AIGYX RealEstate 4.68 – 11.4
AegisValueI/AVALX Small-CapValue 4.68 – 2.0
NuveenRealEstI/FARCX RealEstate 4.57 – 10.0
JPMorganRltyIncR6/JPINX RealEstate 4.56 – 10.2
PGIMUSRealEstZ/PJEZX RealEstate 4.54 – 9.3
GuggenhmRskMgdREInst/GURIX RealEstate 4.48 – 4.0
MorgStanIDiscI/MPEGX Mid-CapGrowth 4.42 77.5
BerkshireFocus/BFOCX Multi-CapGrowth 4.41 43.6
KineticsInternetNL/WWWFX Science&Tech 4.41 8.2
IvySecurianRESecsA/IRSAX RealEstate 4.38 – 8.6
Manning&NapierREW/MNRWX RealEstate 4.38 – 9.3
PIMCORERlRtnInst/PRRSX RealEstate 4.35 – 12.7
FidelityAdvRlEstI/FHEIX RealEstate 4.33 – 10.0
SterlingCapStrREInst/STMDX RealEstate 4.31 – 5.0
FidelityFlexRealEst/FFERX GlbRealEstate 4.29 – 12.0
THEWEEK'SBOTTOM10
Fund InvestmentObjective OneWeek Year-to-Date
AlphaCentricEII/AEIIX NaturalResources – 6.51% – 23.4%
InvescoExchange/ACEHX Multi-CapValue – 4.74 – 4.8
FranklinMutFinlSvcA/TFSIX GLFinancialSrvcs – 4.07 – 27.7
FidelitySelEnrgySer/FSESX NaturalResources – 3.97 – 50.5
FidelitySelEnergy/FSENX NaturalResources – 3.93 – 39.4
HennessyBPEnergyInst/HNRIX NaturalResources – 3.93 – 38.3
FidelityAdvEnergyI/FANIX NaturalResources – 3.92 – 39.3
GuinnAtkinGlEnergy/GAGEX GLNaturalResourc – 3.89 – 42.1
EventideHlthcare&LSI/ETIHX Health/Biotech – 3.88 – 0.1
FranklinMutEuropeanZ/MEURX EuropeanRegion – 3.87 – 20.6
THELARGEST25
Assets 3-Year* 1-Week YTDFund (billions) InvestmentObjective Return Return Return
FidelityContrafund/FCNTX $99.4 Large-CapGrowth 17.0% 1.48% 15.9%
AmericanFundsGroA/AGTHX 99.3 Large-CapGrowth 15.0 0.78 13.3VanguardWellingtonAdm/VWENX 87.8 MixTgtAllGro 8.6 0.30 0.9
AmericanFundsBalA/ABALX 77.3 MixTgtAllGro 8.0 0.31 2.4AmericanFundsEuPcR6/RERGX 71.1 IntlLarge-CapGrowth 5.8 1.09 2.2
AmericanFundsIncA/AMECX 68.1 MixTgtAllMod 4.7 0.73 – 3.8Dodge&CoxIncome/DODIX 64.2 CoreBond 5.8 0.07 7.3
PIMCOIncomeInst/PIMIX 63.4 Multi-SectorInc 3.6 0.10 – 0.2Dodge&CoxStock/DODGX 59.9 Large-CapValue 3.5 – 0.71 – 12.4
AmericanFundsICAA/AIVSX 59.3 Large-CapCore 8.0 – 0.05 0.0AmericanFundsCIBA/CAIBX 58.7 GlobalEquityIncome 2.5 0.03 – 5.2
BlackRockCashInstSLA/ 56.8 InstlMoneyMkt NA NA NAAmericanFundsWashA/AWSHX 56.2 Large-CapCore 8.2 – 0.57 – 5.4
VanguardPRIMECAPAdm/VPMAX 55.4 Large-CapCore 11.0 – 0.40 – 2.3PIMCOTotRtnInst/PTTRX 53.1 CorePlusBond 5.6 0.32 7.7
AmericanFundsFInvA/ANCFX 51.4 Large-CapCore 8.5 0.44 – 1.4MetWestTotalRtnI/MWTIX 49.1 CorePlusBond 6.1 0.20 8.2
TRowePriceBCGro/TRBCX 48.9 Large-CapGrowth 19.5 1.55 18.3AmericanFundsCWGIA/CWGIX 48.5 GlobalLarge-CapCore 6.0 0.41 – 0.8
VanguardWellesleyAdm/VWIAX 45.8 MixTgtAllocCon 7.1 – 0.16 3.4AmericanFundsNPerA/ANWPX 45.6 GlobalLarge-CapGrowth 12.3 0.84 9.0
VanguardTgtRet2025Inv/VTTVX 44.5 Mixed-AssetTarget2025 7.0 0.30 2.2DoubleLineTotRtnI/DBLTX 44.3 USMortgage 4.0 0.19 3.4
VanguardSh-TmInvAdm/VFSUX 44.1 ShortInvGrade 3.6 0.14 3.9FidelityStrAdvCreInc/FPCIX 40.8 GeneralBond 5.9 0.22 7.8
*Annualized07/27/2017to07/30/2020.ThroughThursday. Source:Lipper