Baron Funds, an investment management company, released its “Baron Small Cap Fund” third-quarter 2024 investor letter. A copy of the letter can be downloaded here. The fund returned 9.68% (Institutional Shares) in the quarter outperforming the Russell 2000 Growth Index’s 8.41% return and the broader Russell 3000 Index’s 6.23% return. For the first nine months of 2024, the Fund is up 14.74% compared to 13.22% and 20.63% returns for the indexes. In contrast to the narrow market leadership of previous periods, the market rally during the quarter saw strong performance across a broad range of sectors and market capitalization. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Baron Small Cap Fund highlighted stocks like GCM Grosvenor Inc. (NASDAQ:GCMG), in the third quarter 2024 investor letter. GCM Grosvenor Inc. (NASDAQ:GCMG) provides alternate asset management services. The one-month return of GCM Grosvenor Inc. (NASDAQ:GCMG) was 5.16%, and its shares gained 47.80% of their value over the last 52 weeks. On November 20, 2024, GCM Grosvenor Inc. (NASDAQ:GCMG) stock closed at $12.43 per share with a market capitalization of $2.323 billion.
Baron Small Cap Fund stated the following regarding GCM Grosvenor Inc. (NASDAQ:GCMG) in its Q3 2024 investor letter:
“We initiated a position in GCM Grosvenor Inc. (NASDAQ:GCMG) in the quarter. Grosvenor is an alternative asset manager with $79 billion in assets under management (AUM), which is invested in both Private Markets ($56 billion) and hedge funds ($23 billion). Grosvenor has a 53-year history of supporting clients with their investments in alternatives, a secular growth area within financial services. Due to the long duration nature of these investments, capital is generally committed for 5 to 10 years. This creates a highly resilient earnings model, helped further by client reinvestments, which are typically 30% higher than the prior commitment.
Grosvenor helps its clients to access, choose, and manage these investments. This requires specialized expertise due to the fragmentation of the alternatives industry, the illiquid nature of these assets, and LPs lacking the necessary scale to build this talent and effectively diligence managers and investments for themselves. Grosvenor has particular strengths in infrastructure and sustainable investing, with each growing AUM at a 20% plus CAGR over the past 3.5 years.
We think Grosvenor is a high-quality business with durable earnings, secular growth tailwinds, and further margin expansion opportunities, led by a management team with significant skin in the game (CEO owns over 35% of the company). We believe Grosvenor can double fee-related earnings and EPS over the next 5 years and, with the stock trading at a discount to peers, this should lead to good upside from current levels.”
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GCM Grosvenor Inc. (NASDAQ:GCMG) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 22 hedge fund portfolios held GCM Grosvenor Inc. (NASDAQ:GCMG) at the end of the third quarter which was 19 in the previous quarter. While we acknowledge the potential of GCM Grosvenor Inc. (NASDAQ:GCMG) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed GCM Grosvenor Inc. (NASDAQ:GCMG) and shared Wasatch Micro Cap Value Strategy’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.