Baron’s Big Bet on SpaceX

Key Morningstar Metrics for Baron Partners Fund

• Morningstar Medalist Rating: Negative
• Process Pillar: Below Average
• People Pillar: Average
• Parent Pillar: Above Average

Baron Partners BPTRX keeps producing amazing returns, but an increasingly unorthodox and extreme portfolio means it isn’t a recommended choice for most investors.

Buy-and-hold investing is a common strategy, but few investors take it to the extent that Ron Baron does here. Most managers will trim their winners to comply with internal guidelines around how much capital can be invested in any single stock or sector—but not Baron. While he historically gave some heed to diversification by owning a relatively balanced mix of business types, since he allowed portfolio holding Tesla TSLA to ascend to 54% of net assets at its 2022 peak, the traditional risk playbook has been out the window.

More recently, another huge bet has emerged that pushes the envelope even further. Baron first established a roughly 4% position in Elon Musk’s SpaceX in 2017 when it was valued at about $20 billion, but through successive fundraising rounds and secondary market sales, the valuation has ballooned to a reported $800 billion, resulting in a much higher weighting. The latest markup is reflected in the retail shares’ 19% one-day return on Dec. 4, 2025. That immense appreciation has pushed SpaceX’s portfolio weighting to 32% of net assets as of Dec. 31, 2025.

Baron Capital historically treated SpaceX as an illiquid security for regulatory purposes, which essentially puts a 15% cap on its share of the portfolio. However, because of the security’s active secondary market and SpaceX’s consistent repurchasing activity, the firm now classifies it as merely less-liquid, which gets around the 15% rule. The fund successfully sold a tranche of its stake in 2024, and Baron believes he won’t have an issue doing it again (though he hasn’t expressed a desire to sell). The firm has a case for its decision to reclassify, though it’s uncharted territory for a mutual fund, and the arrangement’s status in the eyes of regulators could also be subject to change (the firm states they’ve already run the plan by the SEC).

However, the debate around classification may be short-lived if SpaceX follows through with a reported initial public offering in 2026. After that, its shares will trade on public exchanges just like any other stock. Of course, achieving greater liquidity won’t change the huge concentration risk that the investment presents, and it may very well exacerbate matters if SpaceX earns a higher valuation when it goes public.

So, for the near future, this fund is likely to have over 60% of its net assets invested in just two companies. Certain investors may find that intriguing, though the risks they will bear are unlike those of any other fund in history. But one thing’s for sure: Long-term investors have enjoyed returns unlike any other.

Baron Partners Fund: Performance Highlights

This fund’s track record is stupendous.

Measuring from the mutual fund’s 2003 inception through Dec. 31, 2025, the retail share class’ 17.7% annualized return destroyed the Russell 1000 Growth category benchmark’s 13.1%, and the Russell Midcap Growth Index’s 11.7%. The fund was part of the mid-growth Morningstar Category for many years until 2021, when its soaring stake in Tesla pushed the portfolio into large growth. The great returns came with a materially higher standard deviation of 26%, far greater than the roughly 16% of the Russell 1000 Growth or 18% of the Russell Midcap Growth. The fund’s use of leverage contributed to the results, given the market’s strong returns.

Performance in 2022 was quite poor, as the fund’s 43% decline landed in the bottom decile of peers amid a bear market for growth stocks. Returns recovered in 2023 and 2024 with gains of 43% and 33%, respectively. But 2025 got off to a rough start, with the fund’s 3% rise near the bottom of the peer group through November. Shares of Tesla were up slightly on the year, but longtime holdings such as MSCI MSCI, Gartner IT, FactSet FDS, and Vail Resorts MTN all posted negative returns.

But everything changed on Dec. 4, when the fund’s roughly 20% position in SpaceX essentially doubled due to an updated valuation. The fund returned 19% that day, catapulting it to near the top of its peer group and well past any index. While such incredible gains have defined this fund’s legacy, equally sharp losses are also possible.