Baron Discovery Fund Purchased Ategrity Specialty Insurance Company Holdings (ASIC) Backed by Multiple Catalysts

Baron Funds, an investment management company, released its “Baron Discovery Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the second quarter, the fund was up 14.76% (Institutional Shares), outperforming the 11.97% return for the Russell 2000 Growth Index. The fund was up 7.68% year-to-date, well ahead of the Index’s -0.48% return.  In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, Baron Discovery Fund highlighted stocks such as Ategrity Specialty Insurance Company Holdings (NYSE:ASIC). Ategrity Specialty Insurance Company Holdings (NYSE:ASIC) is a US-based insurer that provides excess and surplus lines insurance and reinsurance products to small and medium-sized businesses. The one-month return of Ategrity Specialty Insurance Company Holdings (NYSE:ASIC) was -6.67%. On July 30, 2025, Ategrity Specialty Insurance Company Holdings (NYSE:ASIC) stock closed at $19.72 per share, with a market capitalization of $928.155 million.

Baron Discovery Fund stated the following regarding Ategrity Specialty Insurance Company Holdings (NYSE:ASIC) in its second quarter 2025 investor letter:

“Ategrity Specialty Insurance Company Holdings (NYSE:ASIC) is an insurance company focused on the excess and surplus (E&S) market. E&S insurance is a complementary market to the more heavily regulated “Admitted” market. The E&S market gives insurers more flexibility in policy terms and pricing than the Admitted market, which enables more suitable underwriting of certain risks. Ategrity is 100% focused on the E&S market, similar to existing Fund holding Kinsale Capital Group, Inc.

We invested in Ategrity when it went public in the quarter. Ategrity focuses on policies for small businesses. This segment is more attractive than large business as there is less competitive intensity, since most insurers can’t serve small businesses in a cost-effective manner. Ategrity is able to serve this segment profitably as it leverages a data-driven approach to better ingest policy submissions, segment risks, and quote prices. This allows Ategrity to acquire small business policies in a high-speed, light-touch fashion, which also makes the company an attractive partner to insurance brokers who value timely quotes.

Ategrity has been growing written premiums at over 20% and is currently ceding over 30% of its business to reinsurers. Post-IPO the company will be over-capitalized and so can retain more of the business that it generates, which should lead to strong earnings improvement. We expect the company will continue growing premiums rapidly, and as it builds scale profitability should improve through a lower expense ratio. With improving margins and more business retained by the company, we think Ategrity can achieve a mid-teens return on equity over the next three years, delivering a compelling return on our investment.”

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A financial adviser in a suit talking with a senior client about their life insurance policy.

Ategrity Specialty Insurance Company Holdings (NYSE:ASIC) is not on our list of 30 Most Popular Stocks Among Hedge Funds. While we acknowledge the risk and potential of Ategrity Specialty Insurance Company Holdings (NYSE:ASIC) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ATEGRITY SPECIALTY INSURANCE COMPANY HOLDINGS (NYSE:ASIC) and that has 10,000% upside potential, check out our report about this cheapest AI stock.

In addition, please check out our hedge fund investor letters Q2 2025 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.