Baron Capital, an investment management company, released its Q1 2026 investor letter for the “Baron Durable Advantage Fund”. A copy of the letter can be downloaded here. In Q1 2026, Baron Durable Advantage Fund (the Fund) declined 9.0% (Institutional Shares) compared to the 4.3% decline for the S&P 500 Index (the Index), the Fund’s benchmark. The Fund started 2026 with optimism, having posted three consecutive years of strong market returns. However, heightened geopolitical tensions and the subsequent war with Iran drove up oil prices, adversely affecting market dynamics. Two-thirds of the Fund’s relative underperformance was due to sector allocation, with the remaining third attributable to poor stock selection. The letter highlighted durable structural competitive moats. As a long-only investor, the Fund aims to achieve an annualized alpha of 100 to 200 basis points, net of fees, while minimizing permanent capital loss. In addition, please check the Fund’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Baron Durable Advantage Fund highlighted CME Group Inc. (NASDAQ:CME) as a leading performance contributor. CME Group Inc. (NASDAQ:CME) is a leading financial derivative marketplace operator specializing in futures and options products. On May 13, 2026, CME Group Inc. (NASDAQ:CME) closed at $297.13 per share. One-month return of CME Group Inc. (NASDAQ:CME) was 0.31%, and its shares gained 8.44% over the past 52 weeks. CME Group Inc. (NASDAQ:CME) has a market capitalization of $107.67 billion.
Baron Durable Advantage Fund stated the following regarding CME Group Inc. (NASDAQ:CME) in its Q1 2026 investor letter:
“CME Group Inc. (NASDAQ:CME) operates the world’s largest and most diversified derivatives marketplace. Shares rose 10.8% due to higher trading volumes during a period of elevated market volatility. Average daily trading volume rose at a robust 22% pace during the first quarter, reflecting concerns over higher energy prices from the Iran war, persistent inflation, and an uncertain outlook for interest rates. We continue to own the stock because we believe that CME enjoys significant competitive advantages and should benefit from increasing adoption of exchange-traded derivatives and episodic volatility spikes.”
CME Group Inc. (NASDAQ:CME) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 74 hedge fund portfolios held CME Group Inc. (NASDAQ:CME) at the end of the fourth quarter, compared to 77 in the previous quarter. CME Group Inc. (NASDAQ:CME) reported record revenue of $1.9 billion in Q1 2026, up $238 million or 14% from Q1 2025. While we acknowledge the risk and potential of CME Group Inc. (NASDAQ:CME) 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 CME Group Inc. (NASDAQ:CME) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered CME Group Inc. (NASDAQ:CME) and shared a bullish thesis on the company. In addition, please check out our hedge fund investor letters Q1 2026 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.
