Baron Capital, an investment management company, released its “Baron Financials ETF” fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the fourth quarter, the Fund fell 2.22% (Institutional Shares) compared to a 7.19% decline for the FactSet Global FinTech Index (Benchmark) and a 2.07% gain for the MSCI USA Financials Index. Since inception, the Fund returned a 10.21% annualized rate compared to 2.55% and 11.97% return for the indexes. In December 2025, the product transitioned from a mutual fund to an exchange-traded fund (ETF) in response to investor feedback. Despite this change in structure and name, the investment strategy continues to focus on a growth approach aimed at financial and financial-related companies. Several factors contributed to quarterly gains and a steady market recovery from the lows observed on April 8, including diminishing tariff effects, strong corporate earnings, and ongoing monetary easing. Moving to 2026, the firm is optimistic about the outlook for the financial sector and its holdings, given the healthy and supportive macroeconomic environment. In addition, please check the Fund’s top five holdings to know its best picks in 2025.
In its fourth-quarter 2025 investor letter, Baron Financials ETF highlighted stocks like Houlihan Lokey, Inc. (NYSE:HLI). Houlihan Lokey, Inc. (NYSE:HLI) is a global investment bank specializing in mergers and acquisitions (M&A), capital markets, financial restructurings and liability management, and financial and valuation advisory services. On March 30, 2026, Houlihan Lokey, Inc. (NYSE:HLI) closed at $141.05 per share. One-month return of Houlihan Lokey, Inc. (NYSE:HLI) was -12.99%, and its shares lost 14.05% over the past 52 weeks. Houlihan Lokey, Inc. (NYSE:HLI) has a market capitalization of about $9.84 billion.
Baron Financials ETF stated the following regarding Houlihan Lokey, Inc. (NYSE:HLI) in its fourth quarter 2025 investor letter:
“Within Capital Markets, overexposure to digital brokerage platform Robinhood Markets, Inc. and unique exposure to global investment bank Houlihan Lokey, Inc. (NYSE:HLI) weighed on relative performance versus the Financials Index. Houlihan Lokey’s stock price fell due to a slowdown in restructuring activity resulting from improving macroeconomic conditions and lower interest rates. However, these same conditions are driving strong growth in Houlihan Lokey’s M&A and valuation advisory businesses, which collectively represent over three quarters of the business and drove 24% pretax earnings growth in the recent quarter.”
Houlihan Lokey, Inc. (NYSE:HLI) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 36 hedge fund portfolios held Houlihan Lokey, Inc. (NYSE:HLI) at the end of the fourth quarter, up from 26 in the previous quarter. In the third quarter of fiscal 2026, Houlihan Lokey, Inc. (NYSE:HLI) reported revenues of $717 million, marking an increase 13% year-over-year. While we acknowledge the risk and potential of Houlihan Lokey, Inc. (NYSE:HLI) 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 Houlihan Lokey, Inc. (NYSE:HLI) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Houlihan Lokey, Inc. (NYSE:HLI) and shared a bullish thesis on the company. In addition, please check out our hedge fund investor letters Q4 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.
