Baron Capital, an investment management company, released its first quarter 2026 investor letter for its “Baron Financials EFT”. A copy of the letter can be downloaded here. The Fund fell 15.97% (NAV) compared with a 9.89% decline for the MSCI USA Financials Index (the Financials Index) and a 20.15% decline for the FactSet Global FinTech Index (the FinTech Index). U.S. equities fell in Q1 due to AI-driven disruption and geopolitical shocks, prompting a rotation from software and growth stocks to defensive, commodity, and value segments. Small caps outperformed large caps, with value significantly surpassing growth across all categories. The fund lagged the Financials Index mainly due to overexposure to sectors impacted by AI concerns and underexposure to value stocks. However, it outperformed the FinTech Index due to strong stock selection and unique exposure to the capital markets. 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 Financials EFT highlighted stocks like KKR & Co. Inc. (NYSE:KKR). KKR & Co. Inc. (NYSE:KKR) is a leading private equity and real estate investment firm focusing on direct and fund-of-fund investments. On June 4, 2026, KKR & Co. Inc. (NYSE:KKR) closed at $95.46 per share. One-month return of KKR & Co. Inc. (NYSE:KKR) was -6.89%, and its shares lost 22.64% over the past 52 weeks. KKR & Co. Inc. (NYSE:KKR) has a market capitalization of $89.01 billion.
Baron Financials EFT stated the following regarding KKR & Co. Inc. (NYSE:KKR) in its Q1 2026 investor letter:
“Leading alternative asset manager KKR & Co. Inc. (NYSE:KKR) detracted from performance amid broad concerns sweeping the private markets space, particularly around private credit. Fears over credit quality and fundraising led to a sell-off across alternative asset managers, while volatility related to AI and the Iran conflict added worries that capital markets activity could be softer than expected this year. We believe such fears are overdone. KKR is a large, diversified manager with $744 billion in assets under management, including $135 billion in private credit and $40 billion in direct lending. Market concerns have centered on direct lending to private equity backed companies, which is a relatively small contributor to KKR’s business. Also, the firm has minimal exposure to semi-liquid funds that are experiencing elevated redemptions by retail investors. We continue to view KKR as a premier asset manager with multiple long-term growth opportunities and a compelling valuation.”
KKR & Co. Inc. (NYSE:KKR) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 82 hedge fund portfolios held KKR & Co. Inc. (NYSE:KKR) at the end of the first quarter, up from 76 in the previous quarter. While we acknowledge the risk and potential of KKR & Co. Inc. (NYSE:KKR) 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 KKR & Co. Inc. (NYSE:KKR) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered KKR & Co. Inc. (NYSE:KKR) and shared the list of best growth stocks to buy with low P/E ratios. 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.
