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 Morgan Stanley (NYSE:MS). Morgan Stanley (NYSE:MS) is a global financial holding company that offers financial products and services. On March 30, 2026, Morgan Stanley (NYSE:MS) closed at $158.37 per share. One-month return of Morgan Stanley (NYSE:MS) was -4.57%, and its shares gained 36.83% over the past 52 weeks. Morgan Stanley (NYSE:MS) has a market capitalization of $251.469 billion.
Baron Financials ETF stated the following regarding Morgan Stanley (NYSE:MS) in its fourth quarter 2025 investor letter:
“During the quarter, the Fund invested in Morgan Stanley (NYSE:MS), a leading global investment bank and wealth management firm. Morgan Stanley has successfully diversified its business beyond cyclical banking and trading fees into more recurring wealth and investment management. These businesses collectively oversee $9.3 trillion in client assets that generate predictable, capital light revenue that grows from inflows and market appreciation. Morgan Stanley has a unique client acquisition model that includes financial advisors, self-directed accounts, and workplace accounts, providing multiple avenues to serve clients. In 2025, the company amassed over $350 billion in net new assets, with a 7% net inflow rate in the fourth quarter. These businesses provide a durable base of revenue and earnings for Morgan Stanley even when banking activity is slow. At the same time, Morgan Stanley remains a top three global investment bank, enabling the firm to generate considerably higher earnings during periods of strength in the capital markets.
Morgan Stanley benefits from numerous competitive advantages. It has a leading brand in banking and wealth management, long held customer relationships, and access to premier industry talent. Its unique customer acquisition model gives Morgan Stanley a strong relationship with clients earlier in their wealth lifecycle and the ability to grow with clients as they build wealth. As Morgan Stanley grows revenues, we expect continued margin expansion from operating leverage and efficiencies from the broader usage of AI. The company has significant excess capital, which could be used to invest in the business or returned to shareholders, especially as capital requirements ease under a more business-friendly administration…” (Click here to read the full text)
Morgan Stanley (NYSE:MS) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 80 hedge fund portfolios held Morgan Stanley (NYSE:MS) at the end of the fourth quarter, up from 69 in the previous quarter. While we acknowledge the risk and potential of Morgan Stanley (NYSE:MS) 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 Morgan Stanley (NYSE:MS) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Morgan Stanley (NYSE:MS) and shared a list of most undervalued stocks to buy according to analysts. 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.
