Three years ago, Baron Real Estate Fund launched with Jeff Kolitch as its portfolio Manager. We are pleased to report that the Baron Real Estate Fund has achieved recognition for its achievements marking its 3-year anniversary on December 31, 2012 as follows:*
•Ranked #1 among 263 funds according to Morningstar and #1 out of 237 Funds according to Lipper in their respective real estate categories for highest total return of 42.99% for the full year ended December 31, 2012.
•Awarded highest 5-star Morningstar rating for the Fund's full 3-year performance ended December 31, 2012.
•Ranked by Morningstar in the top 4.00% of 220 real estate funds for its 3-year cumulative return of 82.91%. This represents an average annual return of 22.30%.
•The Fund's 3-year cumulative return of 82.91% exceeded its primary benchmark, the MSCI USA IMI Real Estate Index, that gained 54.92%, and also the S&P 500 Index that gained 36.30%.
As the Fund embarks on its next chapter, we thought it would be an ideal time to check in with Jeff for an update on his outlook for real estate, the Fund, and other related topics.
What is your outlook for real estate? We continue to be optimistic about the prospects for commercial and residential real estate. At Baron, we believe we are in the early stages of a multi-year real estate recovery fueled by rising demand, low supply, improving credit availability, and extraordinarily low interest rates. We believe the key ingredients are in place for this asset class to continue to perform well for several years. How long do you expect the upturn for real estate to last?
Real estate cycles typically last 6 to 7 years. Commercial real estate has been mending for the last 2 to 3 years. We believe the next 3 to 4 years will be strong for commercial real estate. Following the worst housing crisis in history, the most notable development in real estate in 2012 was the onset of the rebound in the U.S. housing market. In our view, this housing rebound is a major positive game changer and the prospects for the next 4 to 5 years are promising.