Ron Baron, an early backer of Tesla (TSLA), is deepening his embrace of Elon Musk by setting up partnerships that permit clients to invest in Musk’s private ventures. Baron Capital Management formed two funds to invest solely in xAI and SpaceX. Soaring demand for the limited supply of shares has spawned a cottage industry where firms charge fees for the chance to invest. Baron’s vehicles forgo high compensation, betting that access to these companies will raise the firm’s profile among family offices and private bank clients.
In April, BaronX Cayman filed to raise money from offshore investors for SpaceX, and BaronxAI invested $130 million in xAI through a May stock sale. Each fund charges an annual management fee of around 1%, which falls by half if SpaceX or xAI go public. The private partnerships aim to offset outflows that Baron Capital’s mutual funds have experienced since the start of 2022. Baron Capital’s assets total more than $40 billion, most of which is held in mutual funds.
Market Overview:- Ron Baron sets up funds to invest in Musk’s xAI and SpaceX.
- Baron Capital’s assets total over $40 billion.
- Funds charge 1% annual management fee, reduced if firms go public.
- BaronxAI invested $130 million in Musk’s AI venture.
- BaronX Cayman filed to raise money for SpaceX from offshore investors.
- Partnerships aim to attract family offices and private bank clients.
- Potential IPOs of xAI and SpaceX could reduce management fees.
- Baron Capital aims to offset mutual fund outflows with private investments.
- Baron Capital’s strategy focuses on long-term stock holdings.
Baron, who started his firm in 1982 with $10 million, is a holdout from a bygone money-management era. He holds stocks for decades and makes outsize bets on CEOs he considers exceptional. Baron’s firm has invested over $1 billion in SpaceX, building a 1.2% stake valued at almost $2.8 billion. SpaceX’s reusable rockets and Starlink satellite system have made it a huge draw for investors. Meanwhile, Baron Partners’ fortunes remain closely tied to Tesla, with about 29% of its assets invested in the car company.
Baron Partners fund has generated an average annual return of almost 16% since 2003. Despite volatile returns, the fund ranks as a top US equity fund since its conversion from a private partnership. Baron’s investments in Musk’s ventures, both public and private, reflect his long-term strategy and confidence in the visionary CEO’s ability to lead transformative companies.
