Baron Durable Advantage Fund Added CME Group (CME) Driven by Varied Growth Drivers

Baron Funds released its “Baron Durable Advantage Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund primarily focuses on investing in securities of large-sized companies. The fund increased 15.6% (Institutional Shares) in the second quarter compared to a 10.9% return for the S&P 500 Index (the Index). The Fund is up 7.5%, year to date, compared to the 6.2% gain for the Index. After two consecutive years of strong market recovery, there was a correction at the end of the first quarter and the early part of the second quarter. But later in the second quarter, the market rebounded meaningfully. For more information on the fund’s best picks in 2025, please check its top five holdings.

In its second-quarter 2025 investor letter, the Baron Durable Advantage Fund highlighted stocks such as CME Group Inc. (NASDAQ:CME). CME Group Inc. (NASDAQ:CME) operates the leading financial exchange for the trading of futures and options on futures contracts. The one-month return of CME Group Inc. (NASDAQ:CME) was -1.39%, and its shares gained 30.39% of their value over the last 52 weeks. On August 21, 2025, CME Group Inc. (NASDAQ:CME) stock closed at $273.32 per share, with a market capitalization of $98.499 billion.

Baron Durable Advantage Fund stated the following regarding CME Group Inc. (NASDAQ:CME) in its second quarter 2025 investor letter:

"Our largest add to an existing investment was CME Group Inc. (NASDAQ:CME). CME operates the world’s largest financial exchanges for trading derivatives on interest rates, equity indexes, energy, agricultural commodities, currencies, and metals. The company benefits from higher trading volumes during periods of high market volatility. Over the long term, the company benefits from global capital markets expansion, increasing demand for risk management tools, and bank capital requirements that favor CME’s centrally cleared securities over non-cleared OTC products. CME has significant competitive advantages due to its proprietary products, deep liquidity pools, and capital efficiencies for its customers. These advantages lead to high margins, low capital intensity, and strong capital returns to shareholders. Given the uncertain path of inflation and interest rates, we believe demand for CME’s financial derivatives will likely remain firm. The company’s average daily trading volume has increased 15% year-to-date as of June 30. While easing market volatility may cause trading activity to slow from record high levels, we believe CME provides an attractive hedge against tariff- and macro-related uncertainty. We also believe concerns about competition from a new derivatives exchange called FMX are overblown and have created an attractive entry point to increase our position."

CME Group Inc. (NASDAQ:CME) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 75 hedge fund portfolios held CME Group Inc. (NASDAQ:CME) at the end of the second quarter, which was 73 in the previous quarter. CME Group Inc. (NASDAQ:CME) reported revenue of $1.7 billion in the second quarter of 2025, up 10% from Q2 2024. While we acknowledge the potential of CME Group Inc. (NASDAQ:CME) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered CME Group Inc. (NASDAQ:CME) and shared the list of stocks Jim Cramer discussed recently. In addition, please check out our hedge fund investor letters Q2 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.