MAGAZINE   January Magazine Contents Web Links Past Issues Try a Free Issue Customer Service Feedback GETTING STARTED   STOCKS Build a Strong Stock Portfolio Four Questions to Ask Before You Buy How to Make Sense of the Earnings Report   FUNDS Growing a Fund Portfolio Pick Funds the Right Way Time to Ditch Your Fund?   BONDS Add Balance with Bonds Bonds Made Easy MORE... TOOLS   STOCKS Kiplinger's Stock Finder Test your risk tolerance Pick the Best 'Bankerage' Company   FUNDS Kiplinger's Mutual Fund Finder Which fund is better? How do growth and income funds compare?   BONDS Which bond is better? What is my bond's yield to maturity? What price should I pay for a bond?

FUNDS
Baron Switcheroo
by Steven Goldberg

With so many mutual fund managers bolting to join hedge funds, it's refreshing to see one take a different tack. In mid 2003, Ron Baron, head of the $9-billion Baron fund family, converted a hedge fund into a mutual fund. As a regular fund, Baron Partners is on a tear: It gained 32% in 2004 to November 15, putting it on course to be the year's top diversified U.S. stock fund.

Partners retains the trappings of hedge funds -- lightly regulated vehicles that give their managers wide latitude. Partners (BPTRX; 800-992-2766) is concentrated: 42% of its assets are in three stocks. It can borrow money to boost returns, and it can bet on stocks declining in price. "This isn't something you should put a large percentage of your net worth in," says Baron, 61, who has $70 million of his own money in the $380-million fund.

Investors get a fairer shake with Partners as a mutual fund than as a hedge fund. Partners used to extract an annual fee of 1% of assets and claim 20% of any yearly profits. As a mutual fund, it levies below-average annual fees of 1.35%. For a little spice in a well-rounded portfolio, Partners might be just the thing.