Baron Funds, an investment management company, released its “Baron Real Estate Fund” fourth quarter 2024 investor letter. A copy of the letter can be downloaded here. The fund increased 12.46% (Institutional Shares) in the full year compared to a 7.49% return for the MSCI US REIT Index (the REIT Index) and a 12.70% return for the MSCI USA IMI Extended Real Estate Index (the MSCI Real Estate Index). The fund decreased 2.98% in the fourth quarter, outperforming 6.39% and 4.69% declines for the indexes for the same period. In addition, please check the fund’s top five holdings to know its best picks in 2024.

In its fourth quarter 2024 investor letter, Baron Real Estate Fund emphasized stocks such as Kilroy Realty Corporation (NYSE:KRC). Kilroy Realty Corporation (NYSE:KRC) is leading U.S. landlord and developer. The one-month return of Kilroy Realty Corporation (NYSE:KRC) was -9.22%, and its shares lost 6.82% of their value over the last 52 weeks. On February 26, 2025, Kilroy Realty Corporation (NYSE:KRC) stock closed at $34.54 per share with a market capitalization of $4.231 billion.

Baron Real Estate Fund stated the following regarding Kilroy Realty Corporation (NYSE:KRC) in its Q4 2024 investor letter:

"During the fourth quarter, we initiated a position in Kilroy Realty Corporation (NYSE:KRC), a REIT that owns a portfolio of high-quality office properties concentrated in U.S. West Coast markets including San Francisco, San Diego, Los Angeles, and Seattle. The company also owns one property in Austin, Texas.

While we have remained generally cautious on office real estate for several years in light of both cyclical and secular headwinds that we expected would persist, we also have acknowledged that certain well-located, modern office properties were poised to gain market share and outperform as market conditions improved. We would categorize Kilroy’s portfolio as falling into this latter bucket.

We are optimistic about our investment in Kilroy for several reasons: 1. Although office fundamentals remain challenged in certain of Kilroy’s markets (most notably in the greater San Francisco Bay area), we have begun to see several encouraging signs that lead us to believe that office fundamentals are bottoming and beginning to improve. These signs include stable or rising utilization of office space and more return-to-office mandates, improving levels of leasing activity and tenant interest, declining levels of vacant sublease space, more confident corporate decision making, and stabilizing market rents and concessions..." (Click here to read the full text)

A wide-angle view of a mixed-use development project revealing a mix of commercial and residential buildings.

Kilroy Realty Corporation (NYSE:KRC) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 26 hedge fund portfolios held Kilroy Realty Corporation (NYSE:KRC) at the end of the fourth quarter compared to 22 in the third quarter. While we acknowledge the potential of Kilroy Realty Corporation (NYSE:KRC) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In addition, please check out our hedge fund investor letters Q4 2024 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.