For the majority of investors, tech investing has become synonymous with passive index funds heavy with Magnificent Seven companies. While exposure to these funds has provided strong returns in recent years, Baron Technology ETF (BCTK) is a departure from the typical market-cap weighted status quo.
BCTK moves beyond this proverbial index trap through an active, research-driven approach. This helps investors find tech opportunities that can last long-term.
Active Selectivity Over Index Passivity
The most fundamental difference between BCTK and its passive peers is its active management. Passive tech ETFs are bound by their underlying indices. Those using a market-cap-weighted approach simply hold more of a company if its stock price rises. This is irrespective of whether its price reflects its true valuation.
BCTK, managed by Michael Lippert and Ashim Mehra, doesn’t hug an index. Instead, the active management allows Lippert and Mehra to make high-conviction decisions to construct a portfolio of just under 40 companies (as of 3/27/26). Compare this to passive tech funds, some of which have upwards of 300 holdings. That said, BCTK’s portfolio construction methodology only includes the best ideas after rigorous research.
This selectivity allows managers to bypass companies that may be overvalued due to market hype. Instead, they identify companies with truly strong fundamentals and durable competitive advantages that are positioned to benefit from secular growth trends.
Additionally, a highlight of BCTK’s active approach is its focus on qualitative metrics in addition to quantitative. This includes an emphasis on human capital, specifically on management teams capable of leading their companies effectively.
“We want to hold companies led by exceptional entrepreneurs and leaders, with a proven track record of long-term value creation,” said Ashim in a portfolio manager’s Q&A. “When we talk about leadership, we mean more than just the CEO and CFO. We dedicate time to actively engage with other key members of the broader executive team who are driving the strategic direction of the company.”
A Diversified Approach
BCTK removes domestic bias by looking for opportunities through a global, multi-cap lens. Furthermore, because BCTK is not forced to weight by market capitalization, it can find significant growth opportunities in small- and mid-cap companies before they become household names.
BCTK’s approach isn’t sector-specific, so it can further diversify its holdings beyond the typical IT names. The ETF also doesn’t adhere to rigid Global Industry Classification (GICS) standards that passive tech ETFs must follow. As such, the fund can hold names that are not typically considered technology companies but should equally benefit from the same tailwinds.
By combining Baron Capital’s 40-year legacy of growth investing with a flexible, active ETF wrapper, BCTK offers a strategic way to own the next generation of tech innovators.
“Baron Technology ETF seeks to offer a differentiated, more balanced, active solution that benefits from greater diversification and an unrelenting focus on identifying long-term winners,” said Lippert. “This active approach not only can mitigate the risks of market concentration found in indexes and passive funds but also allows us to uncover compelling opportunities beyond the typical dominant names.”
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