Though new to the ETF market, Baron Capital is not new to investment management. The firm entered the ETF space last year, bringing its “old school active” philosophy to investors. During a product due diligence session, TMX VettaFi Director of Research Cinthia Murphy was joined by Matt Camuso, Head of ETF Solutions at Baron Capital. They discussed the firm’s unique approach to investing, while delving into two specific funds: Baron SMID Cap ETF (BCSM) and Baron Technology ETF (BCTK).
Baron Capital was founded in 1982 by Ron Baron, and the firm operates under a single investment philosophy that spans across all its funds.
“Through a bottom-up, fundamental research-driven approach, we try and identify companies with durable competitive advantages, run by exceptional management teams, and where we feel that from its current valuation today, we can double our investment in a three- to five-year time horizon,” Camuso explained.
This long-term mindset is now available in an ETF wrapper, which provides a transparent and tax-efficient way to access Baron Capitals’s high-conviction portfolios.
See More: Old School Edge: Baron Capital’s High-Conviction ETF Strategies
A Balanced Approach to SMID
BCSM (Baron Smid-Cap ETF) is an extension of the firm’s heritage in small-cap research. It moves slightly up the capitalization range to include the mid-cap space. Managed by Randy Gwirtzman and Laird Bieger, the fund maintains an astounding 96.3% active share. This metric ensures that the portfolio is fundamentally different from comparable passive benchmarks that also focus on small-/mid-cap companies.
A key differentiator for BCSM is that the team has successfully worked together managing Baron Discovery small-cap strategy for more than a decade, and ideas that have been successful in that strategy and still have meaningful growth potential can naturally extend into the SMID-cap ETF.
Beyond the Mega-Cap Tech Bubble
As mentioned, another fund discussed was BCTK (Baron Technology ETF). This fund offers a more global and cap-agnostic alternative to passive benchmarks focused on tech. Managed by Michael Lippert and Ashim Mehra, the fund captures the artificial intelligence (AI) value chain on a global scale, across sectors. This includes key infrastructure players like Taiwan Semiconductor (TSMC).
“This AI trend with regard to the need for building out the infrastructure across the AI value chain is not just a domestic opportunity,” Camuso said.
BCTK currently holds a concentrated basket of 38 names, reflecting the managers’ high conviction. With a 69% active share relative to the Nasdaq-100, BCTK serves as a strategic complement to core large-cap tech exposure by providing access to mid-cap innovators that other indices often overlook.
Baron Capital’s Active Advantage
The common thread across Baron Capital’s lineup is its rigorous approach to research. Camuso emphasized that Baron Capital investors are not just getting access to company tickers, but to a process that invests in businesses and their management teams for the long term.
“This is not buy a company, hold on until we get some fundamental screen and then sell,” Camuso said. As Baron Capital continues to expand its ETF suite, the firm remains committed to its principles: investing in long-term secular growth businesses with durable competitive advantages that are run by great management teams.
To learn more about the active ETFs offered by Baron Capital, click here.
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