Baron Capital launches high-conviction ETFs

Baron Capital, founded in 1982 by Ron Baron, entered the ETF market last year with two active funds: the Baron SMID Cap ETF (BCSM) and the Baron Technology ETF (BCTK). The firm placed its single, research-driven investment philosophy into ETF wrappers designed to offer tax efficiency and portfolio transparency.

At a product due diligence session hosted by TMX VettaFi, Cinthia Murphy, Director of Research, interviewed Matt Camuso, Head of ETF Solutions at Baron Capital, about the firm’s investment process. Camuso described a bottom-up, fundamental research approach focused on companies with durable competitive advantages and experienced management, and a target of doubling an investment within three to five years. “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.

BCSM extends the firm’s small-cap research into the mid-cap range. Managed by Randy Gwirtzman and Laird Bieger, the SMID-cap fund reports an active share of 96.3% versus comparable passive small- and mid-cap benchmarks. The managers have worked together for more than a decade on the Baron Discovery small-cap strategy, and the SMID-cap sleeve can include former small-cap ideas that retain growth potential.

BCTK uses a global, capitalization-agnostic approach to technology investing. Michael Lippert and Ashim Mehra manage a concentrated portfolio of roughly 38 names intended to cover the artificial intelligence value chain across sectors and countries. Holdings include infrastructure companies such as Taiwan Semiconductor Manufacturing Company. BCTK shows a 69% active share relative to the Nasdaq-100 and provides exposure to mid-cap technology companies often absent from major indexes.

Baron Capital says the ETFs give investors access to the firm’s high-conviction portfolios while keeping the liquidity and tax-treatment characteristics of the ETF structure. The firm applies the same research framework across strategies, focusing on long-term secular growth businesses with competitive positions and experienced management.