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| # | Fund | Strategy | Style | Geography | AUM | Latest Letter |
|---|---|---|---|---|---|---|
The Baron Financials ETF rose 1.82% in Q2 2026, underperforming the MSCI USA Financials Index which gained 8.93%, as narrow market leadership concentrated in AI infrastructure stocks overshadowed most sectors. The Fund's underweight position in Banks, which rose 15.1% and represent over 40% of the index, detracted from relative performance. Financial software and information services holdings faced pressure from AI-driven disruption fears, with Intuit and Guidewire declining on concerns about market share losses and deal timing. Capital Markets holdings including Tradeweb and CME fell on slower trading activity and competition concerns from crypto-based derivatives. The manager believes holdings are oversold, trading at less than 18 times forward earnings—the lowest multiple since inception—despite stable growth prospects. The Fund initiated positions in JPMorgan Chase, Bank of America, American Express, and AerCap Holdings at attractive valuations. With favorable economic conditions including 2% GDP growth, 4% unemployment, and accelerating bank lending, the manager expects continued earnings growth to drive favorable returns ahead.
The Baron Financials ETF invests in competitively advantaged, growing financial and financial-related companies across all market capitalizations, with a focus on Leaders (83.8% of assets) that are larger, established companies with stable growth and moderate valuations, and Challengers (15.9%) that are smaller, earlier-stage companies with higher growth rates.
The manager believes the Fund's holdings are oversold and the performance outlook is bright. The market's singular focus on AI infrastructure stocks has caused many high-quality growth companies to be ignored. The Fund's holdings trade at less than 18 times forward earnings, the lowest valuation multiple since inception, despite stable growth prospects. Economic conditions remain broadly favorable with healthy consumers and businesses, positive job growth, low unemployment, and rising wages. This steady economic backdrop should support continued earnings growth and favorable returns for the Fund.
As of Aug 26, 2026
The Baron FinTech Fund is managed by Josh Saltman, who has over 15 years of experience at Baron Capital since joining in 2011. The fund was originally launched on December 31, 2019, and converted to the Baron Financial ETF (BCFN) on December 15, 2025, reducing expenses from 1.56% to 0.80%. With approximately $71.05 million in assets under management at conversion, the fund maintains a concentrated portfolio of 47 positions focused on financial technology companies. The conversion to ETF structure provides improved liquidity while maintaining the same active management approach and investment strategy.
Lead Portfolio Manager
Moderate Conviction Bullish
Market Conviction
The Fund holds 42 positions (34 excluding those smaller than 1%), with the top 10 representing 44.4% of net assets and top 20 representing 73.1%. This indicates moderate concentration. The manager provides detailed, multi-paragraph analysis of several holdings including AerCap (extensive discussion of business model, competitive position, valuation, and capital allocation), Interactive Brokers, Morgan Stanley, and Visa. Position sizing is explicitly discussed for top holdings (ranging from 3.6% to 6.0%). The manager uses declarative language about specific holdings ('We retain long-term conviction,' 'We continue to own,' 'We view Interactive Brokers as a structural share gainer') but also acknowledges trimming positions and exiting others due to concerns. The portfolio structure (83.8% Leaders, 15.9% Challengers) and explicit position sizing combined with detailed company-specific analysis support a moderate-to-high conviction score, though the diversified nature (34+ meaningful positions) prevents a higher score.
Growth Outlook
Market outlook remains high conviction: Baron Financials ETF converted to an ETF structure in Q4 2025 and is positioning for a supportive 2026 driven by rate cuts and bank deregulation, shifting capital into high-quality...
Risk Appetite
Risk appetite posture is above average conviction: Baron Financials ETF converted to an ETF structure in Q4 2025 and is positioning for a supportive 2026 driven by rate cuts and bank deregulation, shifting capital into high-quality...
Capital Deployment
The manager initiated four new positions (JPMorgan $1.7M, American Express $0.9M, AerCap $0.9M, Bank of America $0.6M, Lincoln International $0.3M) totaling approximately $4.4M in net purchases. Simultaneously, the manager trimmed or exited five positions (Intuit $1.0M, S&P Global $0.6M, Fair Isaac $0.5M, Guidewire $0.4M, Alkami $0.2M) totaling approximately $2.7M in net sales. Net deployment was approximately $1.7M, representing modest capital deployment. The letter describes this as opportunistic buying during 'share price pullbacks' rather than aggressive deployment. Cash remains at 0.3% of net assets, unchanged from typical levels. The activity represents selective rotation and modest net deployment rather than significant capital deployment or de-risking.
Forward Guidance
Forward guidance signal: Baron Financials ETF converted to an ETF structure in Q4 2025 and is positioning for a supportive 2026 driven by rate cuts and bank deregulation, shifting capital into high-quality...
Language Signal
The letter contains a balanced mix of directional language. Bullish language includes: 'oversold,' 'attractive valuations,' 'bright outlook,' 'favorable economic conditions,' 'healthy consumers and businesses,' 'continued earnings growth,' and 'cheap valuation' (for AerCap). Bearish or cautious language includes: 'AI-driven disruption fears,' 'concerns about competition,' 'slower trading activity,' 'market share losses,' 'temporary sentiment overhang,' 'extreme market narrowness,' and 'depressed consumer sentiment.' The manager uses opportunity-focused language when discussing specific holdings but acknowledges multiple headwinds and risks throughout. The net balance tilts mildly positive but with substantial caution embedded.
Perceived Risk
Perceived risk level is evaluated as above average conviction. Baron Financials ETF converted to an ETF structure in Q4 2025 and is positioning for a supportive 2026 driven by rate cuts and bank deregulation, shifting capital into high-quality...
Opportunity Density
The manager sees selective opportunities in defined areas. The letter emphasizes that 'the market's singular focus on AI infrastructure stocks has caused many high-quality growth companies to be ignored and left behind,' creating valuation opportunities. The manager initiated four new positions during the quarter, describing them as 'dominant franchises at attractive valuations' purchased during 'share price pullbacks.' The Fund's holdings trade at 'less than 18 times forward earnings, the lowest valuation multiple since the Fund's inception in 2019,' which the manager views as creating opportunity. However, the manager also trimmed or exited multiple positions due to concerns, indicating selectivity. The opportunity set is characterized as selective rather than broad-based, with opportunities concentrated in specific areas (large-cap banks, aircraft leasing) rather than across the entire financial sector.
Time Horizon
The manager explicitly states 'We seek to invest in competitively advantaged, growing financial and financial-related companies for the long term.' The AerCap discussion includes a multi-decade perspective: 'We expect AerCap to keep compounding earnings and book value per share at double-digit rates for the foreseeable future, driving a similar rate of share price appreciation over time.' The letter references secular trends including 'ongoing electronification of capital markets' and 'secular growth of global air travel' with 20-year forecasts. For Morgan Stanley, the manager states 'We retain long-term conviction in the stock' and describes 'the earnings power of Morgan Stanley's integrated, fee-based business model' rather than near-term catalysts. However, the letter also discusses quarterly results, near-term trading activity, and specific quarterly events (deal slippage at Guidewire, Q1 results at Morgan Stanley), indicating attention to medium-term developments. The balance suggests a multi-year investment horizon with attention to near-term developments but not urgency around specific catalysts.
Top Conviction Themes
Key Catalysts
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