Baron Technology ETF

BCTK

Valor de mercado US$ 222 mi

Software and IT services appear undervalued relative to 11-year averages, while other subsectors are notably overvalued. The Baron Technology ETF offers active exposure to global tech, with 38 holdings and a 0.75% expense ratio. Despite an impressive cash flow growth rate, BCTK's short track record and high fees are still unconvincing.

As part of its record-breaking IPO, we acquired shares in Space Exploration Technologies Corp. We initiated a position in Advanced Micro Devices, Inc. during the second quarter. We trimmed our position in NVIDIA Corporation, which had grown to represent an outsized share of the Fund.

During the second quarter, Baron Technology ETF rose 38.95% (NAV), roughly in line with the MSCI ACWI Information Technology Index, which gained 39.09%. Communication Services was our top-contributing sector, driven by both our overweight positioning and favorable stock selection. In Health Care, relative outperformance was led primarily by stock selection, most notably from digital musculoskeletal and physical therapy platform trailblazer Hinge Health.

During earnings season, short-term market movements can test investor conviction, especially when large-cap technology companies report results that often drive sharp market movements. While these broad movements can increase uncertainty or fear of missing out, they rarely change the long-term fundamentals of a durable business.

Software appears undervalued by 34% versus historical averages, while other tech sub-sectors are greatly overvalued despite hardware's improved quality score. Baron Technology ETF is an actively managed, globally diversified technology ETF with a broad sector definition and high concentration in semiconductors. BCTK's high expense ratio, limited trading volumes, and short track record make it uncompelling for now.

SpaceX's $60 billion acquisition of AI startup Cursor strengthens its AI ambitions, boosts shares and puts SpaceX-heavy ETFs in focus.

During the first quarter, we initiated a position in Alphabet Inc., the parent company of Google and one of the world's most valuable technology franchises. We added to our position in Shopify Inc., the leading global operating system for commerce, after shares pulled back in a broader software sell-off. We exited our investment in Microsoft Corporation due to a combination of near-term execution shortfalls and longer-term structural concerns about its competitive positioning in AI.

Baron Technology ETF® declined roughly in line with its benchmark, the MSCI ACWI Information Technology Index. Top contributors were Lumentum Holdings Inc., Taiwan Semiconductor Manufacturing Company Limited, and Coherent Corp. Top detractors were Broadcom Inc., Amazon.com, Inc., and Tesla, Inc.

A tidal wave of conversions has siphoned an unprecedented amount of capital out of mutual funds and into the ETF wrapper. Last year's record 60 mutual-fund-to-ETF conversions in 2025 across 31 firms pushed total converted assets past $260 billion, and the past five years have now seen a grand total of 203 conversions.

Baron Capital continues to grow its active ETF lineup with today's introduction of Baron Risk Optimized Large Cap ETF™ (BROL). The ETF builds upon the firm's commitment to long-term growth investing with a targeted focus on U.S. large-cap companies that exhibit durable competitive advantages, significant growth opportunities, exceptional management teams, and compelling valuations.