An ETF With An Active, Disciplined Approach to Tech

As the markets move through the first quarter of 2026, the tech sector continues to be the engine that’s powering global growth. After the recent AI boom, investors are now looking for tech plays in sophisticated, actively managed vehicles with strategies that discern between hype and long-term opportunities. When considering the options, Baron Technology ETF (BCTK) should be on that list.

Given the recent mania surrounding AI, investors may be worried that valuations in certain large cap tech names may be stretched and don’t align with their fundamentals. This is where a disciplined approach to tech is imperative, which earned the BCTK ETF a Gold Morningstar Medalist Rating.

“A strong management team and sound investment process underpin Baron Technology ETF’s Morningstar Medalist Rating of Gold,” Morningstar noted.

The Active Advantage

2025 was a record year for active ETF launches. Increasingly, investors are turning to funds that give portfolio managers the autonomy to adjust the holdings. This is necessary to mitigate risk or capture upside. This gives actively managed funds like BCTK an advantage over passive tech funds that are anchored to an index.

Managed by Michael Lippert and Ashim Mehra, the fund’s active approach helps it avoid this “index hugging.” The fund’s selective nature is apparent in its high-conviction portfolio. As of February 4, it has 40 holdings. This includes companies with strong leadership, sustainable competitive advantages relative to its market peers, significant growth opportunities, and compelling valuations.

“The Baron Capital approach focuses on people first,” Mehra said. “You want leaders and founders who are innovators.”

“Baron Capital focuses on competitive advantage,” he added. “Competitive advantage today is defined as the rate of innovation: how quickly can you innovate and then scale those innovations.”

Under The Hood

As mentioned, given the recent run in tech, 2026 is marked by selective growth. This requires greater scrutiny when choosing a fund’s holdings. With heavy capital expenditures (CapEx) during the buildout of AI infrastructure, portfolio managers must choose companies that can translate this spending into actual earnings.

When diving into the holdings, investors will see some familiar large cap tech names powering the fund. As of February 4, NVIDIA (11.8%) and Broadcom (10%) occupy the top two holdings in the fund. These are strategic bets on the modern economy centered around AI’s buildout. The semiconductor focus also includes an 8.45% stake in TSMC, while strategic allocations to platform giants Amazon (8.48%) and Alphabet (4.94%) round out the top five holdings. These  allocations are derived according to Baron Capital’s fundamental research and expected growth trajectory.

Compared to passive indexed funds that focus on tech, BCTK provides exposure to companies beyond the “Magnificent Seven.” A typical passive fund that tracks an index will construct portfolios using a market cap-weighted approach, thereby eschewing exposure to opportunities in small- and mid-cap companies. This highlights the advantage of Baron Capital’s portfolio managers who can actively locate opportunities outside of household names in the large cap tech space.

Getting tech exposure is a staple component in any portfolio. However, for investors looking to strategically allocate to tech, which is a must in the current market environment, BCTK offers an actively refined approach to owning the “right” tech as opposed to just simply owning tech.

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