With mega-cap valuations coming into question, more investors are gravitating toward small companies in pursuit of greater growth opportunities. However, simply allocating capital to an ETF that tracks a broad small-cap index, such as the Russell 2000 Index, can expose investors to unintended volatility and risk. Investors seeking smaller-company exposure may therefore consider a more selective, active approach, such as Baron SMID Cap ETF (BCSM).Key Takeaways:
BCSM uses active management and proprietary research to identify small- and mid-cap companies with strong long-term growth prospects
Through rigorous bottom-up fundamental research, the fund seeks to invest in growth companies with strong competitive advantages and exceptional management teams
This disciplined framework is designed to manage small- and mid-cap volatility while pursuing long-term growth opportunities
See More: BCSM’s Active Approach to SMID-Caps Is More Relevant Than EverFiltering Out Benchmark Quality TrapsPassive small-cap indexes can include a meaningful number of unprofitable companies. Some of these businesses may depend heavily on external financing, making them more vulnerable during economic slowdowns.
To help address these risks, the fund’s portfolio managers, Laird Bieger and Randy Gwirtzman, use an active approach that allows them to allocate capital selectively. Each has 29 years of investment experience and brings complementary sector expertise; together, they have managed Baron Discovery Fund for more than a decade.
BCSM employs an integrated, multipronged approach to risk management that balances exposure across growth profiles and emphasizes companies likely to generate predictable revenue and cash flow. The team conducts extensive due diligence based on the belief that effective risk management begins with thoroughly understanding each holding.
This disciplined approach provides exposure to both emerging, scalable businesses with high growth potential and more established companies that often carry a lower risk profile and help balance the portfolio.Targeting High-Conviction Growth CatalystsRather than making broad sector calls, the fund generally keeps sector exposure closely aligned with its benchmark and seeks to add value through active stock selection—one key tenet of its risk management approach. Fundamental research then helps the managers identify SMID-cap companies that are likely to benefit from strong secular tailwinds and have the potential to become tomorrow’s market leaders.
Within these parameters, the fund retains the flexibility to overweight high-potential sectors when the managers identify attractive opportunities. This may include investing in some of the economy’s fastest-growing themes without becoming overly concentrated in any one, including AI. At the same time, the managers seek to maintain balance across industries, growth profiles, position sizes, and valuations, as part of their risk management approach.Managing Volatility Through Bottom-Up ResearchSmall- and mid-cap equities naturally experience wider price swings than their mega-cap counterparts. BCSM combines bottom-up fundamental research with active management to assess and manage this inherent volatility.
For investors seeking the growth potential of smaller companies, BCSM offers active exposure to small- and mid-cap equities through a disciplined, quality-focused approach to long-term investing.
To learn more about the active ETFs offered by Baron Capital, click here.
For more news, information, and analysis, visit the Market Insights Content Hub.DisclosuresInformation and services provided on independent websites are not reviewed, guaranteed by or endorsed by Baron Capital or its affiliates. Please be aware that this independent website’s terms and conditions and other legal information may be different than those of Baron Capital’s website. Baron Capital is not liable for the content appearing on it, or for technical or systems issues arising from the use of this independent website.
Investors should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund and can be obtained from the Fund’s distributor, Baron Capital, Inc., by calling 1-800-99-BARON or visiting BaronCapitalGroup.com. Please read them carefully before investing.
Baron SMID Cap ETF’s cumulative return as of June 30, 2026: 1.47%. As of April 30, 2026, the annual expense ratio of the Fund’s Shares was 0.75%.
Baron SMID Cap ETF’s cumulative Market Price return as of June 30, 2026: 1.49%. As of April 30, 2026, the annual expense ratio of the Fund’s Shares was 0.75%.
Russell 2500 Growth Index’s cumulative return as of June 30, 2026 since the Fund’s inception (December 12, 2025): 16.91%.
Russell 3000 Index’s cumulative return as of June 30, 2026 since the Fund’s inception (December 12, 2025): 10.95%.
The performance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate; and investor’s shares, when sold, may be worth more or less than the original cost. Total returns assume the reinvestment of all distributions and the deduction of all fund expenses. Current performance may be lower or higher than the performance data quoted. For performance information current to the most recent month end, visit BaronCapitalGroup.com or call 1-800-99-BARON.
Historical performance was impacted by gains from IPOs. There is no guarantee that these results can be repeated or the level of IPO participation will be the same in the future.
Risks: Securities issued by small and medium-sized companies may be thinly traded and may be more difficult to sell during market downturns. The risk of investing in special situations is that the anticipated development does not occur or its impact is not what the Adviser expected.
This information does not constitute an offer to sell or a solicitation of any offer to buy securities by anyone in any jurisdiction where it would be unlawful under the laws of that jurisdiction to make such offer or solicitation. This information is only for the intended recipient and may not be distributed to any third party.
Investors generally incur the cost of the spread between the prices at which shares are bought and sold. Buying and selling shares may result in brokerage commissions which will reduce returns.
Prior to trading in the secondary market, shares of the fund are “created” at NAV by market makers, large investors and institutions only in block-size Creation Units. Each “creator” or “Authorized Participant” enters into an authorized participant agreement with Baron Capital, Inc. Only an Authorized Participant may create or redeem Creation Units directly with the fund.
Investors buy and sell shares of ETFs at market price (not NAV) in the secondary market throughout the trading day. These shares are not individually available for purchase or redemption directly from the ETF. Baron Capital, Inc. serves as the distributor of the Creation Units for the ETFs on an agency basis. Baron Capital does not maintain a secondary market in Fund’s shares.
The discussion of market trends is not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this document reflect those of the respective writer. Some of our comments are based on management expectations and are considered “forward-looking statements.” Actual future results, however, may prove to be different from our expectations. Our views are a reflection of our best judgment at the time and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.
The Russell 2500™ Growth Index measures the performance of small to medium-sized U.S. companies that are classified as growth. The Russell 3000® Index measures the performance of the largest 3,000 US companies representing approximately 98% of the investable US equity market, as of the most recent reconstitution. All rights in the FTSE Russell Index (the “Index”) vest in the relevant LSE Group company which owns the Index. Russell® is a trademark of the relevant LSE Group company and is used by any other LSE Group company under license. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. The Fund includes reinvestment of dividends, net of withholding taxes, while the Russell 2500™ Growth and Russell 3000® Indexes include reinvestment of dividends before taxes. Reinvestment of dividends positively impacts the performance results. The indexes are unmanaged. Index performance is not Fund performance. Investors cannot invest directly in an index.
Investment Products: NOT FDIC INSURED | MAY LOSE VALUE | NOT BANK GUARANTEED
BAMCO, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Baron Capital, Inc. is a broker-dealer registered with the SEC and member of the Financial Industry Regulatory Authority, Inc. (FINRA).
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