Sector-specific changes in global finance are leading to a new era of digital innovation that’s replacing traditional banking. For investors looking to capitalize on this next wave of growth opportunities in financials, Baron Financials ETF (BCFN) — managed by portfolio manager Josh Saltman — offers a high-conviction, active approach to investing in the sector.
By focusing on financial-related growth companies, BCFN looks beyond legacy institutions to find firms that will define the financial sector in the next decade. The result is a high-conviction portfolio (just over 40 holdings as of March 31, 2026) built from rigorous research.
“The common denominator across all of our holdings is that we invest in differentiated businesses that are using technology or data to better serve customers and to grow at above-average rates in a large global market for financial services,” Saltman summarized in the video below.
Growth Beyond the Macro
Compared to passive financial sector ETFs, BCFN’s actively managed approach defines its holdings. The constituents in passive funds are often weighted toward traditional banks that are sensitive to interest rate swings. BCFN focuses on companies with strong growth prospects irrespective of the macroeconomic backdrop.
Saltman emphasized that the fund’s strategy is to identify businesses using technology and innovation to disrupt or adapt with the new status quo. This includes looking beyond large-cap companies and into small- or mid-cap companies with strong growth prospects. As mentioned, this involves a rigorous research process to locate the financial industry’s next big opportunities and the incumbents positioned to withstand.
“We do our own deep, fundamental research to understand our own industries and companies really well,” Saltman added, noting that Baron Capital takes a “top-down approach to identify attractive growth themes and a bottom-up approach to find the companies that are best able to capture those growth opportunities.”
Modern Finance Enablers and Diversifiers
Saltman highlights that the fund targets companies that are benefiting from the secular shift toward electronic payments and digital data. This includes key holdings that investors will recognize like Visa and Mastercard, which are indirect plays on cryptocurrencies.
“These companies are increasingly serving the cryptocurrency and blockchain ecosystem,” said Saltman. “Their cards can be used to purchase cryptocurrencies on exchanges like Coinbase and also spend cryptocurrency.”
The fund also invests in companies with a global footprint in the financial sector. This includes Nubank and Mercado Libre, which have a strong presence in Latin America.
“These companies are expanding the offering for financial services to an underserved part of the market in Latin America,” Saltman noted.
Aside from these growth opportunities and indirect exposure to technological innovation, the financial sector as a whole diversifies from the ongoing hype surrounding AI as it generally continues to perform well even when growth is broadly underperforming. In the current times of volatility, sector diversification is imperative.
“Investing in financials provides diversification beyond the AI trade,” Saltman said. “Financial services has not really participated in the AI buildout, but we believe that they will be primary beneficiaries of using AI to operate more efficiently and to improve productivity.”
To learn more about BCFN, click here.
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