(Bloomberg) — One of the last remaining holdouts to the global $14 trillion exchange-traded fund industry is weighing whether to finally join in.
Baron Capital, which focuses on traditional mutual funds, hasn’t made a decision. But it’s sizing up the tax advantages and trading capabilities of ETFs. Known for its early bets on Elon Musk and its bottom-up stockpicking style, the firm manages roughly $45 billion.
“Plans to launch now? No. Are we studying it? Yes,” Michael Baron, co-president and portfolio manager, said at Baron Capital’s annual investment conference Friday at New York’s Lincoln Center. “The active ETF structure is interesting. There are benefits to an active ETF whether it be liquid, transparent, tax, operational cost.”
That Baron Capital, founded by Ron Baron in 1982 with a $10 million investment from George Soros, is even having the discussion, given its market-beating successes and faithful clients, highlights the gravitational pull of ETFs.
Several newcomers have filed for debut ETFs over the past few months, including Bridgewater Associates and Apollo Global Management Inc., after the vehicles’ low fees, tax advantages and liquidity drew trillions away from mutual funds over the past decade. Even MFS Investment Management — the firm behind the world’s first mutual fund — filed to launch its first ETFs this year.
Baron Capital hasn’t been immune to the migration toward ETFs, with its assets declining more than 20% from a peak of some $59 billion in late 2021. Still, it isn’t fully sold on launching one of its own — and is still keeping an open mind toward other fund structures a well.
“I think everybody’s crazed about ETFs, but those aren’t necessarily the only instruments,” said Rachel Stern, Baron’s chief operating officer.