In a market landscape increasingly defined by the gravitational pull of artificial intelligence and a handful of trillion-dollar technology titans, veteran investors are beginning to question the sustainability of the current concentration of wealth. As the S&P 500 continues to lean heavily on the "Magnificent Seven" and their AI-adjacent peers, the search for "alpha" has led some of the world’s most successful fund managers to look toward the periphery—sectors and companies that have been overlooked, undervalued, or temporarily bruised by short-term headwinds. Among these contrarian voices is Ron Baron, the billionaire founder and CEO of Baron Capital, who is currently signaling a strategic pivot toward high-moat financial services and data providers.
Baron’s investment philosophy has long been rooted in a "buy and hold" mentality, prioritizing long-term growth over quarterly fluctuations. His firm, which has generated an estimated $57 billion in profits for its investors over the last four decades, is currently embarking on a significant structural evolution. This week, Baron Capital rolled out five new active exchange-traded funds (ETFs), marking a major transition for a firm that has spent decades primarily as a mutual fund powerhouse. Baron’s confidence is not merely historical; he has publicly forecasted an additional $250 billion in profits for his clients over the next decade. Central to this optimistic outlook is a conviction that the market’s current obsession with technology has created a massive blind spot for high-quality companies in the financial sector, specifically those that provide the critical infrastructure for global capital markets.
Two companies, in particular, have captured Baron’s attention: MSCI and FactSet Research Systems. Both represent the "picks and shovels" of the financial world, providing the data, indices, and analytical tools that institutional investors rely upon to manage trillions of dollars. However, despite their systemic importance, both stocks have struggled to keep pace with the broader market rally of 2024 and 2025, presenting what Baron views as a classic value opportunity.
MSCI, formerly known as Morgan Stanley Capital International, is perhaps the most influential entity in the world of passive investing. Since its spin-off from Morgan Stanley and subsequent IPO in 2007 at $18 per share, the company has grown into a global behemoth. Its indices serve as the benchmarks for nearly $15 trillion in assets, ranging from developed market equities to emerging market funds and the increasingly critical environmental, social, and governance (ESG) sector. When an asset manager launches an ETF or a pension fund rebalances its portfolio, they are almost invariably using MSCI’s data to do so.
Despite this dominant market position, MSCI has been notably absent from the recent bull run. Its shares are down approximately 8% over the past year, trading in the mid-$500 range. For Baron, this disconnect between the stock price and the company’s fundamental utility is an invitation. He points to the leadership of Henry Fernandez, the company’s founder and chairman, as a primary reason for his continued bullishness. Fernandez’s personal narrative—fleeing a coup in Nicaragua and arriving in the United States with virtually no resources before building a financial empire—resonates with Baron’s preference for "owner-operators" with a deep personal stake in their business. Baron has maintained a position in MSCI since its IPO, famously buying more shares during the depths of the 2008 financial crisis when others were fleeing.
The second pillar of Baron’s current financial thesis is FactSet Research Systems. While MSCI dominates the indexing world, FactSet is a titan in the realm of financial data and analytics, competing directly with the likes of Bloomberg and the London Stock Exchange Group (LSEG). FactSet provides the integrated software and data feeds that analysts, portfolio managers, and investment bankers use to conduct research and execute trades.
The stock’s recent performance has been even more dramatic than MSCI’s, falling nearly 40% this year following a series of disappointing earnings reports and a tempered profit outlook. To many on Wall Street, FactSet appears to be a "falling knife," a company struggling to adapt as financial institutions look to cut costs on expensive terminal subscriptions. Baron, however, sees a different narrative. He views FactSet’s current troubles as ephemeral and points to a recent management shakeup as the catalyst for a massive turnaround.
In September, FactSet appointed Sanoke Viswanathan as its new CEO. The move was significant enough for Baron to draw a direct comparison to one of the most revered figures in global finance: JPMorgan Chase CEO Jamie Dimon. Viswanathan’s pedigree is formidable. An alumnus of top-tier engineering schools and a former partner at McKinsey & Company, he rose to prominence at JPMorgan, where he was a key lieutenant to Dimon. At just 33 years old, he was reportedly advising U.S. government officials during the peak of the 2008 financial crisis.
Before taking the helm at FactSet, Viswanathan was widely considered a frontrunner to succeed Dimon at JPMorgan. According to Baron, when it became clear that the succession timeline at the nation’s largest bank did not align with Viswanathan’s personal ambitions, he chose to apply his "killer" instinct to FactSet. Baron’s thesis is simple: putting a top-tier executive like Viswanathan in charge of a mid-cap company with a strong product like FactSet is akin to "putting Jamie Dimon at age 51 in charge" of a specialized growth firm. It is a bet on human capital as much as it is on financial data.
This focus on management quality is a cornerstone of the broader economic philosophy known as "quality investing." In an era where algorithmic trading and passive index tracking account for the majority of market volume, Baron’s approach emphasizes the qualitative aspects of a business—culture, leadership, and long-term vision. This approach is particularly relevant in the financial data sector, where the barriers to entry are high but the competition for talent is fierce.
The economic context for these investments is a phenomenon many analysts are calling the "Great Rotation." As interest rates stabilize and the initial fervor over generative AI begins to meet the reality of corporate earnings, investors are increasingly looking for companies with "sticky" revenue streams and high margins. Both MSCI and FactSet operate on subscription-based models with high retention rates. Once a global investment firm integrates MSCI indices or FactSet terminals into its workflow, the cost of switching to a competitor is prohibitive. This creates a "moat" that can withstand broader economic volatility, even if the stock price suffers in the short term.
Furthermore, the global demand for financial data is only expected to grow. The rise of private credit, the expansion of international markets, and the increasing complexity of risk management tools mean that the "raw materials" provided by MSCI and FactSet are more essential than ever. While technology stocks may offer explosive growth, financial infrastructure stocks offer a form of "compounding" that Baron believes is the key to building generational wealth.
Baron’s pivot also reflects a broader skepticism regarding market concentration. With the S&P 500’s top ten holdings accounting for an unprecedented percentage of the index’s total value, the risk of a "mean reversion" is high. By moving into the financial sector—which currently trades at a significant discount to the technology sector on a price-to-earnings basis—Baron is positioning his firm to capture the upside of a more diversified market.
As Baron Capital expands its footprint through its new active ETFs, the firm is betting that its history of identifying overlooked gems will repeat itself. The inclusion of SpaceX as the firm’s largest private investment further illustrates this barbell strategy: high-risk, high-reward frontier technology on one side, and reliable, undervalued financial infrastructure on the other.
Ultimately, Ron Baron’s endorsement of MSCI and FactSet serves as a reminder that in the world of high finance, the most lucrative opportunities are often found where others are not looking. By focusing on the personal stories of CEOs like Henry Fernandez and Sanoke Viswanathan, and by maintaining a decades-long horizon, Baron continues to challenge the short-termism of modern equity markets. Whether FactSet can indeed achieve a "Dimon-esque" turnaround or MSCI can reclaim its bull market momentum remains to be seen, but for Baron, the math is clear: quality businesses run by exceptional people eventually find their true value.
