Despite People Pillar weakness and an Average Process Pillar, Harbor Human Capital Factor US LrgCapETF gets enough right to retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy gets an Average Process Pillar. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in liquidity exposure and volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The team managing this passive strategy earns a Low People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

Analyst Rating

NVIDIA

Amazon

Microsoft

Apple

Eli Lilly

JPMorgan Chase & Co

Alphabet

Mastercard

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Harbor Human Capital Factor US LrgCapETF earns an Average Process Pillar rating. The leading factor in the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Low costs across its parent firm's funds, whose fees, on average, rank in the middle quintile of their respective category, also strengthen the process. The pattern of low expenses at the firm indicates that it is focused on delivering strong results for investors. Lastly, the process is limited by the experience of the management team, which averages two years at this fund.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to provide investment results that correspond, before fees and expenses, and to the performance of the CIBC Human Capital Index.  The fund invests at least 80% of its total assets in securities that are included in the index. The index consists of a modified market capitalization-weighted portfolio of equity securities of approximately 150 U.S. companies identified by Irrational Capital LLC (“Irrational Capital”) as those the advisor believes to possess strong corporate culture based on its proprietary scoring methodology. 

 The portfolio is overweight in communication services by 3.4 percentage points in terms of assets compared with the category average, and its energy allocation is similar to the category. The sectors with low exposure compared to category peers are industrials and technology; however, the allocations are similar to the category. The strategy owns 152 securities and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 39.0% of the portfolio's assets were concentrated in the top 10 fund holdings, as opposed to the category’s 49.5% average. And finally, in terms of portfolio turnover, this fund trades more frequently than its average peer, potentially racking up additional expenses for investors and creating a drag on performance.

Average

Process

Harbor’s team receives a Low People Pillar rating. The primary detractor from the rating is the experience of the management team, which averages two years at this fund. The parent firm's five-year retention rate of 51% also holds the team back. The parent firm's inferior risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 2.6 stars, detracts from the rating as well. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

People

A history of thoughtful manager selection and continued investment in its research team underpin Harbor Capital Advisors' Above Average Parent rating.

Harbor is an independent subsidiary of Orix Corporation Europe N.V., itself a subsidiary of Japanese financial-services firm Orix, which bought Harbor's previous parent Robeco in 2013. Today Robeco, Harbor, and other asset managers operate autonomously under Orix, which takes a hands-off approach toward its subsidiaries.

Harbor has long been known for hiring best-in-class subadvisors to manage its roughly $64 billion held almost exclusively in actively managed mutual funds. Yet the firm has expanded its vehicle lineup in recent years: from February 2020 through March 2022, the firm introduced a collective investment trust version of an existing open-end strategy as well as six transparent, active exchange-traded funds. The firm has also shaken up its subadvisor lineup, removing Pimco from Harbor Core Plus HABDX in February 2022 and hiring smaller and less established asset managers like BlueCove and Quantix Commodities to manage its newer ETF offerings. These moves break new ground for Harbor, but the firm has invested in new data and analytics tools to help its capable manager research team oversee the expanding subadvisor roster and has retained long-standing subadvisor relationships where they continue to add value.

Above Average

Parent

Harbor ETF Trust - Harbor Corporate Culture ETF

HAPI tracks an index of large-cap US companies scored highly for their strong corporate culture contributions to financial performance. The portfolio is weighted by market-cap and then adjusted to meet sector neutrality.

Some investors want to take a socially conscious approach to their portfolios. Some try to keep things more simple by investing in companies they believe are likely to be good financial performers, to support rising share prices.

This ETF outperforms by stressing corporate culture — but not ESG

Harbor Corporate Culture Small Cap ETF

Harbor Corporate Culture Leaders ETF

According to Harbor Capital Advisors, human capital is difficult to measure yet essential to a company's success and profitability. Harbor has a suite of human capital ETFs that are based on proprietary data, offering investors exposure to the nontraditional human capital factor for the first time.

Under the Hood of Harbor's Human Capital ETFs

iShares California Muni Bond ETF

iBet Sports Betting & Gaming ETF

Invesco Raymond James SB-1 Equity ETF

With only four trading days during the week, ETF launches were few and far between. Only four new funds launched this week.

This Week in ETFs: Shortened Week Yields 4 Launches

 BlackRock Future Innovators ETF

iShares MSCI Germany Small Cap ETF

iShares Currency Hedged MSCI Canada ETF

iShares Currency Hedged MSCI United Kingdom ETF

AdvisorShares Peritus High Yield ETF

Noble Absolute Return ETF

Advisorshares Poseidon Dynamic Cannabis ETF

Harbor Small Cap Explorer ETF

SPDR S&P 500 ETF Trust

ETFMG Sit Ultra Short ETF

This week saw a total of 17 ETF launches, a major rebound from last week when only six funds debuted and a reversal of the summer trend of fewer launches. ETF closures continued their march forward, with several completing during the week and another handful announced.

This Week in ETFs: Summer Doldrums Ending?

Investing in companies with strong corporate culture and social performance may enhance performance. Inefficiencies create opportunities.

Companies With Healthy Corporate Culture May Offer Better Returns

Harbor has launched a small-cap ETF, expanding its human capital investing suite. The Harbor Corporate Culture Small Cap ETF (HAPS), listed on the NYSE Arca on April 13, offers exposure to small-cap companies with strong Human Capital Factor scores while constraining sectors to enhance overall diversification benefits.

Harbor Grows Human Capital Investing Suite With Small-Cap ETF HAPS

Intangible assets have become increasingly important in the modern economy. We believe valuations of businesses are now skewed to an increasing extent toward intangible versus tangible assets.

Access the Human Capital Factor With HAPY and HAPI

Harbor Dividend Growth Leaders ETF

Harbor Health Care ETF

Harbor Energy Transition Strategy ETF

Thematic investments are seeing a resurgence in investor interest after developing a – perhaps undeserved and unwarranted – negative reputation in recent years. The economic regime has shifted, and passive index funds aren't offering the returns they did in the post-global financial crisis decade.

Harbor CIO Kristof Gleich: Thematics Help Advisors Connect With Clients

Harbor Scientific Alpha Income ETF

Harbor Scientific Alpha High-Yield ETF

Interest rates are up and glamour stocks are down, big; the era of cheap money has come to an end. The regime change will mean that markets remain more complex and challenged than they have in the past decade, and security selection will continue to play a much bigger role in generating returns.

4 Harbor ETFs to Invest in Through This Regime Change

VettaFi's vice chairman Tom Lydon discussed the Harbor Corporate Culture ETF (HAPI) on this week's “ETF of the Week” podcast with Chuck Jaffe of “Money Life.

ETF of the Week: Harbor Corporate Culture ETF (HAPI)

Harbor Capital Advisors has expanded its product offerings, enhancing investors' ability to access the field of human capital investing.  On Thursday, the premier multi-manager investment firm launched the Harbor Corporate Culture ETF (HAPI), listed on the NYSE with a 36 basis point expense ratio.

Harbor Expands Access to Human Capital Investing with HAPI

CHICAGO--(BUSINESS WIRE)--Harbor Capital Advisors, Inc. (“Harbor”), a premier multi-manager investment firm offering access to innovative and specialized expertise across a range of investment strategies and vehicles, today launched the Harbor Corporate Culture ETF (ticker: HAPI).

News for Harbor ETF Trust - Harbor Corporate Culture ETF ETF (HAPI)