The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  Harbor Commodity All-Weather StrategyETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The team managing the passive strategy earns a Below Average People Pillar. The fund's assessment results in an Average Process 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

Morningstar's evaluation of this fund's process seeks to understand management's investment philosophy, and whether it has been applied consistently over time and can add value across the market cycle. Harbor Commodity All-Weather StrategyETF earns an Average Process Pillar rating. The most important driver of the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Low expenses across its parent firm's funds, whose fees, on average, rank in the middle quintile of their respective category, also influence the rating. The pattern of low costs at the firm suggests that it is focused on delivering strong results for investors. Lastly, the process is limited by its parent firm's subpar risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 2.6 stars. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

The investment strategy as stated in the fund's prospectus is as follows: 

 The investment seeks to provide investment results that correspond, before fees and expenses, to the performance of the Quantix Commodity Index.  The fund seeks to primarily invest, through its subsidiary, in one or more excess return swaps on the index. The index is composed of futures contracts on physical commodities and is constructed using QCI’s proprietary quantitative methodology, which considers a commodity’s relative inflation sensitivity and the relative cost of holding a “rolling” futures position in the commodity. It is non-diversified.

Average

Process

Harbor’s team receives a Below Average People Pillar rating. The team is supported by the fund's structure. It tracks an index, which is helpful because historical data, such as Morningstar's Active/Passive Barometer, shows that index funds have generally outperformed their active counterparts, especially over the long term. However, the rating is weakened by the parent firm's five-year success ratio of 44%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. The parent's modest success ratio suggests that the firm could do better across its fund lineup. The parent firm's five-year retention rate of 52% also limits the team.

Below Average

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 All Weather Inflation Focus ETF

HGER tracks an index designed to provide broad exposure to inflation-sensitive commodities, selected and weighted based on fundamental and technical factors. The objective of the fund is to hedge inflation.  

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Many investors are looking to enhance their portfolio with a commodity ETF as equity markets struggle. While some investors have tried to tactically play commodity ETFs, jumping from fund to fund, many investors are finding comfort in Harbor's dynamic balanced commodity ETF, such as the Harbor Commodity All-Weather Strategy ETF (HGER).

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The Harbor Commodity All-Weather Strategy ETF (HGER) is among the top-performing broad commodity ETFs in the past month as of August 2023. HGER's dynamic approach to commodities investing has recently led the fund to outpace category peers in the same timeframe.

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Investors seeking momentum may have Harbor Commodity All-Weather Strategy ETF HGER on radar now. The fund recently hit a new 52-week high.

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Diversification is a key theme in 2023 as advisors position client portfolios for the new economic regime. Kristof Gleich, president and CIO at Harbor Capital Advisors, said that Harbor is focused on the problem with diversification within a 60/40 portfolio, which is skewed towards a pro-growth and disinflationary environment.

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While the latest inflation report showed consumer price gains modestly eased in February, we believe it's still too early to leave client portfolios without an inflation hedge. While consumer price gains eased on a 12-month basis, increasing 6% in February from 6.4% in January, the one-month change in core prices paints a less rosy picture.

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Harbor Capital Advisors has renamed its commodity all-weather ETF, positioning the fund as a long-term core component in portfolios. The Harbor Commodity All-Weather Strategy ETF (HGER) was previously known as the Harbor All-Weather Inflation Focus ETF, with the change effective March 1, 2023.

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Recent U.S. economic data releases are showing signs of sticky inflation, as headline numbers climbed unexpectedly higher in January. Personal spending rose 1.8% in January, the Commerce Department's Bureau of Economic Analysis reported on February 24.

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The era of free money, which lifted portfolios for much of the last decade, is over, and advisors will have to work harder to provide returns for clients. As investment returns are going to be harder to generate on a go-forward basis, diversification will play an increasingly important role in portfolios.

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Harbor Capital Advisors will transfer three ETFs to the NYSE in the new year. Effective January 2, the Harbor All-Weather Inflation Focus ETF (HGER), the Harbor Dividend Growth Leaders ETF (GDIV), and the Harbor Long-Term Growers ETF (WINN) will migrate to the NYSE from NYSE Arca, maintaining their existing ticker symbols.

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Harbor Capital has partnered with subadvisor Quantix Commodities to launch the All-Weather Inflation Focus ETF (HGER). HGER is a solution for advisors who are seeking to hedge inflation.

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