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 ).
HGER is a newer ETF available to investors, accreting $106 million in assets under management since its February 2022 inception as of October 30, 2023. However, the fund has garnered significant investor attention already.
Harbor’s fund has seen the seventh largest flows year to date across the commodity ETF category per Logicly.
“HGER has been an under-the-radar dynamic commodity ETF but has been gaining traction with investors. It provides exposure to agriculture, energy, and metals commodities and has risen in value this year," Todd Rosenbluth, head of research at VettaFi, said.
The Benefits of a Broad-Based Commodity ETF
An allocation to a commodity ETF seeks to help advisors add value to client portfolios. Starting with a small 5% allocation to commodities has the potential to provide diversification benefits and impact returns.
HGER provides exposure to 24 of the most liquid commodity futures traded. The fund’s dynamic approach strives to illustrate that commodity exposures are adjusted based on different market and inflationary regimes, particularly commodity scarcity and debasement. Furthermore, the Quantix Commodities Index, which HGER tracks, aims to allocate to commodities with more favorable roll yield dynamics.
Energy commodities (brent crude, heating oil, RBOB gasoline, and gasoil) make up 32.3% of HGER’s underlying index by weight as of October 31. Gold comprises 31.6% of the index by weight, and industrial metals make up 16.6% of the index. In the current environment, HGER also has positions in grains and soybean products, as well as sugar and cotton.
Harbor believes an advantage of a balanced approach to commodities is reduced volatility. Investors in individual commodities can expect substantial volatility; however, the volatility profile for a broad-based ETF like HGER should look much different.
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Important Information
Investors should carefully consider the investment objectives, risks, charges and expenses of a Harbor fund before investing. To obtain a summary prospectus or prospectus for this and other information, visit harborcapital.com or call 800-422-1050. Read it carefully before investing.
All investments involve risk including the possible loss of principal. Please refer to the Fund’s prospectus for additional risks. For current performance, fees, and important information: HGER
Investing involves risk, principal loss is possible. Unlike mutual funds, ETFs may trade at a premium or discount to their net asset value. The ETF is new and has limited operating history to judge.
There is no guarantee that the investment objective of the Fund will be achieved. Stock markets are volatile and equity values can decline significantly in response to adverse issuer, political, regulatory, market and economic conditions. A non-diversified Fund may invest a greater percentage of its assets in securities of a single issuer, and/or invest in a relatively small number of issuers, it is more susceptible to risks associated with a single economic, political or regulatory occurrence than a more diversified portfolio.
Commodity Risk: The Fund has exposure to commodities through its and/or the Subsidiary’s investments in commodity-linked derivative instruments. Authorized Participant Concentration/Trading Risk: Only authorized participants (“APs”) may engage in creation or redemption transactions directly with the Fund. Commodity-Linked Derivatives Risk: The Fund’s investments in commodity-linked derivative instruments (either directly or through the Subsidiary) and the tracking of an Index comprised of commodity futures may subject the Fund to significantly greater volatility than investments in traditional securities.
Additional Information
The views expressed herein are those of Harbor’s investment professionals at the time the comments were made. These views are subject to change at any time based upon market or other conditions, and the author/s disclaims any responsibility to update such views.
The Quantix Commodity Total Return Index (“QCI”) is calculated on a total return basis, which combines the returns of the futures contracts with the returns on cash collateral invested in 13-week U.S. Treasury Bills. This unmanaged index does not reflect fees and expenses and is not available for direct investment. The Quantix Commodity Total Return Index was developed by Quantix Commodities LP and is owned by Quantix Commodities Indices LLC. These indices are unmanaged and do not reflect fees and expenses and are not available for direct investment.The weightings, holdings, industries, sectors, and countries mentioned may change at any time and may not represent current or future investments.
Diversification does not assure a profit or protect against loss in a declining market.
Debasement refers to lowering the value of a currency.
Scarcity is when the demand for a good or service is greater than the availability of the good or service.
Quantix Commodities, LP is the subadvisor for the Harbor Commodity All-Weather Strategy ETF (HGER).
This article was prepared as Harbor Funds paid sponsorship with VettaFI.
Foreside Fund Services, LLC is the Distributor of Harbor Commodity All-Weather Strategy ETF (HGER).
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