As recent advancements in are AI top of mind, many investors are looking to invest in disruptive innovation ETFs.
There are many disruptive innovation ETFs available to investors. This makes it imperative to look under the hood to fully understand what’s inside the fund. Importantly, disruptive innovation isn’t a neat category with a clear definition, so firms take their own approaches in crafting strategies that capture the theme.
Many investors think of speculative small caps when thinking about disruptive innovation; however, the AI space favors the incumbents. The mega-cap names that already control smartphones, the cloud, and other technologies are likely going to continue to capture a large portion of the value from AI.
“There are many megatrends likely to drive the market higher in the next few years including artificial intelligence and cybersecurity,” Todd Rosenbluth, head of research at VettaFi, said. “Many mega-cap growth companies are tapping into these secular drivers but also provide a portfolio with stability given strong balance sheets."
Harbor believes that the Harbor Disruptive Innovative ETF (INNO) is different from many peers in the disruptive innovation category as it looks at a broader opportunity set. Harbor’s disruptive innovation ETF aims to offer exposure to leading-edge, industry-transforming companies across sectors, market caps, and regions, according to the firm.
INNO notably holds some well-known mega-cap growth names, such as Microsoft (MSFT) and ASML Holding (ASML). These larger, established companies may be poised to provide more stability to a portfolio than more speculative names. Harbor’s ETF then includes smaller, newer companies to add seasoning.
INNO Offers Disruptive Innovation Exposure
Harbor’s fund is an active multi-strategy ETF. The fund leverages the investment experience of specialized managers and places portfolio construction and risk management front and center. INNO allocates across five different active managers with compelling investment styles, offering philosophical, style, and sector diversification, as well as quality security selection.
As growthier names have led in returns year to date, INNO is outpacing its benchmark S&P 500. INNO is up 24.81% (NAV) year to date as of July 27, 2023, while the benchmark has gained 19.28%, each on a total return basis.
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate and when redeemed may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end at harborcapital.com or by calling 800-422-1050.
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Disclosure 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 associated with the Fund. For the Fund’s prospectus, holdings, and most current standardized performance, please click: INNO
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. Since the Fund may hold foreign securities, it may be subject to greater risks than funds invested only in the U.S. These risks are more severe for securities issuers in emerging market regions. Investing in REITs will subject the Fund to additional risk.
Diversification in an individual portfolio does not assure a profit.
The S&P 500 Index is an unmanaged index generally representative of the U.S. market for large capitalization equities. This unmanaged index does not reflect fees and expenses and is not available for direct investment.
Companies that the adviser and subadvisor believe create and capitalize on disruptive innovation and developing technologies to displace older technologies or create new markets may not in fact do so. Companies that initially develop a novel technology may not be able to capitalize on the technology. The Fund may invest in a company that does not currently derive any revenue from disruptive innovations or technologies, and there is no assurance that a company will derive any revenue from disruptive innovations or technologies in the future.
This article was prepared as Harbor Funds paid sponsorship with VettaFI.
Foreside Fund Services, LLC is the Distributor of the Harbor ETFs.
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