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.
Speaking with the New York Stock Exchange for “ETF Leaders Powered by the NYSE,” Gleich said, “I think it’s hard, if not impossible, to overstate how much the macro and investing environment has shifted and how dramatically that’s shifted in the past year or so. I believe what’s been really revealing in the last 12 months is that 60/40 portfolios are actually not diversified.”
Gleich said that he thinks that the easiest, most convenient, and most effective way to diversify a 60/40 portfolio is to introduce the role of commodities.
The firm has two ETFs that offer exposure to commodities, the first being the Harbor Commodity All-Weather Strategy ETF (HGER ).
“HGER is run by a partner firm called Quantix who have deep domain expertise in investing in commodities with the purpose of providing diversification using commodities and, as appropriate, seeking to hedge portfolios in inflationary and volatile environments that we’re going through at the moment,” Gleich said.
The second ETF in Harbor’s lineup of commodities funds is the Harbor Energy Transition Strategy ETF (RENW ), which is also run by Quantix.
Gleich said that RENW is focused on the energy transition, concentrating on those commodities that are in tight supply but should see continued demand for decades to come, thanks to the energy transition.
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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, RENW
The views expressed herein are those of Harbor Capital Advisors, Inc. investment professionals at the time the comments were made. They may not be reflective of their current opinions, are subject to change without prior notice, and should not be considered investment advice.
HGER Risk: 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.
RENW Risk: Commodity and Commodity Linked Derivative Risk: The Fund has exposure to commodities through its and/or the Subsidiary’s investments in commodity-linked derivative instruments. 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. The Fund is non-diversified and may invest a greater concentrate of its assets in a particular sector of the commodities market (such as metal, gas or emissions products). As a result, the Fund may be more susceptible to risks associated with those sectors. Authorized Participant Concentration/Trading Risk: Only authorized participants (“APs”) may engage in creation or redemption transactions directly with the Fund. Energy Transition Risk: The commodities included in the Index may become less representative of energy transition trends over time and the Fund’s investments may be significantly impacted by government and corporate policies. Foreign Currency Risk: Because the Index may include futures contracts denominated in foreign currencies, the Fund could be subject to currency risk.
Energy Transition Risk: The commodities included in the Index may become less representative of energy transition trends over time and the Fund’s investments may be significantly impacted by government and corporate policies.
A “60/40 portfolio” is guidepost portfolio for a moderate risk investor. Portfolio allocations of 60% to equities to seek capital appreciation and 40% allocation to fixed income help mitigate risk and offer potential income.
Diversification does not assure a profit or protect against loss in a declining market.
Quantix Commodities, LP is the subadvisor for the Harbor Commodity All-Weather Strategy ETF (HGER) and the Harbor Energy Transition Strategy (RENW).
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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