On Wednesday, Harbor Capital bolstered its fund library with the launch of the Harbor AlphaEdge Small Cap Earners ETF (EBIT ).
“In our conversations with clients, we have heard a consistent and growing concern around the lack of profitability of small cap companies that comprise the Russell 2000 Index. We built EBIT as a solution for advisors who are cautious about small caps given concerns about profitability levels,” noted Harbor Capital Advisors President and CIO Kristof Gleich. “We’ve responded with a straightforward, repeatable investment approach that we feel strongly has greater potential to generate immediate and long-term compelling returns for clients.”
EBIT aims to generate similar results to the Harbor AlphaEdge Small Caps Earners Index. The fund has a net expense ratio of 0.29%.
Profitable Small Caps
Harbor’s index tracks the performance of certain small caps within the U.S. equity market. The index’s portfolio is constructed with companies that have met Harbor’s profitability qualifications across the last 12 quarters.
To measure assets, the index uses a methodology in which the portfolio is weighted by profitability. The fund prospectus notes that the index will be rebalanced twice annually. Additionally, as of July 9, 2024, the index does not have significantly strong exposure to any individual sector.
To provide fund results similar to that of the index, EBIT uses a representative sampling approach. By doing so, the fund does not intend to take defensive positions in instances of market downturn or potential overvaluation.
While small cap equities often come at the expense of risk, EBIT’s strategy focuses on scrutinizing assets for a refined portfolio. By focusing on profitable small caps, the fund may provide alpha and strong long-term returns to investors.
The launch of EBIT comes as Harbor Capital has over 10 ETFs listed in the United States. One of Harbor’s largest funds, the Harbor Long-Term Growers ETF (WINN ), has over $500 million in assets under management.
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