Investors can look to two Harbor ETFs for distinct commodities exposure as the asset class works to play an increasingly important role in portfolios.
Last year marked the second consecutive year that commodities were the top-performing asset class, with economists predicting commodities could outperform again this year as underlying fundamentals remain strong.
The Harbor Energy Transition Strategy ETF (RENW) and the Harbor Commodity All-Weather Strategy ETF (HGER) each provide dynamic exposure to commodities. Both funds are sub-advised by Quantix, which has extensive experience investing, trading, and developing innovative commodities strategies.
RENW tracks the Quantix Energy Transition index, which includes commodities necessary for the energy transition1. Since the theme is a global movement, the index includes commodities from the U.S., Europe, and the U.K.
The fund includes commodities that will be used in the net-zero end state (such as industrial metals and precious metals), commodities that will be used as transition fuels (such as natural gas and oilseeds), and the mechanism for pricing carbon during the transition (such as emissions).
HGER may be a solution for advisors looking to hedge inflation across different market environments. The fund provides exposure to the Quantix Commodities Index (QCI), which is comprised of liquid commodity futures, weighted toward the goal of maximizing the correlation to inflation.
HGER’s underlying index places more weight on those commodities which have a higher pass-through cost to inflation, such as gasoline, and a lower weighting to those with lower pass-through costs, such as cotton or cocoa, according to Harbor Capital Advisors.
The QCI notably includes a scarcity debasement indicator to indicate the source of inflation. This means that in a debasement regime, where inflation is coming from a weaker U.S. dollar, the index will tilt toward gold, and in a scarcity regime, where inflation is coming from demand outstripping supply, the QCI will tilt toward consumable commodities such as oil.
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1 Energy transition is the accelerating transition from carbon-intensive energy sources, such as petroleum, crude oil and thermal coal, to less carbon-intensive sources of energy, such as natural gas, ethanol, wind power, and solar power.
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: RENW, HGER
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.
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. The Quantix Energy Transition Index (“QET”) is a dynamic commodity index with the objective of providing diversified exposure to the building blocks of the accelerating transition from carbon-intensive energy sources to less carbon intensive sources of energy using commodity futures. This index is unmanaged and does not reflect fees and expenses and is not available for direct investment.
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.
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 Index was developed by Quantix Commodities LP and is owned by Quantix Commodities Indices LLC.
Correlation is a statistic that measures the degree to which two variables move in relation to each other.
Scarcity is when the demand for a good or service is greater than the availability of the good or service.
Debasement refers to lowering the value of a currency.
Net-zero end state is cutting greenhouse gas emissions to as close to zero as possible, with any remaining emissions re-absorbed from the atmosphere.
Quantix Commodities, LP is the subadvisor for the Harbor Commodity All-Weather Strategy ETF (HGER).
Quantix Commodities, LP is the subadvisor for 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.