After posting the strongest gain of all major asset class last year, we believe commodities are positioned for another year of impressive growth in 2023.
Last year marked the second consecutive year that commodities was the top-performing asset class. But, despite the impressive recent performance, fundamentals remain strong, and we believe the asset class should outperform again in 2023.
Despite the constructive outlook for commodities, investors remain notoriously under allocated to the asset class says Kristof Gleich, president and CIO of Harbor Capital Advisors.
As advisors look to reallocate a portion of client portfolios to the asset class, it is essential to look through the cyclical and instead focus on the structural and secular opportunities, according to Gleich. Investing in the energy transition is a significant opportunity for investors to gain exposure to commodities that are expected to not only be in high demand, but also tightly constrained in supply, for decades to come.
The Harbor Energy Transition Strategy ETF (RENW) provides exposure to commodity futures, which offer the most direct way of gaining exposure to the expected demand increase for the materials essential for the transition.
Although popular, commodity-based equities are not a suitable substitute for investors looking to add direct commodities exposure to a portfolio. The unique downsides of commodity-related stocks include corporate risk factors such as management, geological and political risks. They are also subject to systematic or broad equity market risk like other stocks.
RENW tracks the Quantix Energy Transition index, which includes commodities expected to 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), as well as the mechanism for pricing carbon during the transition (such as emissions). The index includes exposure to the U.S., Europe, and the U.K to offer full access to the global movement.
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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 associated with the Fund. For the Fund’s prospectus and most current performance, please click RENW.
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.
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 an unmanaged index that maintains exposure to at least 10 commodities from its eligible universe of energy transition themes in the United States (U.S.), Canada, United Kingdom (U.K.) and other European exchanges. Commodity futures from the component candidates are selected for the Index and weighted based on QCI’s quantitative methodology. Under normal circumstances, the Index is rebalanced on a monthly basis. The index listed is unmanaged and does not reflect fees and expenses and is not available for direct investment.
Net-zero refers to the balance between the amount of greenhouse gas produced and the amount removed from the atmosphere.
Quantix Commodities is a third-party subadvisor to the Harbor Energy Transition Strategy ETF
This article was prepared as Harbor Funds paid sponsorship with VettaFI.
Foreside Fund Services, LLC is the Distributor of the Harbor ETFs.