Harbor Capital Advisors has added a long-short equity ETF to its range of funds.
The Harbor Long-Short Equity ETF (LSEQ) offers investors equity exposure with an elevated focus on downside mitigation and diversification benefits. LSEQ, listed on the NYSE Arca on December 6, provides access to a compelling liquid alternative product in an ETF wrapper.
LSEQ features both long and short equity positions, which are weighted based on subadvisor Disciplined Alpha’s macro regime analysis. The positions aim to determine the current market regime help determine whether LSEQ will take a bearish or bullish approach with value or growth investments, as well as its exposure to long and short positions, according to Harbor.
The fund will generally have net exposure ranging from 40% to 60% long equity . However, net equity exposure at times may be up to 150% long, according to regulatory filings. The fund’s investment universe is the Russell 1000 Index, including only U.S. mid and large-cap stocks.
“Many advisors have turned to factor investing rather than focusing on a broader investment style. The newly converted ETF will be differentiated from many by incorporating a short not just a long equity approach,” Todd Rosenbluth, head of research at VettaFi, said.
LSEQ’s Management Edge
LSEQ is subadvised by Disciplined Alpha, which utilizes a disciplined quantitative investment process. The firm has managed the predecessor fund, the Disciplined Alpha Onshore Fund LP, since its inception in 2015. Kevin Shea, CEO and portfolio manager of Disciplined Alpha, serves as the fund’s portfolio manager.
Disciplined Alpha is a specialized firm, which Harbor believes sets the fund apart from the competition. The company’s systematic approach and over 10 years of experience shorting securities with undesirable characteristics has helped it to avoid traps as it seeks to tilt the odds in its favor, Harbor said.
Harbor believes LSEQ is durable and appropriate for inclusion in all environments. However, the fund may be best positioned in environments characterized by lower returns and heightened volatility. This tends to support active management.
LSEQ offers diversification in a portfolio with a lower beta to traditional long-only, equity investments. It may be an attractive option for someone concerned about equity risk. For example, a retiree who wants to stay invested in equities but wants to dial down the risk a bit, or an investor seeking a different type of return stream, according to Harbor.
The fund charges 176 basis points gross expense ratio.
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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. For the most current performance, holdings and fees, please click: LSEQ
All investments involve risk including the possible loss of principal. Unlike mutual funds, ETFs may trade at a premium or discount to their net asset value. The ETF is new and has limited operating history to judge.
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. Short selling securities could potentially have unlimited loss due to the price of securities sold short increasing beyond the cost of replacement and the limitless increase on the value of a security. The Fund utilizes a quantitative model and there are limitations in every quantitative model. There can be no assurances that the strategies pursued or the techniques implemented in the quantitative model will be profitable, and various market conditions may be materially less favorable to certain strategies than others.
Beta is a measure of systematic risk, or the sensitivity of a fund to movements in the benchmark. A beta of 1 implies that the expected movement of a fund’s return would match that of the benchmark used to measure beta.
Diversification does not assure a profit or protect against loss in a declining market.
Additional Information
The Harbor Long-Short Equity ETF (the “Fund”) acquired the assets and assumed the then existing known liabilities of the Disciplined Alpha Onshore Fund LP (the “Predecessor Fund”), a Delaware limited partnership, on 12/1/23. The Fund is the performance successor of the reorganization. This means that the Predecessor Fund’s performance and financial history will be used by the Fund going forward from the date of reorganization. Performance information prior to 12/1/23 reflects all fees and expenses, including a performance fee, incurred by the Predecessor Fund. Disciplined Alpha LLC (“Disciplined Alpha”) served as the general partner and investment manager to the Predecessor Fund, which commenced operations on
1/1/15 and, since that time, implemented its investment strategy indirectly through its investment in a master fund, which had the same general partner, investment manager, investment policies, objectives, guidelines and restrictions as the Predecessor Fund. Regardless of whether the Predecessor Fund operated as a stand-alone fund or invested indirectly through a master fund, Disciplined Alpha managed the Predecessor Fund assets using investment policies, objectives, guidelines and restrictions that were in all material respects equivalent to those of the Fund. However, the Predecessor Fund was not a registered fund. So it was not subject to the same investment and tax restrictions as the Fund. If it had been, the Predecessor Fund’s performance may have been lower.
Shares are bought and sold at market price not net asset value (NAV). Market price returns are based upon the closing composite market price and do not represent the returns you would receive if you traded shares at other times.
A basis point is one hundredth of 1 percentage point.
The Russell 1000® Index is an unmanaged index generally representative of the U.S. market for larger capitalization stocks. This unmanaged index does not reflect fees and expenses and is not available for direct investment. The Russell 1000® Index and Russell® are trademarks of Frank Russell Company.
This article was prepared as Harbor Funds paid sponsorship with VettaFI.
Foreside Fund Services, LLC is the Distributor of the Harbor Long-Short Equity ETF.
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