According to Harbor Capital Advisors, human capital is difficult to measure yet essential to a company’s success and profitability.
Harbor has a suite of human capital ETFs that are based on proprietary data, offering investors exposure to the nontraditional human capital factor for the first time.
The suite includes the Harbor Human Capital Factor Unconstrained ETF (HAPY), the Harbor Human Capital Factor U.S. Large Cap ETF (HAPI), as well as the Harbor Human Capital Factor U.S. Small Cap ETF (HAPS). The three funds have accumulated over $350 million in assets under management as of October 31, 2023.
“Human capital is overlooked by many investors but is important,” Todd Rosenbluth, head of research at VettaFi, said. “Happy motivated employees are more productive, and this should impact share prices.”
Harbor’s trio of ETFs provides exposure to the human capital factor, which applies workplace behavioral science, financial acumen, and deep data science to measure the connection between human capital and stock performance.
The nontraditional investment factor was derived from Irrational Capital’s proprietary research and employee survey data. Other publicly available, grassroots sources such as employee reviews were also incorporated.
Irrational Capital calculates human capital factor scores based on the Funds’ Index methodology, which the Funds’ track. The scoring methodology aims to quantitatively measure the contribution of a company’s corporate culture to its financial performance.
The Differences Between Harbor’s 3 Human Capital ETFs
HAPY, HAPI, and HAPS are tracked by the same underlying indices that score companies on human capital. The funds combine systematic research to generate returns through statistical correlations between specific cultural characteristics and equity performance.
HAPY and HAPI each offer exposure to large-cap companies with strong human capital factor scores. However, HAPY is unconstrained while HAPI constrains sectors, seeking to enhance overall diversification.
Meanwhile, HAPS provides access to small-cap companies with compelling human capital factor scores. Like HAPI, HAPS implements sector constraints that seek to enhance overall diversification benefits.
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Important 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.
All investments involve risk including the possible loss of principal. Please refer to the Fund’s prospectus for additional risks associated with each Fund. For the most current standardized performance, holdings and current yields: HAPI, HAPY, HAPS
Investing involves risk, principal loss is possible. Unlike mutual funds, ETFs may trade at a premium or discount to their net asset value. Harbor ETFs are new and have limited operating history to judge.
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.
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. The Fund may not exactly track the performance of the Index with perfect accuracy at all times. Tracking error may occur because of pricing differences, timing and costs incurred by the fund or during times of heightened market volatility. The Fund relies on the Index provider’s methodology in assessing whether a company may be considered a corporate culture leader.
There is no guarantee that the construction methodology will accurately assess a company to include or exclude it from the index which could have an adverse effect on the Fund’s returns. The Fund’s assets may be concentrated in a particular sector or industries to the extent the Index is concentrated and is subject to the risk that economic, political, or other market conditions that have a negative effect on that sector or industry will negatively impact the value of the Fund.
Companies in the information technology sector can be significantly affected by short product cycles, obsolescence of existing technology, impairment or loss of intellectual property rights, falling prices and profits, competition from new market entrants, government regulation and other factors.
Additional Information
HAPY: 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. The Fund may not exactly track the performance of the Index with perfect accuracy at all times. Tracking error may occur because of pricing differences, timing and costs incurred by the fund or during times of heightened market volatility.
The Fund relies on the Index provider’s proprietary scoring methodology in assessing whether a company may be considered a to have a strong corporate culture. There is no guarantee that the construction methodology will accurately assess a company to include or exclude it from the index which could have an adverse effect on the Fund’s returns. The Fund’s assets may be concentrated in a particular sector or industries to the extent the Index is concentrated and is subject to the risk that economic, political, or other market conditions that have a negative effect on that sector or industry will negatively impact the value of the Fund. Since the Fund may hold foreign securities, it may be subject to greater risks than funds invested only in the U.S.
HAPS: 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. Stocks of small cap companies pose special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies. The Fund may not exactly track the performance of the Index with perfect accuracy at all times. Tracking error may occur because of pricing differences, timing and costs incurred by the fund or during times of heightened market volatility. The Fund relies on the Index provider’s methodology in assessing whether a company may be considered a corporate culture leader. There is no guarantee that the construction methodology will accurately assess a company to include or exclude it from the index which could have an adverse effect on the Fund’s returns.
The Fund’s assets may be concentrated in a particular sector or industries to the extent the Index is concentrated and is subject to the risk that economic, political, or other market conditions that have a negative effect on that sector or industry will negatively impact the value of the Fund. The Fund’s assets may be concentrated in a particular sector, industry or group of industries to the extent the Index is so concentrated and could subject the Fund to the risk that economic, political or other conditions that have a negative effect on the Fund. There can be no assurance that the Fund will grow to or maintain an economically viable size, in which case the Board of Trustees may determine to liquidate the Fund.
Diversification does not assure a profit or protect against loss in a declining market.
Irrational Capital LLC is a third-party index provider to the Harbor Corporate Culture Leaders ETF. The Fund is managed by Harbor Capital Advisors, Inc.
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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