Harbor Capital Advisors
Harbor All-Weather Inflation Focus ETF (HGER) Strategy Profile
Access a vehicle that targets liquid and inflation sensitive commodities, accounts for the multiple forms of inflation, addresses the impact of futures roll yields, eliminates the need for K-1 tax filing, leverages the potential benefits of an ETF, and more.
Harbor Insights - HGER with Ross Frankenfield
How does Quantix define inflation?
Why is inflation difficult to hedge?
Do you consider CPI to be the best measure of inflation?
Inflation-Focused. Driven by a specialized investment process specifically designed to be a powerful tool for hedging inflation.
All-Weather. Structured to account for the multiple forms of inflation including commodity scarcity and debasement.
Dynamic. Leverages proprietary technology to target liquid commodities with high expected inflation sensitivity while aiming to mitigate negative futures roll yield.
No K-1s. Offered as a 1940-Act ETF structure, eliminating the need for Schedule K-1 tax filing.
The Harbor All-Weather Inflation Focus ETF (HGER) seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the Quantix Inflation Index (the“Index”).
Quantix Inflation Index
Through a distinctive construction and exposure to a diversified basket of commodities, the Quantix Inflation Index (“QII”) is designed to deliver inflation protection and seeks to outperform traditional commodity indices, particularly in inflationary environments.
QII is comprised of commodity futures, which are distinct in their relationship to inflation and are generally regarded as having the highest positive correlation to inflation of all the major asset classes.
As part of its methodology, QII considers the relative inflation sensitivity of each commodity, how to hedge against different types of inflation, and the cost of holding and rolling futures positions. The Index is rebalanced on a quarterly basis.
- Cost Effective: HGER may be a cost-efficient vehicle to gaining access to an institutional-caliber and cutting-edge commodities strategy focused on hedging inflation.
- Liquid: The ETF vehicle can be traded throughout the day, which provides intra-day liquidity for shareholders.
- Tax-efficient: Due to the in-kind exchange of shares, the ETF vehicle may allow for greater tax efficiency and reduced costs.
- Transparent: The availability of daily holdings may allow investors to make more informed investment decisions.
About the Manager
Quantix Commodities LP (“Quantix”) is a commodities focused fund manager specializing in the development and management of commodities-based investment strategies. The firm is a market leader in delivering comprehensive commodity investment solutions to the marketplace.
The Quantix Team
A seasoned investment team averaging 20 years of experience investing in commodities.
The Quantix team worked side-by-side for 7 years at Goldman Sachs to run one of the largest commodity index portfolios, pioneered innovative trading techniques to outperform commodity indices, and developed bespoke investor solutions.
Team members each led major business lines within Commodities at Goldman, a mark of their fundamental expertise across all sectors of the commodity markets.
Portfolio Manager - HGER
The Quantix Partners
- Don Casturo Chief Investment Officer
- Daniel Cepeda Portfolio Manager
- Tom Glanfield Portfolio Manager
A Team Approach
“Teamwork is critical to our success. We believe that a collective mindset can deliver much more than any individual. We value contribution and prioritize collaboration.”
The eligible universe of commodities consists of the 24 most liquid commodity futures based on historical open interest and volume measures. They are traded on either a US or UK exchange and denominated in USD. A minimum of 15 commodity futures will be included in the index.
The investment process is designed to reflect the Inflation Sensitivity and Roll Yield Return of each commodity, applied to the economic significance of commodities in the real world, within a diversification risk management framework.
This is accomplished via a five-step process:
- Calculate the ‘Economic Significance’ of each commodity in the universe in order to understand their importance to the real economy
- Calculate the Quality Score of each commodity
- Reweight the Economic Significance base weights according to the Quality Score
- Ensure diversification within the QII to provide broad based commodity exposure and remain highly liquid and tradeable
- A proprietary Quantix Scarcity Debasement Indicator adjusts the Gold weight for the determined type of inflationary regime
Quantix aims to optimize commodity basket weights to increase inflation sensitivity and long-term returns through weighting toward commodities which have a higher Quality Score.
- Higher correlations to CPI
- High relative pass-through costs
- Lower cost to hold and roll the exposure
Sector Weights: No minimum limit. Maximum varies by sector with upper limit of 50%
Commodity Weights: 2% minimum, 20% maximum (except Gold with max 40%)
Engineered to Target Inflation
- Designed to increase inflation sensitivity in periods of higher inflation by targeting commodities with high pass-through costs, a higher correlation to CPI, and taking in account the cost to hold the exposure.
- Though commodities with low pass-through costs are filtered out, the index retains relevant exposure to a broad spectrum of commodity sectors to help potential diversification to an investment portfolio.
- Sector weights are determined to achieve inflation protection from a variety of sources by analyzing historical correlations.
- Quantix understands the critical importance of implementation methodology in rolling commodity indices, especially in differing commodity price inflation environments.
- Quantix carefully optimizes the implementation of the inflation sensitivity framework using a scarcity/debasement lens.
For more information, please visit www.harborcapital.com/etfs or call (866) 313‐5549.
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.
Quantix Commodities LP ("Quantix") is a third-party subadviser to the Harbor All-Weather Inflation Focus ETF.
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 Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services.