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Harbor Scientific Alpha High-Yield ETF Strategy Profile

Average Annual Returns as of 3/31/2024

3 MonthsYTD1 Yr.3 Yr.5 Yr.10 Yr.Since InceptionInception Date
Harbor Scientific Alpha High-Yield ETF (NAV) 1.39% 1.39% 11.52% N/AN/AN/A2.39%9/14/2021
Harbor Scientific Alpha High-Yield ETF (Market)1.83% 1.83% 11.33% N/AN/AN/A2.41%9/14/2021
ICE BofA US High Yield Index (H0A0)1.51% 1.51%11.04%N/AN/AN/A0.97%9/14/2021

Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions. Investment returns and principal value will fluctuate and when redeemed may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end at harborcapital.com or by calling 800-422-1050.

Shares are bought and sold at market price not net asset value (NAV). A fund’s NAV is the sum of all its assets less any liabilities, divided by the number of shares outstanding. 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.

History of Consistent & Attractive Return Profile

Harbor Scientific Alpha High-Yield ETF NAV vs. ICE BofA US High Yield % Outperformance Over Rolling Period Windows (Monthly) Oct 2021 - Mar 2024

Performance data shown represents past performance and is no guarantee of future results.

Performance data shown is

  • Since inception, SIHY has demonstrated consistent excess returns relative to the ICE BofA US High Yield Index.
  • For instance, over rolling 6-month periods since inception, SIHY has delivered excess returns in 80% of periods. Over rolling 1-year windows, SIHY has outperformed the ICE BofA US High Yield Index in 95% of periods.

Harbor Scientific Alpha High-Yield ETF (SIHY) NAV vs. ICE BofA US High Yield Index & Morningstar US High Yield Bond Category Cumulative Excess Return: 9/14/2022 - 3/31/2024 (Daily)

Source: Morningstar Direct. December 2023.

  • Compounding this consistency has led to attractive results relative to both the index and peers.
  • Since SIHY’s 9/14/2021 inception, the ETF has delivered 370 basis points of cumulative excess return relative to the ICE BofA US High Yield Index.
  • This since-inception performance ranks 20th percentile within Morningstar's US High Yield Bond Category.

Upside Participation with Downside Mitigation

SIHY vs. ICE BofA US High Yield Index Average 1-Month Excess Returns, Up/Down Markets for ICE BofA US High Yield Oct 2021 - Mar 2024 (Computed Monthly)

Performance data shown represents past performance and is no guarantee of future results.

  • A focus on curating high-quality alpha insights and allowing security selection to drive excess returns has produced an attractive return profile since SIHY’s September 2021 inception.
  • In months where the ICE BofA US High Yield Index has delivered positive performance, the ETF has, on average, kept pace with the index. Conversely, in months where the ICE BofA US High Yield Index delivered negative returns, SIHY outperformed by 28 basis points on average.

SIHY vs. ICE BofA US High Yield Index Average Rolling 1-Month Excess Returns Across Different Month-over-Month High Yield Spread Environments (Tightening/Widening) 9/14/2021 - 3/31/2024 (Rolling 1-Month Windows, Daily)

Performance data shown represents past performance and is no guarantee of future results.

Source: FRED.

  • In part, this defensive profile stems from strong excess returns in periods of spread widening.
  • Spread widening in high-yield markets has typically produced elevated levels of dispersion. For BlueCove’s high-breadth active approach, higher dispersion represents an attractive opportunity set for security selection, in our view.
  • On average, in periods of spread widening, SIHY has delivered excess returns to the ICE BofA US High Yield Index.

Introducing BlueCove:

4 people icons in a square connected by dotted lines and a checkmark in the middle

Owner Mentality2

Each employee has an equity interest in the firm

square outline with smaller filled in squares inside

Focus

Commitment to scientific fixed income investing

cloud icon with breadboard circuits running through

Modern Technology

Technology is custom-built for scientific fixed income investing

  • BlueCove is a specialist active manager founded in 2018 with a platform that is custom built for scientific fixed income.
  • BlueCove’s objective is to deliver strong investment outcomes for investors through active management utilizing proprietary research insights.
  • BlueCove is well resourced with a primary focus on investment research and development (R&D). The team includes pioneers in scientific fixed income investing with investment team heads averaging 23 years of experience.
  • The firm’s business model is based on the three main pillars of owner mentality1, total focus, and modern technology.

1. On 28 February 2023, BlueCove and Ares Management announced a strategic partnership.

Introducing Scientific Investing
  • BlueCove’s scientific investment process is evidence based, data-driven, economically intuitive, and grounded in the scientific method with targeted R&D at each step of the investment process.
  • Scientific investing provides investors with an alternative to passive or factor investing through the application of proprietary insights based on economic intuition.
  • Scientific investing may also serve as a complement or alternative to traditional discretionary investing by working to maximize breadth to target high-quality alpha from a large number of positions versus more concentrated or highly diversified portfolios.

Ticker SymbolSIHY
Cusip41151J109
Listed ExchangeNYSE
Gross Expense Ratio0.48%
Lead Market MakerJane Street
Inception Date9/14/2021
Manager NameBlueCove Limited
BenchmarkICE BofA US High Yield Index
Morningstar CategoryHigh Yield

sihy_strategy_profile_degrees_of_active_management.jpg

The BlueCove Process

BlueCove develops proprietary insights driven by signals that emphasize economic intuition and empirical evidence utilizing data beyond the scope of traditional credit analysis.

BlueCove believes their signal set will enable the Fund to take advantage of market inefficiencies by providing insights across:

  • Sentiment
  • Valuation
  • Fundamentals

Insight

 Signal

Equity price

  • Equity momentum

Earnings outlook

  • Earnings forecast
  • Earnings sentiment

Profitability trend

  • Fundamental momentum

Economic relationships

  • Geographic momentum

Relative Value

  • Structural default probability value
  • Fundamental default probability value

Fundamentals

  • Cash flow generation
  • Profitability

Business stability & strength

  • Asset volatility
  • Equity risk premium

portfolio optimization graphic

Ultimately the portfolio is constructed through an optimization1 process driven by proprietary tools and aims to:

  • Maximize alpha forecasts
  • Minimize market, sector, and curve risk
  • Mitigate issuer concentration risk
  • Minimize transaction costs
  • Realistically measure market liquidity

SIHY is differentiated from other active competitors by applying a scientific approach while matching the market exposure of the index, hence emphasizing a strong security selection focus.


Important Information

1. Optimization is a point in time construction of portfolios reflecting known inputs and constraints and does not imply that further improvements are not possible.

For institutional investor use only.

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.

All investments involve risk including the possible loss of principal. Fixed income securities fluctuate in price in response to various factors, including changes in interest rates, changes in market conditions and issuer-specific events, and the value of your investment in the Fund may go down. There is a greater risk that the Fund will lose money because they invest in below-investment grade fixed income securities and unrated securities of similar credit quality (commonly referred to as “high-yield securities” or “junk bonds”). These securities are considered speculative because they have a higher risk of issuer default, are subject to greater price volatility and may be illiquid. Because the Fund may invest in securities of foreign issuers, an investment in the Fund is subject to special risks in addition to those of U.S. securities. These risks include heightened political and economic risks, greater volatility, currency fluctuations, higher transaction costs, delayed settlement, possible foreign controls on investment, possible sanctions by government bodies of other countries and less stringent investor protection and disclosure standards of foreign markets.

The ICE BofAML US High Yield Index (H0A0) is an unmanaged index that tracks the performance of below investment grade U.S. Dollar-denominated corporate bonds publicly issued in the U.S. domestic market. All bonds are U.S. dollar denominated and rated Split BBB and below. This unmanaged index does not reflect fees and expenses and is not available for direct investment.

In relation to any data attributed to Morningstar, please note the following: © Morningstar 2024. All rights reserved. Use of this content requires expert knowledge. It is to be used by specialist institutions only. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied, adapted or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information, except where such damages or losses cannot be limited or excluded by law in your jurisdiction. Past financial performance is no guarantee of future results.

The Morningstar Rankings are based on total returns, with distributions reinvested and operating expenses deducted. Morningstar does not take into account sales charges. Harbor Scientific Alpha High-Yield ETF was ranked against Morningstar’s US Fund High Yield Bond category, quarterly, over the following time periods: 123 out of 666 investments in the category for the 1-year period as of 03/31/2024. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. Past rankings are no guarantee of future rankings.

The views expressed herein may not be reflective of current opinions, are subject to change without prior notice, and should not be considered investment advice.

BlueCove Limited is a third-party subadvisor to the Harbor Scientific Alpha High-Yield ETF.

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Investors should carefully consider the investment objectives, risks, charges and expenses of a fund before investing. To obtain a summary prospectus or prospectus for this and other information, click here or call 800-422-1050. Read it carefully before investing.

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