Commodities as a Diversifier and Inflation Hedge

After generating strong results in the previous decade, the traditional 60/40 portfolio has struggled recently amid unfavorable market conditions. Harbor believes that these headwinds are likely to persist as the economy transitions to a new regime brought on by rising inflation and a shift to tightening monetary policy. In our view, these evolving conditions bring the need for greater diversification beyond just stocks and bonds.

Harbor believes that commodities in particular bring compelling properties that can help investors navigate the changing market environment – the asset class offers diversification benefits while also mitigating the impact of systematically higher inflation. We also think that the ongoing the transition away from fossil fuels toward cleaner sources if energy is an intriguing long-term macroeconomic investment theme that may be supportive of the commodities involved in this transition.

Given the complex nature of the asset class, we believe investors are best served by active managers who are experts in the field. That’s why Harbor has partnered with Quantix Commodities, a specialist commodities boutique founded by investors who have spent decades working together trading and investing across a wide range of commodity markets.

Harbor selected Quantix to oversee two ETFs that we believe can enhance investors’ portfolio amid today’s challenging markets.

Harbor Commodity All-Weather Straregy ETF (HGER)

Intelligent Design. The seasoned professionals at Quantix designed HGER’s approach based on their many years observing the nuances and complexities of commodities markets. The result is what we believe to be an intelligent index construction that improves commodities’ inflation-hedging properties (by tilting toward the most inflation-sensitive commodities) and effectively managing market frictions (futures contract roll costs).

Flexible Allocation And Volatility Management. Not all inflationary regimes are equal. In some inflationary periods, prices rise due to scarcity of supply at a time when the world is demanding more consumable commodities, such as oil, corn or copper. At other times, commodity prices rise because of weakness in the US dollar. In such periods of currency debasement, a robust inflation hedge is a store of value, such as gold. HGER is distinguished by its proprietary process for calibrating its asset allocation to suit the economic environment by increasing the gold weight in periods marked more by debasement driven inflation. We believe that this distinctive design element makes this ETF ideal for a strategic allocation to commodities as it helps minimize the need for investors to selfmanage and time individual exposures such as gold.

Harbor Energy Transition Strategy ETF (RENW)

Innovative Exposure to A Long-term Investment Theme. Quantix has designed the ETF’s benchmark, the Quantix Energy Transition Index, with the objective of providing diversified exposure to liquid commodities that are expected to benefit from and help facilitate the transition to lower carbon energy sources.

Flexible. While the precise end state of the energy transition is unknown, the basic transition sectors and associated commodities can be identified. With that knowledge, Quantix created an index designed to offer exposure to those commodity sectors but with the flexibility to evolve as conditions change. The index is reviewed annually and rebalanced monthly.

Distinctive. RENW is the only broad commodities based ETF focused on the energy transition.

No K-1s. RENW is offered as a 1940-Act ETF structure, avoiding the need for Schedule K-1 tax filing.

Important Information

Harbor Commodity All-Weather Strategy ETF Risks

Investing involves risk, principal loss is possible. 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.

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.

The Fund has a limited number of institutions that may act as authorized participants and engage in creation or redemption transactions directly with the Fund. There is no assurance that authorized participants will establish or maintain an active trading market for the Shares. This risk may be heightened during periods of volatility or market disruptions.

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.

Diversification does not assure a profit or eliminate the risk of loss.

Harbor Energy Transition Strategy ETF Risks

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.

Commodity and Commodity Linked Derivative Risk: The Fund has exposure to commodities through its and/or the Subsidiary’s investments in commodity-linked derivative instruments. 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 Fund is non-diversified and may invest a greater concentrate of its assets in a particular sector of the commodities market (such as metal, gas or emissions products). As a result, the Fund may be more susceptible to risks associated with those sectors.

Authorized Participant Concentration/Trading Risk: Only authorized participants (“APs”) may engage in creation or redemption transactions directly with the Fund.

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.

Quantix Commodities LP (“Quantix”) is a third-party subadvisor to the Commodity All-Weather Strategy ETF and the Harbor Energy Transition Strategy ETF.

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