Diversify Client Portfolios With Active International ETF: OSEA

As advisors look to diversify client portfolios, a concentrated active international equity ETF is worth consideration.

We believe diversification should be a key area of focus this year for advisors. Portfolios with a home country bias may be negatively impacted as markets are expected to be more challenged and complex in this new economic regime than in the past decade.

Advisors looking to adjust or rebalance their clients’ allocation to international equities should consider the Harbor International Compounders ETF (OSEA), a concentrated active international equity ETF.

“Advisors have been increasingly turning to international equity ETFs to start 2023, but most of the funds are extremely diversified,” Todd Rosenbluth, head of research at VettaFi, said. “We believe OSEA stands out as a top ideas portfolio that leveraged the security selection expertise of active management.”

OSEA may be a compelling solution for adding exposure to the foreign large-cap growth segment to portfolios, offering quality exposure to international companies with expected sustainable earnings growth to help drive compounded long-term wealth creation.

In our opinion, quality active management has the advantage of capturing market dislocations in the current environment and has the potential for strong outperformance as security selection continues to play a significant role in generating returns.

Between OSEA’s inception on September 7, 2022 and March 9, 2023, the fund has returned 15.14% (NAV), while the S&P 500 Index has declined 0.66% (NAV), each on a total return basis, according to YCharts. The figures are looking at the total return level (using the closing price of the security that has been adjusted to include price appreciation, dividend, distribution, and expense ratio).

Year to date as of March 9, 2003, OSEA has climbed 5.01% (NAV) compared to the S&P 500’s gain of 1.22% (NAV), each on a total return basis.

The fund’s distinctive high-conviction portfolio and benchmark agnostic approach may provide advisors with the versatility needed, given the volatility in today’s markets versus more broadly diversified funds that either track the index or take more conservative bets.

OSEA subadvisor C WorldWide Asset Management’s investment team seeks to identify high-quality companies with consistent recurring revenues, stable free cash flows, and sustainable returns on invested capital. As part of its security selection process, the investment team evaluates potential constituents by assessing each company’s business model, management, and financial and valuation metrics, among other things.

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For more information, please access our website at www.harborcapital.com or contact us at 1-866-313-5549.

Important Information

All investments involve risk including the possible loss of principal. Please refer to the Fund’s prospectus for additional risks associated with the Fund. For the Fund’s prospectus, holdings, and most current standardized performance, please click: OSEA

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. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. 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.

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. Investing in international and emerging markets poses special risks, including potentially greater price volatility due to social, political and economic factors, as well as currency exchange rate fluctuations. These risks are more severe for securities of issuers in emerging market regions. 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.

The S&P 500 Index is an unmanaged index generally representative of the U.S. market for large capitalization equities. This unmanaged index does not reflect fees and expenses and is not available for direct investment.

Diversification in an individual portfolio does not assure a profit.

Free cash flow represents the cash a company can generate after accounting for capital expenditures needed to maintain or maximize its asset base.

C Worldwide is a third-party subadvisor to the Harbor International Compounders ETF

This article was prepared as Harbor Funds paid sponsorship with VettaFI.

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