Harbor CIO Kristof Gleich: Thematics Help Advisors Connect With Clients
Thematic investments are seeing a resurgence in investor interest after developing a – perhaps undeserved and unwarranted – negative reputation in recent years.
The economic regime has shifted, and passive index funds aren’t offering the returns they did in the post-global financial crisis decade. In the changing market environment, we believe thematics should play a larger role in portfolios as advisors work harder to generate returns going forward.
“From an investment perspective, I’d say thinking thematically can help unlock value in a way that you wouldn't be able to unlock that value simply from a sectoral perspective,” Kristof Gleich, President and CIO of Harbor Capital Advisors, told ETF Trends.
“If you think about digitization as a theme, it's not confined to one sector or one geography, value or growth – it cuts across every industry,” Gleich added. “If you can think thematically, you can see things and you can connect dots across industries in a way that you otherwise wouldn't be able to do.”
The foundation of client portfolios often comprises low-cost, passive funds. To enhance returns, Gleich believes advisors should complement the low-cost ballast with alpha-oriented solutions, which are generally actively managed (and thematics have a role). In Gleich’s view, a traditional 60/40 portfolio will likely require advisors to ideally allocate between 10% and 15% to thematics, particularly funds that offer exposure to an undervalued segment of the market.
Gleich thinks advisors can use thematics to help bring client portfolios to life. “Presumably, if [clients] believe in these themes, they are evaluating and embracing them with the potential goal of investing in them. So, to me, thematics are a way of connecting with clients.”
Harbor is always on the lookout for longer-term, more durable themes that are underappreciated by the marketplace, according to Gleich. The firm then taps boutique managers who they believe have skilled experts that can capitalize on that theme who have the potential to deliver strong risk-adjusted returns.
The firm currently has ETFs offering access to the following themes: dividend growth (the Harbor Dividend Growth Leaders ETF [GDIV]), healthcare (the Harbor Health Care ETF [MEDI]), the energy transition (the Harbor Energy Transition Strategy ETF [RENW]), and the importance of company culture (the Harbor Corporate Culture ETF [HAPI] and the Harbor Corporate Culture Leaders ETF [HAPY], which provides exposure to the human capital factor.)
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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 and most current performance, please click: GDIV, MEDI, RENW, HAPI, HAPY
Alpha is a measure of risk (beta)-adjusted return.
Westfield Capital is the subadvisor for the Harbor Growth Leaders (GDIV) and Harbor Health Care ETF (MEDI)
Quantix Commodities, LP is the subadvisor for the Harbor Energy Transition Strategy (RENW)
CIBC is a third-party index provider to the Harbor Corporate Culture ETF. The Fund is managed by Harbor Capital Advisors, Inc.
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.