Harbor Renames Commodity All-Weather ETF 'HGER'
Harbor Capital Advisors has renamed its commodity all-weather ETF, positioning the fund as a long-term core component in portfolios.
The Harbor Commodity All-Weather Strategy ETF (HGER) was previously known as the Harbor All-Weather Inflation Focus ETF, with the change effective March 1, 2023. The Fund’s name change comes as signs of sticky inflation have recently emerged in the U.S. economy, with investors betting on a longer period of higher interest rates and elevated levels of inflation.
“After a rough year for just stock and bond only ETF portfolios, we believe advisors are increasingly looking to have strategic exposure to commodities to obtain diversification benefits,” Todd Rosenbluth, head of research at VettaFi, said.
Following a solid run for growth equities, investors were largely underexposed to commodities entering 2022; commodities ended the year as a bright spot amid challenging markets and the top-performing asset class for two consecutive years.
As advisors and investors recognize the challenge in timing the market and risks in not maintaining an allocation to commodities, the asset class has earned a long-term role in portfolios, according to Rosenbluth.
HGER aims to provide investors with an inflation hedge through exposure to the Quantix Commodities Index (QCI), previously known as the Quantix Inflation Index (QII) until March 1, 2023, which is made up of liquid commodity futures, weighted towards the goal of maximizing the correlation to inflation.
HGER’s underlying index, the QCI, places more weight on those commodities which have a higher pass-through cost to inflation, such as gasoline, and a lower weighting to those with lower pass-through costs, such as cotton or cocoa, according to the firm.
The QCI also includes a scarcity debasement indicator to indicate what the source of inflation is; in a debasement regime, where inflation is coming from a weaker USD, the QCI will tilt toward gold, and in a scarcity regime, where inflation is coming from demand outstripping supply, the QCI will tilt toward consumable commodities such as oil.
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All investments involve risk including the possible loss of principal. Please refer to the Fund’s prospectus for additional risks. For current performance, fees, and important information: HGER
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 Quantix Commodities Index is calculated on a total return basis, which combines the returns of the futures contracts with the returns on cash collateral invested in 13-week U.S. Treasury Bills. This unmanaged index does not reflect fees and expenses and is not available for direct investment. The Quantix Commodities Index was developed by Quantix Commodities LP and is owned by Quantix Commodities Indices LLC.
The Quantix Inflation Index is calculated on a total return basis, which combines the returns of the futures contracts with the returns on cash collateral invested in 13-week U.S. Treasury Bills. This unmanaged index does not reflect fees and expenses and is not available for direct investment. The Quantix Inflation Index was developed by Quantix Commodities LP and is owned by Quantix Commodities Indices LLC.
Correlation is a statistic that measures the degree to which two variables move in relation to each other.
Debasement refers to lowering the value of a currency.
Diversification does not assure a profit or protect against loss in a declining market.
Quantix Commodities, LP is the subadvisor for the Harbor Commodity All-Weather Strategy ETF (HGER).
This article was prepared as Harbor Funds paid sponsorship with VettaFI.