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Worried About Volatility and High Valuations Within Growth?




August 26, 2021

Worried About Volatility and High Valuations Within Growth?

Take Advantage of Harbor’s Strategic Growth Fund’s Consistent Low Beta Profile

As economies have re-opened, Harbor Strategic Growth Fund (MVSGX) has exhibited higher than historically average levels of defensiveness while delivering steadily improving alpha throughout 2021. The Fund typically avoids companies within the growth universe that trade at the highest valuations. Harbor’s Strategic Growth Fund employs a quality approach to large cap growth investing, emphasizing sustainable growth and attractive valuation characteristics.

Harbor Strategic Growth: Consistent Low Beta Profile

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Since inception, the Harbor Strategic Growth Fund has exhibited a lower risk profile vs. the Russell 1000® Growth index, as evidenced by an average down capture of 88.9% and an average Beta of 0.87.

During the pandemic in 2020, the Fund’s beta temporarily approached 1 (that of the benchmark), as many historically more volatile, high  valuation growth names (where the fund has been underweight) exhibited defensiveness amidst the global economic shutdown.

As the economy has reopened, many U.S. growth stocks have exhibited significant volatility which resulted in the fund delivering a very attractive beta profile in 2021 (average 0.71 in 2021 through mid-July.)

Harbor Strategic Growth: Improving Risk-Adjusted Returns (Alpha) in 2021

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Harbor Strategic Growth Fund’s low beta profile has coincided with consistently improving Alpha in 2021 as the investment team executes on their bottom-up, fundamental growth strategy.

In 2021, the choppiness in markets, as well as the re-opening trade which has favored more pro-cyclical areas, has resulted in the Russell 1000® Growth Index being approximately 25% more volatile than the Russell 1000® Value Index. In this higher volatility environment, Harbor’s Strategic Growth Fund has exhibited both improved defensiveness and alpha, which is consistent with their history.

Harbor’s Strategic Growth Fund is poised to provide exposure to growth stocks if/when the pro-cyclical value rotation wanes. The Fund also provides an alternative to higher octane growth strategies that have exhibited significant volatility in 2021 and may be more susceptible to multiple compression if interest rates rise throughout the rest of 2021 and into 2022.

Summary

If you’re concerned about the volatility of high momentum growth stocks, particularly at high valuations, but still want to maintain exposure to growth, we believe the Harbor Strategic Growth Fund provides a lower risk profile while offering consistent growth exposure.

Harbor Strategic Growth Fund Performance & Facts

Performance - As of 6/30/21

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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 harborfunds.com or by calling 800-422-1050.

Retirement Class shares commenced operations on March 6, 2017. The performance attributed to the Retirement Class shares prior to that date is that of the Institutional Class shares. Performance prior to March 6, 2017 has not been adjusted to reflect the lower expenses of Retirement Class shares. During this period, Retirement Class shares would have had returns similar to, but potentially higher than, Institutional Class shares due to the fact that

Retirement Class shares represent interests in the same portfolio as Institutional Class shares but are subject to lower expenses.

The Russell 1000® Growth Index is an unmanaged index generally representative of the U.S. market for larger capitalization growth stocks. This unmanaged index does not reflect fees and expenses and is not available for direct investment. The Russell 1000® Growth Index and Russell® are trademarks of Frank Russell Company.

Expense ratio information is as of the Fund’s current prospectus, as supplemented. Gross expenses are the Fund’s total annual operating expenses. The net expense ratios for this fund are subject to a contractual management fee waiver and/or expense limitation agreement, excluding interest expense and acquired fund fees and expenses (if any), through 02/28/2022.

Notes & Disclosures

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. At times, a growth investing style may be out of favor with investors which could cause growth securities to underperform value or other equity securities. Since the Fund typically invests in a limited number of companies, an adverse event affecting a particular company may hurt the Fund's performance more than if it had invested in a larger number of companies.

The views expressed herein are those of Harbor Capital Advisors, Inc. investment professionals at the time the comments were made. They may not be reflective of their current opinions, are subject to change without prior notice, and should not be considered investment advice. The information provided in this presentation is for informational purposes only.

This information should not be considered as a recommendation to purchase or sell a particular security. The holdings or sectors mentioned may change at any time and may not represent current or future investments. As of 6/30/2021, the Harbor Strategic Growth Fund held the following positions referenced as a percentage of the Fund’s total net assets: Apple Inc. 4.6%; Berkshire Hathaway Inc. 4.6%; First Republic Bank 4.5%; Amazon.com Inc. 4.3%; Intuit Inc. 4.2%; Alphabet Inc. Class C 4.1%; Adobe Inc. 3.8%; Microsoft Corp. 3.6%; American Tower Corp. 3.3%; Market Corp. 3.3%.

The Russell 1000® Growth Index is an unmanaged index generally representative of the U.S. market for larger capitalization growth stocks. This unmanaged index does not reflect fees and expenses and is not available for direct investment. The Russell 1000® Growth Index and Russell® are trademarks of Frank Russell Company.

©2021 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied 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. Past performance is no guarantee of future results.

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. At times, a growth investing style may be out of favor with investors which could cause growth securities to underperform value or other equity securities.

Since the Fund typically invests in a limited number of companies, an adverse event affecting a particular company may hurt the Fund’s performance more than if it had invested in a larger number of companies.

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

The Harbor Strategic Growth Fund is subadvised by Mar Vista Investment Partners, LLC. 

Distributed by Harbor Funds Distributors, Inc.

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Harbor Funds Distributors, Inc. is the Distributor of the Harbor Mutual Funds.
Foreside Fund Services, LLC is the Distributor of the Harbor ETFs.  

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Investing involves risk and the potential loss of capital.

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.

All trademarks or product names mentioned herein are the property of their respective owners. Copyright © 2021 Harbor Capital Advisors, Inc. All rights reserved.