ContactHarbor Scientific Alpha High-Yield ETF (SIHY) Strategy Profile
October 30, 2024Table of Contents
- History of Consistent & Attractive Return Profile
- Compounding Consistency
- Upside Participation with Downside Mitigation
- Introducing BlueCove
- Introducing Scientific Investing
- Portfolio Construction
- The BlueCove Process
Average Annual Returns as of 9/30/2024
| 3 Months | YTD | 1 Yr. | 3 Yr. | 5 Yr. | 10 Yr. | Since Inception | Inception Date | Total Expense Ratio | |
| Harbor Scientific Alpha High-Yield ETF (NAV) | 4.92% | 8.01% | 16.47% | 4.38% | N/A | N/A | 4.13% | 9/14/2021 | 0.48% |
| Harbor Scientific Alpha High-Yield ETF (Market) | 5.37% | 8.47% | 17.35% | 4.36% | N/A | N/A | 4.15% | 9/14/2021 | |
| ICE BofA US High Yield Index (H0A0) | 5.28% | 8.03% | 15.66% | 3.08% | N/A | N/A | 2.89% | 9/14/2021 |
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. 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.
Shares are bought and sold at market price not net asset value (NAV). A fund's NAV is the sum of all its assets less any liabilities, divided by the number of shares outstanding. 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.
- Since inception, SIHY has demonstrated attractive excess returns relative to the ICE BofA US High Yield Index.
- For instance, over rolling 6-month periods since inception, SIHY has delivered excess returns in 84% of periods. Over rolling 1-year windows, SIHY (NAV) has outperformed the ICE BofA US High Yield Index in 92% of periods.
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.
Source: Morningstar Direct. September 2024.
- Compounding this consistency has led to attractive results relative to both the index and peers.
- Since SIHY’s (NAV) 9/14/2021 inception, the ETF has delivered 406 basis points of cumulative excess return relative to the ICE BofA US High Yield Index.
- This since-inception performance ranks 12th percentile out of 619 funds (based on total returns) within Morningstar's US High Yield Bond Category.
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.
The Morningstar Rankings are based on total returns, with distributions reinvested and operating expenses deducted. Morningstar does not take into account sales charges. Harbor Scientific Alpha High-Yield ETF was ranked against Morningstar’s US Fund High Yield Bond category, quarterly, based on total returns, over the following time periods: 50 out of 665 investments in the category for the 1-year period and 41 out of 620 investments in the category for the 3-year period as of 09/30/2024. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. Past rankings are no guarantee of future rankings.
Source: Morningstar Direct. September 2024
- A focus on curating high-quality alpha insights and allowing security selection to drive excess returns has produced an attractive return profile since SIHY's September 2021 inception.
- In months where the ICE BofA US High Yield Index has delivered positive performance, the ETF has, on average, kept pace with the index. Conversely, in months where the ICE BofA US High Yield Index delivered negative returns, SIHY (NAV) outperformed by 26 basis points on average.
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.
- In part, this defensive profile stems from strong excess returns in periods of spread widening.
- Spread widening in high-yield markets can often produce elevated levels of dispersion. For BlueCove's high-breadth active approach, higher dispersion represents an attractive opportunity set for security selection, in our view.
- On average, in periods of spread widening, SIHY (NAV) has delivered excess returns to the ICE BofA US High Yield Index.
Source: FRED, Morningstar Direct. September 2024
- BlueCove is a specialist active manager founded in 2018 with a platform that is custom built for scientific fixed income.
- BlueCove's objective is to deliver strong investment outcomes for investors through active management utilizing proprietary research insights.
- BlueCove is well resourced with a primary focus on investment research and development (R&D). The team includes pioneers in scientific fixed income investing with investment team heads averaging 23 years of experience.
- The firm's business model is based on the three main pillars of owner mentality1, total focus, and modern technology.
Each employee has an equity interest in the firm
Commitment to scientific fixed income investing
Technology is custom-built for scientific fixed income investing
1. On 28 February 2023, BlueCove and Ares Management announced a strategic partnership.
- BlueCove's scientific investment process is evidence based, data-driven, economically intuitive, and grounded in the scientific method with targeted R&D at each step of the investment process.
- Scientific investing provides investors with an alternative to passive or factor investing through the application of proprietary insights based on economic intuition.
- Scientific investing may also serve as a complement or alternative to traditional discretionary investing by working to maximize breadth to target high-quality alpha from a large number of positions versus more concentrated or highly diversified portfolios.
- Core allocation
- Seeks to capture persistent sources of return
- Style tilts
- Concentrated positions vs highly diversified
- PM driven portfolio construction
- Potential unwanted risk exposures
- Breadth of alpha opportunities
- Proprietary insights
- Portfolio optimization
- Minimize unwanted risk exposures
| Ticker Symbol | Cusip | Listed Exchange | Gross Expense Ratio | Lead Market Maker | Inception Date | Benchmark | Morningstar Category |
|---|---|---|---|---|---|---|---|
| SIHY | 41151J109 | NYSE | 0.48% | Jane Street | 9/14/2021 | ICE BofA US High Yield Index | High Yield |
Ultimately the portfolio is constructed through an optimization1 process driven by proprietary tools and aims to:
SIHY is differentiated from other active competitors by applying a scientific approach while matching the market exposure of the index, hence emphasizing a strong security selection focus.
- BlueCove develops proprietary insights driven by signals that emphasize economic intuition and empirical evidence utilizing data beyond the scope of traditional credit analysis.
- BlueCove believes their signal set will enable the Fund to take advantage of market inefficiencies by providing insights across:
Signal | Insight |
| Equity price |
| Earnings outlook |
| Profitability trend |
| Economic relationships |
| Relative Value |
| Fundamentals |
| Business stability & strength |
Important Information
1. Optimization is a point in time construction of portfolios reflecting known inputs and constraints and does not imply that further improvements are not possible.
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.
All investments involve risk including the possible loss of principal. Fixed income securities fluctuate in price in response to various factors, including changes in interest rates, changes in market conditions and issuer-specific events, and the value of your investment in the Fund may go down. There is a greater risk that the Fund will lose money because they invest in below- investment grade fixed income securities and unrated securities of similar credit quality (commonly referred to as “high-yield securities” or “junk bonds”). These securities are considered speculative because they have a higher risk of issuer default, are subject to greater price volatility and may be illiquid. Because the Fund may invest in securities of foreign issuers, an investment in the Fund is subject to special risks in addition to those of U.S. securities. These risks include heightened political and economic risks, greater volatility, currency fluctuations, higher transaction costs, delayed settlement, possible foreign controls on investment, possible sanctions by government bodies of other countries and less stringent investor protection and disclosure standards of foreign markets.
The ICE BofAML US High Yield Index (H0A0) is an unmanaged index that tracks the performance of below investment grade U.S. Dollar-denominated corporate bonds publicly issued in the U.S. domestic market. All bonds are U.S. dollar denominated and rated Split BBB and below. This unmanaged index does not reflect fees and expenses and is not available for direct investment.
In relation to any data attributed to Morningstar, please note the following: © Morningstar 2024. All rights reserved. Use of this content requires expert knowledge. It is to be used by specialist institutions only. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied, adapted 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, except where such damages or losses cannot be limited or excluded by law in your jurisdiction. Past financial performance is no guarantee of future results.
The Morningstar Rankings are based on total returns, with distributions reinvested and operating expenses deducted. Morningstar does not take into account sales charges. Harbor Scientific Alpha High-Yield ETF was ranked against Morningstar’s US Fund High Yield Bond category, quarterly, over the following time periods: 50 out of 665 investments in the category for the 1-year period and 41 out of 620 investments in the category for the 3-year period as of 09/30/2024. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. Past rankings are no guarantee of future rankings.
A basis point is a standard measure for interest rates and other percentages in finance. One basis point equals 1/100th of 1%, or 0.01% (and.0001 in decimal form).
Option Adjusted Spread (OAS) is the measurement of the spread of a fixed-income security rate and the risk-free rate of return, which is then adjusted to take into account an embedded option.
Alpha refers to excess returns earned on an investment.
The views expressed herein may not be reflective of current opinions, are subject to change without prior notice, and should not be considered investment advice.
BlueCove Limited is a third-party subadvisor to the Harbor Scientific Alpha High-Yield ETF.
Foreside Fund Services, LLC is the Distributor of the Harbor ETFs.
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