Harbor Capital Advisors has expanded its product offerings, enhancing investors’ ability to access the field of human capital investing.
On Thursday, the premier multi-manager investment firm launched the Harbor Corporate Culture ETF ((HAPI)), listed on the NYSE with a 36 basis point expense ratio.
HAPI fits as a core, large cap position in advisor portfolios. HAPI’s underlying index is designed to evaluate the Human Capital Factor scores of the 500 largest U.S. companies, thereby offering diversified, core exposure to the large cap constituents of the S&P 500 Index with low tracking error, a spokesperson for Harbor told VettaFi.
“The new ETF provides a more diversified version of (HAPY ), which was one of the more interesting ETFs to launch in 2022,” VettaFi head of research Todd Rosenbluth said. “A focus on larger-cap companies with relatively strong corporate culture and meaningful exposure to all equity sectors can allow HAPI to support the core of a portfolio.”
HAPI may appeal to socially conscious investors who place importance on investing in businesses that treat employees well and foster inclusive workplace environments, a spokesperson for Harbor said.
HAPI is built around the Human Capital Factor, a distinctive investment factor developed by Irrational Capital, an investment research and development firm that applies workplace behavioral science and data science to capture the powerful connection between human capital and value creation.
The Human Capital Factor is based on proprietary research conducted by Irrational Capital. It enables a strong, systematic assessment of a company’s corporate culture and its link to potential future equity performance. The Human Capital Factor first became publicly investable through HAPY and serves as the foundation for HAPI, allowing for a more diversified and sector-constrained approach to this new field of human capital investing, according to Harbor.
“After launching our first Corporate Culture ETF in February, we’ve had several opportunities to meet with advisors and institutional investors and share the investment thesis behind Human Capital,” a spokesperson said. “HAPI is the result of direct feedback from these conversations and near-term demand for a more diversified, sector-constrained Corporate Culture ETF. We believe it will continue to encourage and emphasize the need for company executives to think differently about their employees.”
HAPI and HAPY use the same methodology to identify and score companies based on the Human Capital Factor; however, there are key differences between the two funds.
HAPI’s underlying index has a minimum market capitalization of $11 billion and a 5% individual stock limit (leading it to have smaller mega-cap exposure versus the S&P 500 Index). HAPY’s underlying index has a minimum market capitalization of $1 billion, leading it to have some mid capitalization exposure, according to the firm.
HAPI is generally sector neutral to the selection universe, with a maximum of 35% or a 10% band. The Index underlying HAPY is unconstrained and may have larger sector over/underweights, according to the firm.
HAPI’s underlying index takes a more diversified, lower beta approach: HAPI will typically hold approximately 150 securities, while HAPY will typically hold between 70 and 100 securities.
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