Harbor Capital ETF Hedges Inflation With Commodities

Rather than relying on TIPS, the fund invests in commodity futures. 

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Reviewed by: Heather Bell
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Edited by: Heather Bell

Harbor Capital Advisors rolled out its fifth fund today with the launch of a commodities futures ETF designed to provide a hedge against inflation. The Harbor All-Weather Inflation Focus ETF (HGER) tracks an index created by Quantix Commodities, an asset manager founded by former Goldman Sachs commodities traders and specializing in commodities-based strategies.

HGER has an expense ratio of 0.68% and lists on the NYSE Arca.

“We think this ETF will become the inflation index of choice for how institutional and retail clients should ultimately hedge inflation risk in their 60/40 portfolio in liquid markets. We think there's a really big opportunity and a big gap in the marketplace,” said Kristof Gleich, president and chief investment officer of Harbor Capital Advisors.

“This is an index that dynamically weights between different commodities within the commodity spectrum with the intended goal of providing a better inflation hedge for clients,” he said of HGER’s underlying benchmark.

The underlying index includes 15 or more commodity futures contracts denominated in U.S. dollars. Commodities are included and weighted based on their economic significance, sensitivity to inflation and roll costs, according to the prospectus.

Gleich notes, for example, that the index is underweight natural gas because of the high costs associated with its storage.

He further points out that while many turn to Treasury inflation-protected securities (TIPS) to hedge inflation, they can come with interest rate risk.

“Not only do you have to look at the inflationary environment, you have to think about how the market will react to future monetary monetary policy expectations,” he added. “TIPS are better than holding nominal bonds in an inflationary environment, but they are not a panacea to protecting a 60/40 portfolio from inflation.”

Contact Heather Bell at [email protected]

Heather Bell is a former managing editor of etf.com. She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.