Alternative Investments/ESG: Harbor Capital’s New ETF Invests In Smaller Companies With Happy Workers

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The new ETF seeks small cap US companies that have a strong corporate culture.

Harbor Capital Advisors has launched a new ETF named Harbor Corporate Culture Small Cap ETF (HAPS) to provide investors exposure to small-cap companies with strong human capital factor scores. The HAPS ETF measures corporate culture and its connection to future equity performance through proprietary research and employee survey data, and other publicly available grassroots sources such as employee reviews. The underlying thesis is that there is a correlation between contented employees and favorable stock performance of smaller firms.

Furthermore, according to Harbor, quantifying human capital as an intangible asset on a company’s balance sheet provides a large informational advantage in investing and is relatively distinct from existing investment factors, such as quality and size. (VettaFi-ETF Trends)

HAPS aims to have a beta of 1 to the Russell 2000 Index, offers a sector-neutral approach, and security representation within sectors based on the highest Human Capital Factor scores. HAPS seeks to provide investment results that correspond to the CIBC Human Capital Factor Small Cap Index. The index comprises around 200 U.S. companies’ equity securities that are selected by Irrational Capital based on its proprietary scoring methodology and weighted by market capitalization with some modifications.

HAPS can act as a fundamental holding for small-cap U.S. equities, diversify portfolios, and provide a socially responsible approach to investing in companies with robust corporate cultures.

HAPS charges a management fee of 0.6%.

The launch of HAPS follows Harbor’s launch of the Harbor Corporate Culture Leaders ETF (HAPY) in February 2022 and the Harbor Corporate Culture ETF (HAPI) in November 2022. All three ETFs use the same methodology to score companies on human capital, with the primary differences being in index construction and resulting market capitalization.

Related Story: Harbor Capital Launches US Equity ETF Focusing On Corporate Culture

Photo by Emma Dau on Unsplash

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