The third quarter of 2025 saw the Harbor Osmosis Emerging Markets Resource Efficient ETF experience a growth of 5.67% in its Net Asset Value (NAV). This growth, however, was outpaced by its benchmark, the MSCI Emerging Markets Index, which recorded a substantial 10.64% return. A detailed analysis revealed that the ETF's strategic decision to underweight its exposure to prominent companies such as TSMC and Alibaba significantly contributed to its underperformance. Despite these challenges, the ETF made notable investments, acquiring shares in LG Electronics and Meituan within the Consumer Discretionary sector, and Bharti Airtel in the Communication Services sector.
Detailed Report on Harbor Osmosis Emerging Markets Resource Efficient ETF's Q3 2025 Performance
During the third quarter of 2025, the Harbor Osmosis Emerging Markets Resource Efficient ETF (the "Fund") recorded a net asset value (NAV) return of 5.67%. This performance lagged behind its benchmark, the MSCI Emerging Markets Index, which achieved a 10.64% return over the same period. The primary factors contributing to this disparity were identified as negative stock selection, particularly within the Information Technology and Consumer Discretionary sectors, and the Fund's strategic underweight positions in key market players such as TSMC and Alibaba. The Fund actively rebalanced its portfolio by making significant purchases. In the Consumer Discretionary sector, the Fund increased its holdings in LG Electronics, a South Korean multinational electronics company, and Meituan, a Chinese e-commerce platform. Additionally, in the Communication Services sector, the Fund invested in Bharti Airtel, a leading Indian telecommunications company. These acquisitions represent the Fund's commitment to its resource efficiency mandate, focusing on companies demonstrating strong environmental, social, and governance (ESG) practices. According to Osmosis Investment Management, a notable divergence in climate action policies between the U.S. and Europe became increasingly apparent during this quarter, influencing broader market dynamics.
This quarter's performance highlights the intricate balance between adhering to a resource efficiency mandate and navigating the volatile landscape of emerging markets. The underperformance against the benchmark, while disappointing, underscores the challenges faced when quality and defensiveness are prioritized in a momentum-driven market. It prompts a reflection on whether such a strategy truly offers resilience in all market conditions or if it is better suited for periods of market slowdown. Looking ahead, the emphasis on identifying profitable companies with high free cash flow remains central to the ETF's strategy. As market sentiment potentially shifts towards valuing quality exposures, the Fund's performance is anticipated to improve. This situation serves as a vital reminder for investors to thoroughly understand the nuances of thematic ETFs and their sensitivity to prevailing market trends.
