The Harbor SMID Cap Value ETF (HSMV) concluded the third quarter of 2025 with a net asset value (NAV) return of 7.57%, slightly trailing the Russell 2500\u00ae Value Index, which posted an 8.17% return. This period, characterized by a robust yet maturing global economy, benefited from accommodative monetary policies and sustained excitement around artificial intelligence. The fund strategically overweighted sectors such as Industrials, Financials, and Information Technology, while maintaining underweight allocations in Communication Services, Consumer Discretionary, and Health Care, aligning with its long-term, fundamentals-driven investment philosophy.
The third quarter of 2025 showcased a dynamic market environment where macroeconomic conditions were marked by resilience, despite signs of maturity in the global economy. This stability was further bolstered by ongoing shifts towards easier monetary policy and an enduring investor enthusiasm for advancements in artificial intelligence. These factors collectively influenced market sentiment and sector performance, impacting the returns of various investment vehicles.
HSMV's sector allocations played a crucial role in its performance. The decision to overweight Industrials, Financials, and Information Technology sectors reflected a conviction in their potential for growth and value. Conversely, underweight positions in Communication Services, Consumer Discretionary, and Health Care indicated a cautious stance on these areas during the quarter. This strategic positioning is a hallmark of HSMV's disciplined, bottom-up approach to identifying high-quality businesses that are trading below their inherent value.
Despite the modest underperformance against its benchmark, the underlying philosophy guiding HSMV remains consistent: to seek out enterprises with robust fundamentals and sustainable earning power. The current market volatility, rather than being a deterrent, is viewed as an opportune moment to invest in such businesses, especially when short-term uncertainties may have overshadowed their intrinsic worth and long-term potential. This commitment to value investing ensures that the portfolio is well-positioned for future growth.
In summary, the Harbor SMID Cap Value ETF's performance in Q3 2025, while slightly behind its benchmark, underscores its steadfast adherence to a fundamental, value-oriented investment strategy. The fund's sector allocations were carefully managed in response to global economic trends and market sentiment, particularly the prevailing optimism surrounding artificial intelligence and the shift in monetary policy. This approach focuses on identifying resilient businesses with strong earning capabilities, leveraging market fluctuations to uncover attractive valuation opportunities for sustained long-term appreciation.
