Harbor Capital Advisors has launched a broad basket commodities ETF focused on the building blocks of the accelerating transition to less carbon-intensive energy sources.
Kristof Gleich, President and CIO of Harbor Capital Advisors.
The Harbor Energy Transition Strategy ETF (RENW US) has been listed on NYSE Arca with an expense ratio of 0.80%.
Harbor Capital notes that the world is undergoing a generational transformation towards the global goal of net-zero carbon emissions, a transition that requires extensive sustainable energy infrastructure to be built. According to a joint study by the IEA and IMF, annual energy investment is on trend to surpass $5 trillion by 2030.
While the precise end state of the transition is unclear, due to new technologies being rapidly developed to meet this goal, the basic commodities required for this infrastructure are known and are expected to be in high demand for decades to come.
For investors seeking to gain access to the energy transition theme, Harbor Capital believes its newest ETF offers a more direct investment compared to equity-based products.
Kristof Gleich, President and CIO of Harbor Capital Advisors, said: “The world is undergoing a dramatic energy regime shift that has only been accelerated by recent events. We believe this will be one of the most significant macro themes in the financial markets for the next several decades. RENW is built to provide the opportunity to invest in this transition, through the commodities needed to facilitate change, as the world marches towards a net zero carbon emissions goal.”
The ETF has also been structured within the 1940 Act, meaning that investors in the fund will be able to avoid dealing with the cumbersome Schedule K-1 tax form.
Methodology
The ETF is linked to the Quantix Energy Transition Index which was developed by Quantix Commodities, a Connecticut-based hedge fund manager whose core founders have decades of collective experience investing and trading commodities at Goldman Sachs.
The index’s eligible universe consists of 25 different commodity futures determined by Quantix to serve one of three purposes: they are used to construct renewable energy infrastructure (examples include copper, aluminum, nickel, zinc, lead, silver, palladium, and platinum); they are used as less-carbon-intensive “bridge fuels” (natural gas, soybean oil, and ethanol); or they incentivize investment in new energy infrastructure (carbon credits).
The index selects and weights its constituents based on Quantix’s quantitative methodology which favours commodities that are liquid and highly traded.
Commodity sectors are capped at 40%, while individual commodities are limited to 15%. Only commodities with a weight of at least 2% will remain eligible for the index, subject to a minimum of ten constituents.
The index is reconstituted annually and rebalanced on a monthly basis.