Harbor SMID Cap Value ETF — Q3 2025 Performance & Outlook

In Q3 2025 the Harbor SMID Cap Value ETF navigated a mixed market where value-oriented small- and mid-cap stocks delivered modest gains overall, outpacing some growth peers but lagging broader large-cap indices. The quarter was characterized by rotation into economically sensitive sectors—industrial, financials and energy—while interest-rate expectations and commodity price moves drove short-term volatility.

Sector contributions were uneven. Industrials and energy holdings provided the largest positive attribution as economic data supported demand for cyclical exposure. Financials contributed modestly, helped by improved net interest margin expectations. Conversely, defensive sectors and certain consumer-facing names weighed on relative results as investors favored cyclical recovery stories. Stock selection within health care and technology offset some sector weakness, but not sufficiently to neutralize the drag from weaker positions in consumer discretionary.

Risk management remained central to portfolio construction. The fund’s emphasis on lower valuations, earnings stability and balance-sheet strength helped limit downside in pockets of market stress. Turnover was moderate as managers opportunistically rebalanced exposures—adding to economically sensitive names with improving fundamentals and trimming positions where valuation stretched or fundamentals deteriorated.

Performance attribution highlighted that while sector allocation accounted for a meaningful portion of relative returns, active stock selection ultimately determined success. Small- and mid-cap value universes continued to display dispersion, rewarding disciplined fundamental research. Volatility metrics showed a modest uptick versus the prior quarter, reflecting heightened macro headlines and shifting rate expectations.

Looking ahead, the fund’s managers emphasize a selective approach: targeting companies with durable cash flows, attractive valuations and clear paths to earnings improvement. They remain cautious on elevated valuations in some pockets of the market and watch macro indicators—inflation trends, interest-rate guidance and industrial demand—to guide positioning. For investors, the ETF aims to offer concentrated exposure to value-oriented SMID opportunities while managing downside risk through active selection and sector awareness.