Harbor SMID Cap Value ETF: Q3 2025 Portfolio Rebalance & Strategy Shift

Harbor’s SMID Cap Value ETF executed a measured portfolio rebalance during Q3 2025, prioritizing higher-quality small- and mid-cap value names while paring back exposure to more cyclical sectors. The fund’s managers emphasized durability and earnings stability as the primary drivers of recent buys, increasing allocations to companies with stronger balance sheets and more predictable cash flow profiles.

Sector positioning shifted modestly: allocations to financials and industrials were modestly increased to capture stable dividend streams and secular growth opportunities within select niches, while energy and commodity-sensitive industrial exposures were trimmed amid continued macro uncertainty. The team also modestly raised liquidity in the portfolio, retaining a slightly higher cash buffer to manage volatility and to maintain flexibility for opportunistic buys.

Portfolio turnover in the quarter was consistent with the fund’s value discipline—selective rather than broad-based—reflecting targeted replacements and position-size adjustments rather than a wholesale strategy pivot. New additions were chosen for valuation resilience and margin potential, while certain high-beta and cyclical holdings were reduced to lower sensitivity to near-term economic swings.

Relative performance commentary indicates the ETF stayed aligned with its value mandate; short-term deviations versus small/mid-cap value benchmarks reflected sector realignments rather than a change in philosophy. Income-oriented investors will note the continued focus on names with sustainable dividends, although yield levels were described as secondary to total-return potential in the managers’ Q3 review.

Risk management remained central: position sizes were calibrated to limit idiosyncratic downside, and stress-tested scenarios informed conviction levels on new picks. Looking ahead, Harbor’s team signaled readiness to deploy cash into attractively priced opportunities should market dislocations present compelling entry points.

This update underscores a cautious, quality-tilted approach within a value framework: the fund is repositioning incrementally toward firms with durable cash flows while preserving the flexibility to capitalize on value-rich small- and mid-cap opportunities as they arise.