Harbor Capital Advisors Launches “NextGen” REITs ETF on the NYSE

How AREA ETF Works

This ETF is designed to track the performance of the Harbor AlphaEdge™ Next Generation REITs Index, which focuses on non-traditional REITs traded on U.S. exchanges. These REITs include sectors such as data centers, healthcare, gaming, and self-storage, and are selected for their strong fundamental and price characteristics. The ETF invests at least 80% of its assets in securities within this index.

The investment process begins by identifying "next-generation" REITs from the 3,000 largest U.S.-listed companies, with certain constraints on size, liquidity, price, and sales. These REITs are then scored based on factors like capital deployment, momentum, quality, risk, and valuation, which are weighted according to the current business cycle regime. The index is optimized to maximize the information ratio, aiming for better risk-adjusted returns compared to a market-cap-weighted reference portfolio.

The ETF uses a passive investment approach, generally replicating the index's holdings in similar proportions. It is rebalanced monthly to stay aligned with the index and may also hold cash or money market funds. The ETF is classified as non-diversified, meaning it may concentrate its investments in fewer issuers, aligning with the index's focus on the real estate sector.

Why Investors Should Consider AREA ETF

For long-term oriented advisors who appreciate the income and tax benefits of a REITs investment but want to avoid structural headwinds facing the asset class, the firm believes that the Harbor AlphaEdge Next Generation REITS ETF (AREA) presents a compelling solution. Unlike traditional REITs that may be exposed to the negative economic trends impacting commercial real estate, AREA aims to limit its exposure to property types positioned to benefit from secular tailwinds with resiliency to cyclical headwinds.

“We believe opportunities have come from challenges in commercial real estate ever since the early days of the pandemic,” stated Kristof Gleich, President, and CIO at Harbor Capital Advisors. “We built AREA as a solution for advisors who believe in the opportunities, we see in commercial real estate for years to come, packaged in a vehicle we also believe makes sense for years to come.”

For more information about AREA, visit their official fund page.

About Harbor Capital Advisors

Harbor Capital Advisors is an asset manager with an AUM of $60.0 billion as of June 30, 2024 and is known for prudently curating a suite of active ETFs, mutual funds, and collective investment trusts from boutique managers. Advisors looking for distinct and differentiated investment options for their clients’ portfolios often connect with our obsession to find what we believe are the best and most bold solutions that have the potential to produce compelling risk-adjusted returns.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.