Harbor Launches Long-Short Equity ETF: LSEQ

Harbor Capital Advisors has added a long-short equity ETF to its range of funds.

The Harbor Long-Short Equity ETF (LSEQ) offers investors equity exposure with an elevated focus on downside mitigation and diversification benefits. LSEQ, listed on the NYSE Arca on December 6, provides access to a compelling liquid alternative product in an ETF wrapper.

LSEQ features both long and short equity positions, which are weighted based on subadvisor Disciplined Alpha’s macro regime analysis. The positions aim to determine the current market regime help determine whether LSEQ will take a bearish or bullish approach with value or growth investments, as well as its exposure to long and short positions, according to Harbor.

The fund will generally have net exposure ranging from 40% to 60% long equity . However, net equity exposure at times may be up to 150% long, according to regulatory filings. The fund’s investment universe is the Russell 1000 Index, including only U.S. mid and large-cap stocks.

“Many advisors have turned to factor investing rather than focusing on a broader investment style. The newly converted ETF will be differentiated from many by incorporating a short not just a long equity approach,” Todd Rosenbluth, head of research at VettaFi, said.

LSEQ’s Management Edge

LSEQ is subadvised by Disciplined Alpha, which utilizes a disciplined quantitative investment process. The firm has managed the predecessor fund, the Disciplined Alpha Onshore Fund LP, since its inception in 2015. Kevin Shea, CEO and portfolio manager of Disciplined Alpha, serves as the fund’s portfolio manager.

Disciplined Alpha is a specialized firm, which Harbor believes sets the fund apart from the competition. The company’s systematic approach and over 10 years of experience shorting securities with undesirable characteristics has helped it to avoid traps as it seeks to tilt the odds in its favor, Harbor said.

Harbor believes LSEQ is durable and appropriate for inclusion in all environments. However, the fund may be best positioned in environments characterized by lower returns and heightened volatility. This tends to support active management.

LSEQ offers diversification in a portfolio with a lower beta to traditional long-only, equity investments. It may be an attractive option for someone concerned about equity risk. For example, a retiree who wants to stay invested in equities but wants to dial down the risk a bit, or an investor seeking a different type of return stream, according to Harbor.

The fund charges 176 basis points gross expense ratio.