In the first quarter of 2026, the Harbor Osmosis International Resource Efficient ETF (EFFI) recorded a net asset value (NAV) return of -3.31%. This figure indicates an underperformance compared to its benchmark, the MSCI World ex. US Index, which posted a return of -0.94% during the same period. This commentary delves into the factors influencing this performance, examining both the individual stock contributions and broader market dynamics that shaped the ETF's results.
The subadvisor for the Harbor Osmosis International Resource Efficient ETF, since December 11, 2024, is Osmosis Investment Management US LLC. The portfolio is managed by Alex Stephen and Fadi Zaher. The ETF's core investment philosophy revolves around identifying companies that demonstrate superior resource efficiency, aiming to generate sustainable long-term returns. The benchmark for comparison is the MSCI World Ex. US (ND) Index, which represents the performance of large and mid-cap equities across developed markets, excluding the United States.
Analysis of the portfolio's individual holdings reveals specific companies that significantly impacted the ETF's Q1 2026 performance. On the downside, top detractors included major international entities such as Nintendo, known for its gaming consoles; Sonova, a hearing care solutions provider; automotive giant Mercedes-Benz; diversified services company Recruit Holdings; and cybersecurity firm Check Point Software. These companies likely faced specific operational challenges, market headwinds, or investor sentiment shifts that led to their negative contributions. Conversely, several holdings provided positive momentum. Leading contributors to performance were Glencore, a multinational commodity trading and mining company; Toyota Tsusho, a general trading company within the Toyota Group; Woodside Energy, an Australian petroleum exploration and production company; Swedish Orphan Biovitrum AB, a biopharmaceutical company; and Lasertec, a Japanese manufacturer of semiconductor inspection equipment. The strong performance of these companies suggests that their underlying business models or market positions were robust enough to withstand broader market pressures or capitalize on specific opportunities.
Despite the overall underperformance against its benchmark, the ETF's focus on resource efficiency did exhibit some defensive characteristics during the volatile quarter. However, negative stock selection within various sectors and suboptimal sector allocation, particularly in Financials, Information Technology, and Industrials, collectively dragged down the fund's returns. Looking ahead, the current geopolitical climate, marked by elevated oil prices and persistent market volatility, could potentially favor the EFFI strategy. Companies with strong balance sheets, higher operating margins, and lower leverage—characteristics often associated with resource-efficient businesses—may prove more resilient and outperform in such an environment. This strategic positioning could enhance the ETF's future performance as market conditions evolve.
