The Harbor SMID Cap Core ETF concluded the fourth quarter of 2025 with a net asset value return of 1.13%, falling short of its benchmark, the Russell 2500® Index, which posted a 2.22% gain. This period was characterized by significant performance variations across different sectors, influenced by evolving investor preferences. Notably, the healthcare sector demonstrated exceptional strength, surging by nearly 17%, thereby significantly outperforming the consumer staples sector, which experienced the weakest results during the quarter. Despite these market dynamics, the ETF made deliberate portfolio enhancements, integrating new holdings like EMCOR Group, Inc. and CACI International, while refraining from any sales. This strategic positioning aims to leverage opportunities in key growth areas, even as some companies, such as Raymond James and Valmont Industries, faced investor scrutiny over short-term financial indicators, despite solid underlying business performance.
Detailed Report on Q4 2025 SMID Cap Core ETF Performance
In the final quarter of 2025, the Harbor SMID Cap Core ETF, under the management of Harbor Capital Advisors, faced a period of considerable market volatility. The fund's performance, as measured by its Net Asset Value (NAV), reached 1.13%, placing it below the Russell 2500® Index's return of 2.22%. This divergence primarily stemmed from notable shifts in investor sentiment and pronounced sector-specific performances within the broader U.S. small/mid-cap market.
During this quarter, the healthcare sector emerged as a leading performer, recording an impressive gain of approximately 17%. This robust growth created a substantial performance gap of over 2,300 basis points when compared to the consumer staples sector, which lagged considerably. Such significant dispersion highlights the selective nature of market rallies during this period.
Amidst these fluctuating market conditions, certain holdings within the ETF's portfolio exhibited mixed results. Raymond James, for instance, saw its shares decline by 7.0%, despite reporting adjusted earnings that surpassed expectations by a notable 10%. This downturn was largely attributed to investor concerns regarding immediate margin pressures, which overshadowed the company's strong operational momentum. Conversely, Valmont Industries demonstrated resilience, achieving a 12% increase in year-over-year sales. This growth was equally driven by both higher sales volumes and strategic pricing adjustments, underscoring the company's ability to capitalize on increased utility investments aimed at fulfilling rising electricity demands.
In a strategic move to optimize its portfolio, the Harbor SMID Cap Core ETF integrated two new companies during the quarter: EMCOR Group, Inc., and CACI International. These additions signal a focused approach toward sectors with perceived long-term growth potential. Notably, the fund did not make any divestments during this period, indicating a strong conviction in its existing holdings and recent acquisitions.
The investment team's emphasis on companies with durable earnings, solid balance sheets, and strong competitive advantages remains a cornerstone of their strategy. This long-term perspective allows them to navigate short-term market fluctuations and sector rotations, positioning the portfolio for sustained growth.
This quarter's performance review from Harbor Capital Advisors underscores the complexities of navigating the small and mid-cap market. The uneven sector performance, coupled with investor focus on specific short-term metrics, highlights the need for a nuanced investment approach. However, the strategic additions to the portfolio, particularly in areas like infrastructure and government technology, indicate a forward-looking perspective aimed at long-term value creation. The emphasis on robust fundamentals rather than fleeting market trends offers a valuable lesson in patient, disciplined investing. It reinforces the idea that true value often lies beyond immediate market reactions, rewarding those who maintain a clear, long-term vision.