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Large Cap Value Fund —
Fund beats market as stocks gain on pro-business expectations
1st Quarter, 2017
"We believe that while stock prices can move quickly at times, business values change much more slowly. "
– Aristotle Capital Management, LLC

In the wake of the Presidential election, expectations of changes in tax policy, interest rates, and the regulatory environment lifted markets driving U.S. stocks higher.
The Harbor Large Cap Value Fund advanced in the first quarter of 2017. The Fund posted a total return of 6.64%, outperforming its Russell 1000® Value Index benchmark, which rose 3.27%.
Both stock selection and sector allocations boosted relative performance during the quarter. The outperformance was due in part to a combination of stock selection and an overweight in Information Technology, the benchmark’s strongest sector for the period. Stock selection in the Financials sector also drove relative gains. The Fund’s underweight in Energy, the weakest sector in the benchmark by a significant margin, also contributed to relative results, as did stock selection and an overweight in Health Care. In contrast, stock selection in the Consumer Staples sector weighed on relative performance.
Aristotle Capital Management’s comments were made in an April, 2017 report. Highlights adapted from the report appear below. All comments relate to the quarter ended March 31, 2017, unless otherwise indicated. All references to the year-to-date are for the period January 1 through March 31, 2017.

Interview Highlights

A Steady Focus on the Long-Term
Post-election, expectations of changes in tax policy, interest rates and the regulatory environment buoyed the markets. We believe that while stock prices can move quickly at times, business values change much more slowly. Our fundamental, bottom-up process rarely responds to short-term changes in the macroeconomic environment, and we did not make any significant changes to the portfolio during the period.
Underweight to Struggling Energy Sector Pays Off
Market conditions during the quarter were mostly benign regarding their impact on our portfolio. The main macro impact to the portfolio was the pullback in energy-related businesses. Our underweight in Energy, which was a detractor in 2016, was a net positive in the first quarter of 2017.
New Administration’s Impact to be Measured Over Years, not Months
We believe that the effects of changes to the macro environment won't be felt for years. Likewise, we believe that any possible changes stemming from the new administration will likely take years before individual business values change.

Performance data shown represents past performance, which is no guarantee of future results. Current performance may be higher or lower than the past performance data shown. Investment returns and the value of an investment will fluctuate, and an investor's shares, when sold, may be worth more or less than their original cost. You can obtain performance data current to the most recent month-end (available within seven business days after the most recent month-end) by calling 800-422-1050 or visiting

Performance figures discussed reflect that of the institutional class shares.

The views expressed herein are those of the portfolio manager at the time of the interview and may not be reflective of their current opinions or future actions.  These views are not necessarily those of the fund company and should not be construed as such.

This information should not be considered as a recommendation to purchase or sell a particular security and the holdings or sectors mentioned may change at any time and may not represent current or future investments.