Harbor Ares ETF Shed 0.64% in Q1 as Rates Rose

The Harbor Ares Systematic Multi-Sector Income ETF (SIFI) posted a -0.64% return in the first quarter of 2026, trailing its benchmark as a rise in interest rates weighed on fixed-income positions. The fund's multi-sector approach, which spans corporate credit, securitized debt, and government bonds, could not offset the drag from duration exposure during a period when the 10-year Treasury yield climbed roughly 40 basis points.

SIFI's allocation to investment-grade corporate bonds and agency mortgage-backed securities, both sensitive to rate moves, contributed most of the underperformance. Floating-rate loans and collateralized loan obligations, which typically benefit from rising rates, provided a partial hedge but were not large enough in the portfolio to flip the result positive. The fund's systematic model, which adjusts sector weights based on momentum and carry signals, had reduced high-yield exposure heading into the quarter, missing some of the spread compression that helped that segment outperform.

The benchmark, a blend of broad fixed-income indices, returned positive territory for the quarter, driven by a stronger showing in high-yield and emerging-market debt. SIFI's underweight to both categories relative to the benchmark was the primary source of the tracking error. The fund's duration stood at roughly 4.5 years at quarter-end, slightly above the benchmark, amplifying the rate sensitivity.