Harbor Capital eyes mutual fund conversions in major ETF push

Harbor Capital Advisors looks all set to join the growing ranks of money managers flipping mutual-fund assets into ETFs.

The firm with about $63 billion overall expects that at least one of its products could be switched to an exchange-traded fund this year, according to Steve Cook, managing director of ETF capital markets at Harbor.

After launching its first ETFs in 2021, the Chicago-based firm wants to have as many as 12 by the end of the year, as it plans a major push into the $6.9 trillion U.S. industry.

“The trends in the marketplace dictate that asset managers and investment managers need to be where the flows are going,” Cook said in an interview. “It’s certainly proven that ETFs, on the wealth-front, have garnered most of the flows and that’s continuing to accelerate.”

Investors have been turning away from mutual funds and toward ETFs for years now, especially in the equity market, and the money-management industry is following. That trend crystallized last year with the historic first conversion by Los Angeles-based Guinness Atkinson Asset Management in March.

Since then, quant giant Dimensional Fund Advisors surged into the list of biggest ETF issuers after flipping about $29 billion from its mutual funds. Franklin Templeton is switching around $250 million of assets this year, while JPMorgan Asset Management plans roughly $10 billion worth of conversions.

While Cook wouldn’t speculate on how many assets could be switched or from which funds, conversions could be key to Harbor’s ETF success.

The Harbor Long-Term Growers ETF (WINN) became the firm’s fourth when it launched this month. The growth-focused fund — managed by a team at Sig Segalas’ Jennison Associates, where ETF star Cathie Wood spent nearly two decades — joined the Harbor Disruptive Innovation ETF (INNO), the Harbor Scientific Alpha Income ETF (SIFI) and the Harbor Scientific Alpha High-Yield ETF (SIHY). All four debuted in the past six months or so.

Collectively they’re off to a slow start, with combined assets of around $73 million. Meanwhile the Harbor Capital Appreciation Fund — with a similar large-cap, growth-focused strategy to WINN — has almost $35 billion in assets across its share classes, according to Bloomberg data.

“We do think and foresee that Harbor will ultimately look to convert some mutual funds into ETFs,” Cook said. “We’re excited about some of the prospects that can bring, where it’s right for shareholders.”