This report details the performance of the Harbor Emerging Markets Select ETF (EMES) for the third quarter of 2025, providing insights into its investment strategy and outlook. The analysis covers the fund's returns relative to its benchmark, key allocation shifts, and the factors influencing emerging markets, particularly the growing optimism surrounding China's technological advancements. Investors can gain a comprehensive understanding of the market dynamics and the strategic positioning of EMES.
During the third quarter of 2025, the Harbor Emerging Markets Select ETF (EMES) experienced a period of underperformance compared to its benchmark, the MSCI Emerging Markets Index. The ETF recorded a net asset value (NAV) return of 6.17%, while the benchmark achieved a higher return of 10.64%. This disparity reflects specific market conditions and the strategic adjustments made within the fund's portfolio during this period.
Emerging Markets Performance in Q3 2025
In the third quarter of 2025, the Harbor Emerging Markets Select ETF (EMES) delivered a net asset value (NAV) return of 6.17%, which fell short of its benchmark, the MSCI Emerging Markets Index, which achieved a 10.64% return. This underperformance was primarily influenced by shifting market sentiments and specific sector allocations. Despite the strong year-to-date rally in emerging market equities, the fund's management maintains a positive long-term view on the available investment opportunities. The increase in China's allocation within the ETF signifies a strategic response to an improving economic outlook and regulatory environment in the region, alongside the country's advancements in critical technological sectors.
The third quarter of 2025 presented a dynamic landscape for emerging markets, where the Harbor Emerging Markets Select ETF (EMES) reported a net asset value (NAV) return of 6.17%. This performance, while positive, trailed the MSCI Emerging Markets Index, which gained 10.64% over the same period. A notable strategic adjustment within the EMES portfolio was a substantial increase in its exposure to China. This decision was driven by an easing of concerns regarding China's economic growth trajectory and a more favorable regulatory climate. Furthermore, the burgeoning enthusiasm around artificial intelligence (AI) and the semiconductor industry has bolstered confidence in China's push towards technological self-sufficiency, a trend anticipated to continue. Despite the benchmark outperforming the ETF during this quarter, the fund's managers remain optimistic about the broader opportunity set within emerging markets, highlighting their conviction in the long-term potential of these regions even after a strong year-to-date run.
Strategic Shifts and Future Outlook
A significant strategic shift observed in the third quarter was the increased weighting of China within the Harbor Emerging Markets Select ETF. This adjustment was made in response to easing concerns about China's economic growth and a more supportive regulatory landscape. The burgeoning optimism surrounding AI and semiconductor industries also played a crucial role, reinforcing confidence in China's drive towards technological self-reliance. This strategic positioning aims to capitalize on these trends. Despite the underperformance relative to the benchmark in Q3, the fund's management remains positive about the long-term opportunities in emerging markets, believing that current valuations and future growth prospects offer compelling investment potential.
The strategic adjustments within the Harbor Emerging Markets Select ETF during the third quarter of 2025 centered on a notable increase in its allocation to China. This decision was predicated on several key factors, including a perceived relaxation of anxieties surrounding China's economic expansion and the implementation of a more favorable regulatory framework. A primary driver for this enhanced confidence is the pervasive excitement surrounding advancements in artificial intelligence (AI) and the semiconductor sector, which is fostering a belief in China's capacity for greater technological independence. This move reflects a deliberate effort to align the portfolio with what are viewed as significant and sustainable growth catalysts. Although the EMES did not match the benchmark's performance during this specific quarter, the overall outlook for emerging market equities remains robust. The fund's managers are confident that, given current market conditions and the forward-looking growth trajectories in these regions, there are substantial opportunities for value creation that warrant continued positive sentiment toward the asset class.