ADVISORY AGREEMENT APPROVALS—Continued
The Trustees considered the expertise of IR+M in managing assets generally and in the bond asset class specifically, noting that IR+M managed approximately $469 million in core plus assets out of a firm-wide total of approximately $96.0 billion in assets under management as of December 31, 2021. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class.
The Trustees observed that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $1.58 billion, showed the Fund’s management fee was above the group median for the Institutional Class. The actual total expense ratio of the Fund’s Institutional Class was below the Broadridge group median and above the universe median expense ratios. The Trustees considered that the Fund’s management fee and total expense ratio had been reduced effective February 2, 2022 and that had those lower fees and expense ratios been in effect during 2021, the Fund’s management fee and expense ratio would have been in the first quintile of its expense group. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2023. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
Harbor Disruptive Innovation Fund. The Trustees considered Harbor Disruptive Innovation Fund (inception date November 1, 2000, formerly Harbor Mid Cap Growth Fund (change effective September 1, 2021)), noting that, according to the Broadridge report, the Fund’s Institutional Class had underperformed its Broadridge group and universe medians for the one-year period ended December 31, 2021, while outperforming its Broadridge group and universe medians for the three- and five-year periods ended December 31, 2021. The Trustees considered that the Fund’s one-, three- and five-year rolling returns as of December 31, 2021 ranked in the fourth, second and first quartile, respectively, according to Morningstar. The Trustees considered that the Fund had underperformed its primary benchmark, the S&P 500 Index, for the one-year period ended December 31, 2021 and outperformed the benchmark for the three- and five-year periods ended December 31, 2021.
The Trustees noted the fact that 4BIO Partners LLP (“4BIO Capital”), NZS Capital, LLC (“NZS Capital”), Sands Capital Management, LLC (“Sands Capital”), Tekne Capital Management, LLC (“Tekne”), and Westfield Capital Management Company, L.P. (“Westfield Capital”) had been appointed as the Fund’s subadvisers for an initial two-year term effective September 1, 2021 and that performance prior to that date is not attributable to 4BIO Capital, NZS Capital, Sands Capital, Tekne, and Westfield Capital. The Trustees further noted that, prior to that date, the Fund was compared to a different benchmark index. The Trustees considered the expertise of 4BIO Capital, NZS Capital, Sands Capital, Tekne, and Westfield Capital in the asset classes for which they provide model portfolios.
The Trustees observed that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $350 million, showed that the Fund’s contractual management fee was below the group median for the Institutional Class. The Broadridge data also showed that the actual total expense ratio for the Fund’s Institutional Class was below its group median and below its universe median. The Trustees considered that the Fund’s management fee rate was reduced in connection with the repositioning of the Fund as Harbor Disruptive Innovation Fund. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least August 21, 2022. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
Harbor Diversified International All Cap Fund. The Trustees considered Harbor Diversified International All Cap Fund (inception date November 2, 2015), noting that its Institutional Class performance was above its Broadridge group median for the one-year period ended December 31, 2021, its Broadridge group and universe medians for the three-year periods ended December 31, 2021, and its universe median for the five-year period ended December 31, 2021, and below its Broadridge universe median for the one-year period ended December 31, 2021 and its Broadridge group median for the five-year period ended December 31, 2021. The Morningstar data presented showed that the Fund’s one-, three- and five-year rolling returns as of December 31, 2021 ranked in the third, second and second quartiles, respectively. The Trustees noted that the Fund had outperformed its benchmark, the MSCI All Country World Ex. U.S. (ND) Index, for the one-, three- and five-year periods ended December 31, 2021.
The Trustees considered the expertise of Marathon Asset Management LLP (“Marathon-London”) in managing assets generally and in the strategy used with respect to the Fund specifically, noting that Marathon-London managed approximately $5.8 billion in assets in this strategy, out of a firm-wide total of approximately $57.0 billion in assets under management. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class.
The Trustees noted that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $1.23 billion, showed the Fund’s management fee was below the group median for the Institutional Class. The actual total expense ratio for the Fund’s Institutional Class was below the group and universe median expense ratios. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2023. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
