In the fourth quarter of 2025, the Harbor International Compounders ETF, operating under its Institutional Class, recorded a return of 3.80% based on its Net Asset Value (NAV). This performance lagged behind its benchmark, the MSCI All Country World ex-US Index, which achieved a return of 5.05% during the same period. This report delves into the key factors influencing the ETF's performance, highlighting both the successes and challenges encountered.

During the evaluated quarter, several holdings significantly impacted the ETF's returns. Companies such as Prosus, RELX, and Linde were identified as the main detractors, pulling down the overall performance. Conversely, strong contributions from AstraZeneca and SSE helped mitigate some of these negative effects, showcasing the diversified nature of the fund's holdings and the varying fortunes of its investments.

The strategic adjustments made to the portfolio during this period reflect the fund manager's active approach to seeking growth opportunities and managing risk. New additions to the portfolio included Contemporary Amperex Technology, MercadoLibre, Rheinmetall, and Tesco. These investments were made with the expectation that they would contribute positively to future performance. Furthermore, the fund increased its existing stake in Prosus, despite its underperformance in the current quarter, indicating a long-term conviction in the company's prospects. This decision likely stems from an analysis of the company's fundamentals and its potential for recovery and growth in the coming periods.

In line with its dynamic investment strategy, the ETF also divested from several companies. Positions in Novo Nordisk, Atlas Copco, SMC, Ferguson, and Diageo were entirely sold off. These sales could be attributed to various factors, including a reevaluation of their growth potential, changes in market conditions, or the need to reallocate capital to more promising opportunities identified through ongoing research and analysis. Such strategic exits are a common practice in active portfolio management, aiming to optimize returns and align the portfolio with the fund's investment objectives.

Looking ahead, the fund will continue to monitor global market dynamics and individual company performances to make informed investment decisions. The insights gained from the fourth quarter's performance will be crucial in shaping future strategies, ensuring the ETF remains agile and responsive to the evolving investment landscape. The blend of new acquisitions and divestitures underscores a commitment to maintaining a robust and strategically aligned portfolio designed to navigate international markets effectively.