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Staff happy with their bosses ETF

Chicago-based Harbor Capital is launching an ESG ETF that targets employee development and job satisfaction—what it calls “human capital”.

 

The Harbor Corporate Culture Leaders ETF (HAPY) tracks the Human Capital Factor Unconstrained Index, which is managed by consultancy Irrational Capital. (The index methodology is not public).

 

The index looks for 80-odd large US companies that have happier employees. The rationale being that happy staff are more productive and more likely to care about their company. Employee wellbeing can therefore be a source of alpha, the thinking runs.

How is employee happiness measured? The prospectus doesn’t say. It says only that it looks at four things:

  • Employee engagement and motivation
  • Trust and transparency
  • Point of view diversity
  • Compensation fairness

Stocks chosen are equally weighted.

The fund charges 0.50%.

Bernie’s commentary – cause and effect

There’s a lot to say here. And if nothing else, this investment thesis is very interesting.

For me, the crucial question is about cause and effect. Do successful companies create happier staff? Or do happy staff create better businesses? Or is there simply no causal relationship there?

The thesis this ETF supports is that happier staff create better businesses. And I’m sure that’s partly true. When staff hate their company, they don’t act in its best interests. They do as little work as possible to avoid getting fired. And who can blame them?

In my experience though it can also go the other way: successful businesses make staff happier. When businesses are successful, they have more money. They can then pay more and provide better conditions. Better pay and conditions then makes staff happier. Microsoft is a good example (great pay, low turnover).

It’s also possible that there’s just no relationship between staff happiness and corporate success. Tesla is probably the most successful company the past five years, yet it has an awful labour record. So bad in fact, that it gets Tesla excluded from ESG indexes.

I don’t know what the answer is to any of this. I guess this ETF’s performance may give us some insight into which way the causal arrow runs.

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Bernie Thurston

Bernie Thurston is the founder and CEO of Ultumus, a leading provider of ETF and index data, calculation, and workflow solutions. With over 20 years of experience in financial technology, Bernie has been at the forefront of index and ETF innovation since 2003.

His finance career began at Markit, where as Managing Director for Equities he designed and developed products for index and ETF composition and dividend forecasting from 2003 to 2011. He then founded and led DeltaOne Solutions as Managing Director, building it into a global provider of index and ETF trading data and technology services. The company managed over 100,000 multi-asset class products before being acquired by Markit in 2015.

Following the acquisition, while working for an ETF issuer, Bernie identified fundamental issues in how index and ETF data was represented across the industry. This led him to found Ultumus in 2016, building solutions for ETF primary market operations. Under his leadership, Ultumus has grown into a market leader serving major financial institutions globally, with its ETF Order Management System (OMS) supporting create and redeem workflows worldwide and its PCF platform calculating and distributing portfolio composition files for ETF issuers across every major market.

Bernie sold Ultumus to SIX Group in 2021, where it continues to expand across Europe, North America, and Asia-Pacific. Known for building lasting teams and leveraging cutting-edge technology, Bernie is focused on establishing Ultumus as the backbone of the global index and ETF industry through standardisation and automation.

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