By Harvest ETFs
It was in 2009, when the global financial sector lay devastated by the global financial crisis, that Harvest Portfolios Group Inc. was launched with their first fund: the Harvest Banks & Buildings Income Fund. Initially a structured fund, and now a mutual fund, Banks and Buildings offered exposure to financials at a time when many investors saw the sector as radioactive.
Harvest launched that fund based on a long-term vision for quality.
Harvest’s Founder Michael Kovacs saw that the global financial sector would remain essential to our world, despite the trials and tribulations it faced in that moment. He saw, as well, that while US banks were sorting out fundamental weaknesses, Canadian banks remained solid, they were trading at a discount because of some exposure to the US subprime market and overall investor sentiments on the sector.
“My thought at the time was, these are great institutions, they’ve been around many decades. We’ve never had a major bank bankruptcy in Canada. I felt that we had a significant mispricing at the time and there was a big opportunity in that,” said Kovacs. “The idea was, we’ve got great financials in Canada, so let’s allocate capital to Canadian financial institutions. Canada also has great real estate businesses, so let’s balance financial assets with hard assets. Both asset classes were providing very high yields, so we combined them together in a product.”
Kovacs saw a set of high-quality companies with long-term growth prospects, and his vision held true. $10,000 invested in the Harvest Banks & Buildings Income Fund at inception would be worth $30,127 at the end of January 2022. Canadian financials have gone from strength to strength, and US banks have corrected their structural mistakes to resume their place at the core of the global economy.
Seven years later, Harvest Portfolios Group launched a suite of ETFs to deliver growth and income from a wide range of industries and mega-trends. Their legacy and expertise in financials, beginning with that 2009 outlook, have been built into the Harvest US Bank Leaders Income ETF (HUBL:TSX). That ETF takes Harvest’s vision for high-quality companies with long-term growth prospects and applies it to the US Banking sector.
US banks are a different beast than they were in 2009. They have worked out their structural weaknesses and become robust players with global reach. Investment banks like Goldman Sachs facilitate and finance massive deals across the globe. The ‘big four’ banks: Bank of America, Wells Fargo, Citi, and JPMorgan Chase play at almost every level of the US economy. JPMorgan, to illustrate the point, is the most valuable bank in the world.
That doesn’t mean the US financial sector is immune to the shocks and struggles that impact all equity markets. Recent fears of a hawkish fed, coupled with geopolitical noise out of Eastern Europe and a few key pieces of earnings news sparked a period of volatility at the start of 2022. It is in a period like this, when investors begin to worry, that investment experience, historical perspective, and a focus on quality companies can be especially valuable.
Having seen the financial sector rise from the ashes of 2009, Kovacs knows that there will always be noise, there will always be pullbacks, and there will always be corrections. But he also knows, with a certainty that only experience can provide, that over long periods of time, the best companies rise to the top. His experience with financials proves this point. When a global sector lay in ruins, Harvest started picking up the best pieces of it. Beginning with Canadian banks, and expanding into US financials Harvest has built funds on the basis of this vision for quality, ETFs that now have their own legacies of success.
“I’ve seen markets correct, I’ve studied corrections going back before 1929,” Kovacs said. “And what you learn over time, is that the best will survive and rise.”