A relief rally that began in January continued for most of the year as investors felt the worst of COVID-19 was in the rear-view mirror.
2021 may go down as the year of the ‘everything rally.’ Equities performed with strength across categories as rising vaccination rates and lower case counts through the summer brought the hope of a return to a more ‘normal’ global economy.
Harvest Portfolios Group used 2021’s strong markets to generate income for investors and capture economic trends that will drive growth, even in leaner times.
The first test for investors came in November, as investors began to worry that the Omicron variant will disrupt the economic recovery.
That test showed the strength of Harvest’s investment philosophy. Harvest’s income strategies continued to deliver for investors while our growth ETFs captured key pandemic-resistant trends, from the new ways we are consuming entertainment to the technologies that will secure our new digital economy.
These strategies amounted to a record year for Harvest Portfolios Group. In a Q&A, Michael Kovacs, Harvest’s President & CEO, reviewed the year, the impact of the pandemic and his outlook for 2022. He discussed Harvest’s top performing ETFs and talked about how the company’s strategy has helped keep the pandemic in perspective.
What kind of year was it for investors in Harvest ETFs?
It was a very good year, which caps a solid five years since we launched our ETFs. These ETFs have grown from a start up to $2 billion in assets with half of that growth this year. We’re proud of that achievement.
What are some of the year’s themes?
Fears of higher inflation and potentially higher interest rates crept in this past year. These worries have lifted financials including our Harvest US Bank Leaders Income ETF (HUBL:TSX). US banks have spent the last 10 years atoning for their sins of overexposure to housing and now their capital positions are stronger, their leverage is down and there are lower loan losses. It has led to a far more stable banking system.
Higher interest rates also work for the banks because their spreads get bigger and so does their profitability. Commodities have done well, including traditional oil and gas. Our Harvest Energy Leaders Plus Income ETF (HPF:TSX) benefitted here. As the economy reopened, our new Harvest Travel & Leisure Index ETF (TRVL:TSX) has benefitted. It was one of the most successful ETF launches of 2021 in Canada.
After a strong 2020 for the clean energy sector, our Harvest Clean Energy ETF (HCLN:TSX) has been under pressure, but we think that industry is only going to see more growth.
So, to make a long story short, it’s been widespread success and at the end of the day we’re happy to see that. Our philosophy keeps us grounded and focussed.
What is the Harvest advantage?
We focus on owning great companies. Our investments are positioned for long term growth and we are less concerned about short term noise. We believe true wealth is created by businesses that grow and expand. There will be storms but over time quality companies in growth industries will prevail.
Which ETF did best this year?
Our Harvest Tech Achievers Growth & Income ETF (HTA:TSX) has been our top performer and is up over 42% year to date. The work-at-home trend benefited some of the larger tech names, but there have been other broader technology developments that have acted as catalysts.
Our Blockchain Technologies ETF (HBLK:TSX) was our second best performing fund and is up by just under 42% for the year. Blockchain goes far beyond cryptocurrency and in fact, our exposure to crypto miners/trading is only about a third of the ETF. At the end of the day there are so many more applications whether in financial services, healthcare, real estate or the Metaverse. It all comes back to blockchain.
 One year Performance as at December 31, 2021
How is Harvest positioned in the Metaverse?
The Metaverse was a big theme this year. We have holdings across many of our ETFs that will benefit as the Metaverse develops, including tech, brand leaders, healthcare and our new sports ETF, Harvest Digital Sports & Entertainment Index ETF (HSPN:TSX). It holds eGaming, virtual reality and augmented reality companies. So, when people wonder how to invest in the Metaverse, we are already there.
Are you worried about inflation?
Inflation is having an effect on the cost of living short term. But I would argue these pressures will ease and inflation is going to stay in the 2% or lower range over the longer term. I think rising interest rates are short term aberrations.
We’re starting to see supply chain bottlenecks easing with commodity prices falling. More people are getting back into the workforce and that will reduce labour shortages in the later half of 2022.
What do you see in 2022?
I don’t think we can expect the same sort of year as 2021. But the S&P has averaged a 6% to 8% compound rate of return since 1913 and longer term I would expect that to continue.
At the end of the day, we keep plugging away sticking to our philosophy. Any future products will continue to follow from that.
To find out how your clients can benefit from this strategy call 1.866.998.8298.
For more on Harvest ETFs click here.
By Michael Kovacs
President & CEO