Harbor Bets on Small-Cap Growth with New Actively Managed ETF

CHICAGO, IL – January 15, 2026 – Harbor Capital Advisors, a Chicago-based asset manager with $67.2 billion under management, today launched the Harbor Active Small Cap Growth ETF (Ticker: SGRW). The new fund enters the market at a pivotal moment, representing a calculated bet that the long-dormant small-cap sector is poised for a significant, multi-year resurgence after more than a decade in the shadow of large-cap stocks.

SGRW is an actively managed exchange-traded fund designed to invest in high-quality U.S. small-cap growth companies. Rather than tracking a passive index, the fund relies on the stock-picking expertise of its subadvisor, Granahan Investment Management, a firm specializing exclusively in the small-cap universe for over thirty years. The launch positions Harbor to capitalize on what its leadership sees as an overdue cyclical shift, offering investors a vehicle to access potentially underpriced and under-researched companies.

A Wager on a Market Turning Point

Harbor’s timing for SGRW is deeply rooted in current market and economic analysis suggesting a potential end to an era of large-cap dominance. For much of the last 15 years, mega-cap stocks, particularly in the technology sector, have driven market returns, leaving smaller companies behind. This extended period of underperformance is an historical anomaly; since 1927, small-caps have, on average, outperformed their larger counterparts.

Several converging factors now support the thesis for a small-cap comeback. First, valuations appear highly attractive. As of early 2026, the Russell 2000 small-cap index trades at a price-to-earnings (P/E) ratio of approximately 18.1, a significant discount to the S&P 500's P/E of around 22. For some benchmarks, the valuation gap between small and large caps is near a two-decade low, suggesting a compelling entry point for value-conscious growth investors.

Second, the macroeconomic environment is becoming more favorable. The Federal Reserve’s three consecutive interest rate cuts in late 2025, which lowered the federal funds rate to a range of 3.50–3.75%, provide critical relief for smaller firms. These companies are often more sensitive to borrowing costs due to a greater reliance on floating-rate debt. Lower rates can directly improve their financial flexibility and profitability.

Finally, earnings growth expectations for 2026 are tilted heavily in favor of smaller companies. Consensus estimates from analysts project that median small-cap earnings will grow by roughly 23% over the next twelve months. FactSet forecasts a 19.1% increase in earnings per share for the S&P Small Cap 600 Index, outpacing the 13.6% growth projected for the S&P 500. After years of narrow market leadership, many analysts believe 2026 will see a broadening of returns, with small and mid-sized companies taking a more prominent role.

The Active Advantage vs. The Passive Price War

While the macro case for small-caps is building, Harbor is arguing that a passive approach may not be the optimal way to capture the opportunity. The SGRW fund is built on the premise that the small-cap market is inherently inefficient, with many companies being underfollowed by Wall Street analysts. This information gap, the firm contends, creates opportunities for skilled active managers to identify mispriced gems with strong fundamentals and durable competitive advantages.

To execute this strategy, Harbor has enlisted Granahan Investment Management, a 100% employee-owned firm founded in 1985. With a stable team averaging 25 years of experience, Granahan employs a disciplined, bottom-up research process to find innovative businesses before they appear on the broader market’s radar. The firm’s philosophy often leads to high-conviction, concentrated portfolios, seeking to maximize the impact of its best ideas.

However, this active expertise comes at a price. SGRW carries an expense ratio of 0.80%, placing it in a premium category compared to its passive competitors. For instance, the Vanguard Small-Cap Growth ETF (VBK) charges just 0.07%, while the iShares S&P Small-Cap 600 Growth ETF (IJT) has an expense ratio of 0.18%. This cost differential presents a significant hurdle that Granahan’s performance must consistently overcome to deliver value to SGRW investors.

Historical data from S&P's SPIVA scorecard shows that active management in this space is challenging; over the 15-year period ending in 2025, more than 85% of active small-cap funds failed to outperform their benchmark. Harbor and Granahan are betting that their specialized, research-intensive approach can place them among the minority that succeeds.

A Tool for Portfolio Diversification

Harbor is positioning SGRW not just as a standalone investment, but as a strategic component within a larger portfolio. The firm suggests the ETF can serve as a “satellite” holding or a “core complement” to foundational large-cap and passive equity exposures. By adding a dedicated allocation to actively managed small-cap growth, investors can potentially enhance diversification and tap into a different set of return drivers than those found in the S&P 500.

The fund’s prospectus outlines the specific risks associated with this strategy, including the inherent price volatility and potential illiquidity of smaller company stocks. It also notes that a growth-focused investing style can fall out of favor, leading to periods of underperformance relative to value strategies. As a new fund, SGRW has a limited operating history, and like all ETFs, its shares may trade at a premium or discount to their underlying net asset value.

“We believe small-cap growth is entering a period where patient, active investors may be well rewarded,” said Kristof Gleich, President and Chief Investment Officer of Harbor Capital Advisors, in the announcement. “After years of large-cap dominance, valuations, innovation cycles, and economic dynamics appear increasingly favorable for smaller, faster-growing companies. The Harbor Active Small Cap Growth ETF (Ticker: SGRW) brings together Granahan’s deep expertise in this space with the efficiency and accessibility of the ETF structure.”

For financial advisors and investors, the launch of SGRW presents a clear proposition: a belief that the tide is turning for small-cap stocks and that the best way to navigate those waters is with an experienced manager at the helm, even if it requires paying a premium for the journey.