Irrational Capital’s HAPI Is Outperforming the S and P 500

The issuer weights companies based on data about employee satisfaction—not financial metrics.

Finance Reporter
Reviewed by: Staff
Edited by: James Rubin

An ETF issuer that picks its holdings based on how employees feel about where they work has been quietly outperforming the S&P 500 for the past 16 months.

Irrational Capital's Harbor Human Capital Factor US Large Cap ETF (HAPI) rose 12.3% in the first quarter of 2024, beating the S&P 500’s 11% gains. HAPI's 30% increase in 2023 also surpassed the index, which rose 26%. 

“We don’t use any financial information, so there are no P/E ratios, no earnings per share metrics—this is purely the perception of employees, and we’ve codified it into the human capital factor,” said Irrational Capital founder David van Adelsberg in an in interview with about his firm's employee-centered approach to weighting companies. 

Although behemoths such as Vanguard and BlackRock dominate the ETF industry, smaller issuers without the sprawling infrastructure of huge asset managers can gain assets by finding ways to differentiate themselves. Pacer ETFs won the Best ETF of the Year at the Awards with its $9 billion U.S. Small Cap Cash Cows 100 ETF (CALF), which also vastly outperformed the S&P 500.

Measuring ‘Human Capital’

Irrational Capital, which introduced its funds through the white-label issuer Harbor, has $460 million in assets in its lineup of three ETFs, which also include the Harbor Human Capital Factor US Small Cap ETF (HAPS) and the Harbor Human Capital Factor Unconstrained ETF (HAPY).

The firm uses survey data that includes employee responses to questions about intrinsic rewards, such as how they feel they are valued by their employer, in addition to more straightforward data points such as compensation and benefits. Van Adelsberg explained that he and co-founder, behavioral economist Dan Ariely, developed the methodology with the notion that companies with the most positive and inspirational corporate culture will see that reflected in their stock price.

“It was a great concept—but we realized we could only execute it with data,” van Adelsberg said of the firm’s founding. “You have to ask people, and you have to get information from the frontline to the top of the organization,” he said.

HAPI's largest holdings are Nvidia Corp. and Microsoft Corp., but van Adelsberg says that's because of their "human capital" ratings, not their financial information. 

To be sure, HAPI's $5.6 million in inflows in the first quarter were modest compared to other ETFs that also beat the S&P 500, but inflows hit $4.7 million in the first week of April, according to a company spokesperson.

Contact Lucy Brewster at [email protected].

Lucy Brewster is a finance reporter at covering asset managers, emerging technologies, and regulation. She hosts webinars and appears on Exchange Traded Fridays,’s flagship podcast. She previously was a finance fellow at Fortune Magazine where she covered markets, investment strategy, and venture capital. She has also been a freelancer writer at the publication Mergers & Acquisitions and a research fellow at the Historic Hudson Valley. 

She graduated from Vassar College in 2022 with a degree in History and was an editor of The Miscellany News, the college's award winning student run newspaper. 

Lucy lives in Brooklyn, NY, and in her free time she loves to run and find new recipes to cook.