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Strategic Beta ETFs Underutilized in Managing Current Investor Anxieties, Hartford Funds Survey Finds
Lack of Familiarity Stifling Advisor, Investor Use

January 18, 2017
Radnor, PA

New survey data from Hartford Funds reveals that market volatility and geopolitical events are fueling investor anxiety, yet most aren’t taking advantage of the full suite of investment options that may help manage risk exposure at a lower cost*, namely strategic beta exchange traded funds (ETFs).


Further, while advisors are aware of these products, they aren’t familiar enough to begin using them in a meaningful way in client portfolios. Hartford Funds surveyed nearly 800 investors and more than 300 financial advisors to gauge sentiment and knowledge of strategic beta ETF strategies.

While most advisors (62 percent) report being at least somewhat familiar with strategic beta ETFs, 72 percent either don’t use them at all (36 percent) or only have 0-10 percent of client portfolios invested in these solutions (36 percent). Of those advisors who do not invest in strategic beta ETFs, 41 percent claim it is because they simply are not familiar enough. This disconnect is trickling down to investors too, as only 14 percent claim to be familiar.

“As strategic beta ETFs proliferate the marketplace, advisors have an enormous opportunity to educate themselves and their clients about their potential advantages,” said Ted Lucas, head of Systematic Strategies and ETFs at Hartford Funds. “These investment products have the potential to help clients solve for specific objectives like growth, volatility and income – typically at a lower cost than traditional actively managed mutual funds.”

The survey revealed a sharp disconnect between usage and perceived potential benefits. Investors are most concerned about market volatility (36 percent) and geopolitical events including elections and political unrest (22 percent) when thinking about their investments, yet don’t have products incorporated into their portfolio to help address these challenges. Similarly, advisors cited the potential to achieve index outperformance (33 percent) and diversification (30 percent) as some of the most attractive features of these products, yet are underutilizing them.

“Strategic beta ETFs provide advisors with an opportunity to help investors with the challenges in today’s low-growth and potentially volatile market environment looking forward,” continued Lucas. “While strategic beta usage has often been tactical to date, many multifactor strategic beta products were designed for core allocations and long-term investments.”

The overwhelming majority of advisors consider strategic beta to be a tactical investment tool rather than a strategic “core” investment tool (72 percent compared to 28 percent). These findings align with the fact that only five percent of surveyed financial advisors approximate that they allocate 20 to 30 percent of assets to strategic beta in client portfolios, followed by 5 percent of advisors who allocate more than 30 percent.

The survey of 794 investors and 348 advisors was executed both in-person and via phone during the months of October and November 2016.

*Ordinary brokerage commissions apply.

About Hartford Funds

Founded in 1996, Hartford Funds is a leading provider of mutual funds and 529 college savings plans. Using its human-centric investing approach, Hartford Funds creates strategies and tools designed to address the needs and wants of investors. Leveraging partnerships with MIT AgeLab and leading practice management experts, Hartford Funds delivers insight into the latest demographic trends and investor behavior.

As of October 24, 2016, the firm’s line-up includes more than 55 mutual funds in a variety of styles and asset classes, and five strategic beta ETFs. Its mutual funds (with the exception of certain fund of funds) are sub-advised by Wellington Management or Schroder Investment Management North America Inc. The strategic beta ETFs offered by Hartford Funds are designed to help address investors’ evolving needs by leveraging a unique risk-optimized approach, which identifies risks within each asset class and then deliberately and systematically re-allocates capital toward risks more likely to enhance return potential. Hartford Funds has mutual fund assets under management of $77.9 billion as of September 30, 2016 (excluding assets used in certain annuity products). For more information about our investment family, visit www.hartfordfunds.com.

Media Contact:

Meg McDermott
(212) 279-3115 x238
mmcdermott@prosek.com


Important Information

All investments are subject to risks, including the possible loss of principal. Diversification does not ensure a profit or protect against a loss in a declining market.

Hartford Funds refers to Hartford Funds Management Group, Inc., and its subsidiaries, including the mutual funds’ investment manager, Hartford Funds Management Company, LLC (HFMC), the mutual funds’ distributor, Hartford Funds Distributors, LLC, Member FINRA, as well as Lattice Strategies LLC, a wholly owned subsidiary of HFMC, which serves as the adviser to exchange-traded funds (ETFs). Certain funds are sub-advised by Wellington Management Company LLP or Schroder Investment Management North America Inc. Schroder Investment Management North America Ltd. serves as a secondary sub-adviser to certain funds. ETFs are distributed by ALPS Distributors, Inc. (ALPS). Hartford Funds is not affiliated with any fund sub-adviser or ALPS. The MIT AgeLab is not an affiliate or subsidiary of Hartford Funds.

Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing. This and other information can be found in the fund’s prospectus, which should be read carefully before investing. To obtain a mutual fund prospectus or summary prospectus, please call 888-843-7824 (retail) or 800-279-1541 (institutional); ETF prospectuses can be obtained by calling 415-315-6600.

“The Hartford” is The Hartford Financial Services Group Inc. (“HFSG”) and its subsidiaries. HFD is a subsidiary of The HFSG.

HIG-W

Some of the statements in this release may be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We caution investors that these forward-looking statements are not guarantees of future performance, and actual results may differ materially. Investors should consider the important risks and uncertainties that may cause actual results to differ. These important risks and uncertainties include those discussed in The Hartford’s Quarterly Reports on Form 10-Q, our 2015 Annual Report on Form 10-K and the other filings The Hartford makes with the Securities and Exchange Commission. We assume no obligation to update this release, which speaks as of the date issued.

From time to time, The Hartford may use its website to disseminate material company information. Financial and other important information regarding The Hartford is routinely accessible through and posted on our website at http://ir.thehartford.com. In addition, you may automatically receive email alerts and other information about The Hartford when you enroll your email address by visiting the "Email Alerts" section at http://ir.thehartford.com.

 

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