- Cautious rhetoric from central banks, moderating growth and the turmoil in Turkey were among the key developments in July
- The Bank of Japan disappointed markets with only a minimum set of policy easing measures. The Bank of England also refrained from cutting rates, choosing to wait and get a clearer picture of the Brexit impact before deciding on the appropriate policy at August’s meeting.
- Brexit uncertainty continued to drag government yields lower, credit spreads tightened and the US dollar’s performance was mixed
Is the Bank of Japan implicitly acknowledging the limits of monetary policy? Japan: Inflation expectations below pre-QE2 levels
Japan: consumer inflation expectations (%)
Source: Japan Cabinet Office, WCM, CEIC
- Opportunistic strategies drove returns over the course of the month as global government core exposure was neutral based on mixed performance from government bonds and the US dollar
- Allocations to high-yield, investment-grade, and securitized credit drove the majority of results in opportunistic space for the month of July as credit spreads re-traced post Brexit widening
- Macro-driven currency strategies were positive. Our underweight positions in the British pound, New Zealand dollar and euro were the primary contributors as these currencies continued to decline earlier in the month due to the fallout from the Brexit shock.
- Quantitative country relative-value strategies detracted. Our long US 10-year versus UK 10-year position detracted in the second half of the month as spreads widened, driven by a rally in gilts given ongoing Brexit concerns.
|Fund Performance (%)|
|As of 7/31/16||MTD||YTD||1 Year||3 Year||5 Year||Since Inception
|Hartford World Bond Fund A||0.19||3.19||2.52||2.09||2.93||3.38|
|With 4.5% Max Sales Charge||--||--||-2.10||0.53||1.98||2.46|
|Morningstar Category: World Bond||--||7.85||5.91||2.03||1.47||--|
|Citigroup World Government Bond Index||--||11.33||11.32||2.37||0.83||--|
|Barclays US Aggregate Bond Index||--||5.98||5.94||4.23||3.57||--|
Expenses3 % (Class A) Net Op. Exp.: 1.05% Gross Op. Exp.: 1.08%
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of the investment will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For more current performance information to the most recent month-ended, click here.
Portfolio Positioning & Market Outlook
- Portfolio duration1 was decreased to 1.88 years primarily through an increase in active short positions as valuations on government bonds look increasingly rich. Some central banks are acknowledging the limits of monetary policy and the emphasis is shifting towards fiscal stimulus. Our US dollar exposure remains flat month over month at 93% amidst expectation for continued dollar strength.
- The US Federal Reserve looks set to delay resuming its hiking cycle but there is still rising growth divergence between North America, on the one hand, and Europe and Asia on the other. We are overweight the US dollar and Mexican peso versus the euro, Hong Kong dollar and New Zealand dollar.
- The Riksbank will find it hard to match the European Central Bank’s monetary accommodation. We are overweight the Swedish krona versus the euro.
Currency Exposure (%)
|Currency Exposure (%)|
|As of 7/31/16||Fund||Benchmark2|
|New Zealand Dollar||-1.44||0.00|
|Hong Kong Dollar||-2.19||0.00|
A Word About Risk
All investments are subject to risk, including the possible loss of principal. There is no guarantee the Fund will achieve its stated objective. The Fund’s share price may fluctuate due to market risk and/or security selections that may underperform the market or relevant benchmarks. Fixed Income risks include credit, liquidity, call, duration, and interest-rate risk. As interest rates rise, bond prices generally fall; these risks are currently heightened due to the historically low interest rate environment. Obligations of U.S. Government agencies are supported by varying degrees of credit but are generally not backed by the full faith and credit of the U.S. Government. Investments in high-yield (“junk”) bonds involve greater risk of price volatility, illiquidity, and default than higher-rated debt securities. Mortgage- and asset-backed securities’ risks include credit, interest-rate, prepayment, and extension risk. Derivatives may be riskier or more volatile than other types of investments because they are generally more sensitive to changes in market or economic conditions; risks include currency, leverage, liquidity, index, pricing, and counterparty risk. Foreign investments can be riskier than U.S. investments due to the adverse effects of currency exchange rates, differences in market structure and liquidity, as well as political and economic developments in foreign countries and regions. These risks are generally greater for investments in emerging markets. The Fund may have high portfolio turnover, which could increase the Fund’s transaction costs and an investor’s tax liability. The Fund is non-diversified, so it may be more exposed to the risks associated with individual issuers than a diversified fund. Privately placed, restricted (Rule 144A) securities may be more difficult to sell and value than publicly traded securities, thus they may be potentially illiquid.
1 Duration is a measure of the sensitivity of an asset or portfolio’s price to nominal interest rate movement.
2 Benchmark is the Citigroup World Government Bond Index.
3 Expense ratios are as shown in the most recent prospectus. Net expenses reflect contractual expense reimbursements in instances when these reductions reduce the fund’s gross expenses. Contractual reimbursements remain in effect until February 28, 2017 and automatically renew for one-year terms unless terminated.
Citigroup World Government Bond Index is a market-capitalization weighted index consisting of government bond markets. Country eligibility is determined based on market capitalization and investability criteria. All issues have a remaining maturity of at least one year.
Barclays U.S. Aggregate Bond Index is composed of securities from the Barclays Government/Credit Bond Index, Mortgage-Backed Securities Index, Asset-Backed Securities Index, and Commercial Mortgage-Backed Securities Index.
Indices are unmanaged and not available for direct investment.