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Client Conversations: Duration Risk Is Rising: Are You Prepared?

October 2018

Rising interest rates may have a significant effect on fixed-income investments.

Client Conversations gives financial advisors an easy way to communicate with clients on topics influencing financial markets; it highlights common investor behaviors and offers ways to address the challenges investors face. Share this article with your clients, and remember to follow your firm's policies that govern sharing content with clients and prospects.


The Bloomberg Barclays US Aggregate Bond Index is a widely used proxy for the US bond market. With interest rates beginning to rise, there’s a warning light flashing within the Index. Duration, which measures the sensitivity of bonds within a portfolio to interest rates, recently exceeded six years in the Index for the first time since 1978.

 

Duration of the Bloomberg Barclays US Aggregate Bond Index (1/1/78–9/30/18)

Data Source: Barclays Live, Inc., 10/18. For illustrative purposes only. Indices are unmanaged and not available for direct investment.
Bloomberg Barclays US 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.

 

Select Hartford Funds with short duration*

September 30, 2018

  Effective Duration in Years Morningstar Category Overall Rating Cat. Size 3 Year Rating Cat. Size 5 Year Rating Cat. Size 10 Year Rating Cat. Size
Fixed-Income Fund (Class-I Ticker)                    
Hartford Short Duration Fund (HSDIX) 1.63 Short-Term Bond ★★★★ 474 4 474 4 400 4 260
Hartford Municipal Short Duration (HMJIX) 2.47 Muni National Short ★★★★
180 4 180 - - - -
Hartford Floating Rate Fund (HFLIX) 0.46 Bank Loan ★★★★ 211 4 211 4 184 3 81
Hartford Floating Rate High Income Fund (HFHIX) 0.57 Bank Loan ★★★★ 211 5 211 4 184 - -
Hartford World Bond (HWDIX) 2.34 World Bond ★★★★ 261 3 261 4 246 - -

*Funds listed have a duration of three years or less; duration is subject to change. View the full list of Hartford Funds.

Talk to your financial advisor today about how to prepare your portfolio for rising interest rates

Client Conversations gives financial advisors an easy way to communicate with clients on topics influencing financial markets; it highlights common investor behaviors and offers ways to address the challenges investors face. Share this article with your clients, and remember to follow your firm's policies that govern sharing content with clients and prospects.


Performance data quoted represents past performance and does not guarantee future results. Other share classes may have different ratings. The Morningstar RatingTM for funds, or “star rating”, is calculated for funds and separate accounts with at least a 3-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. Star rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance (without adjusting for any sales load, if applicable), placing more emphasis on downward variations and rewarding consistent performance. 5 stars are assigned to the top 10%, 4 stars to the next 22.5%, 3 stars to the next 35%, 2 stars to the next 22.5%, and 1 star to the bottom 10%. Overall Morningstar Rating is derived from a weighted average of the performance figures associated with its 3-, 5-, and 10-year (if applicable) Morningstar Rating metrics. For more information about the Morningstar Fund Ratings, including their methodology, please go to global.morningstar.com/managerdisclosures. © 2018 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/ or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

All investments are subject to risk, including the possible loss of principal. There is no guarantee a fund will achieve its stated objective. A 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 because interest rates are at, or near, historical lows. Foreign investments can be riskier and more volatile 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 (e.g., “Brexit”). These risks are generally greater for investments in emerging markets. Investments in high-yield (“junk”) bonds involve greater risk of price volatility, illiquidity, and default than higher-rated debt securities. Municipal securities may be adversely impacted by state/local, political, economic, or market conditions. Investors may be subject to the federal Alternative Minimum Tax as well as state and local income taxes. Capital gains, if any, are taxable. Loans can be difficult to value and highly illiquid; they are subject to credit risk, bankruptcy risk, and insolvency.

The Hartford Floating Rate and Hartford Floating Rate High Income Fund should not be considered an alternative to CDs or money market funds. These Funds are for investors who are looking to complement their traditional fixed-income investments.

Investors should carefully consider a fund’s investment objectives, risks, charges and expenses. This and other important information is contained in the fund’s prospectus and summary prospectus (if available), which can be obtained by visiting hartfordfunds.com. Please read it carefully before investing.

This information should not be considered investment advice or a recommendation to buy/sell any security. In addition, it does not take into account the specific investment objectives, tax and financial condition of any specific person. This information has been prepared from sources believed reliable but the accuracy and completeness of the information cannot be guaranteed. This material and/or its contents are current at the time of writing and are subject to change without notice. This material may not be copied, photocopied or duplicated in any form or distributed in whole or in part, for any purpose, without the express written consent of Hartford Funds. 

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