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The Factor Report
The Factor Report

4Q17: What's driving factor performance?

Jump to chart out of 24 GO »

Structural Factor Performance: Regions, Sectors, and Size

Performance of 15 developed markets:
Largest market cap to smallest


The rally in developed markets has been broad based, extending beyond the largest nations in which passive capitalization-weighted indexes are concentrated (as of 9/30/17)

Country portfolios are capitalization-weighted with free-float market cap. The portfolios are theoretical and assume no fees, trading costs, or short-selling restrictions. Actual results may differ significantly. Performance is based on annual “total returns,” which includes reinvested dividends but not interest, capital gains, taxes, or transaction costs. A simple average was used to calculate the return for countries in the “Other” category. MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of 23 developed markets. MSCI performance is shown net of dividend withholding tax. Data source: Compustat. Calculations by Hartford Funds. For illustrative purposes only. Results are subject to change.

Data Source: MSCI. Index is unmanaged and not available for direct investment. Past performance is no guarantee of future results.

Structural Factor Performance: Regions, Sectors, and Size

Performance of 16 emerging markets:
Largest market cap to smallest


Emerging markets rebounded dramatically over the past year, with many countries turning in double-digit gains (as of 9/30/17)

Country portfolios are capitalization-weighted with free-float market cap. The portfolios are theoretical and assume no fees, trading costs, or any short selling restrictions. Actual results may differ significantly. Performance is based on annual “total returns,” which includes reinvested dividends but not interest, capital gains, taxes, or transaction costs.
MSCI EM Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance in the global emerging markets, consisting of 24 emerging market country indices. MSCI performance is shown net of dividend withholding tax. Data source: Compustat. Calculations by Hartford Funds. For illustrative purposes only. Results are subject to change.

Data Source: MSCI. Index is unmanaged and not available for direct investment. Past performance is no guarantee of future results.

Structural Factor Performance: Regions, Sectors, and Size

The cyclical nature of US sector performance (1/1/07-9/30/17)


Information technology and healthcare have led the way in 2017, while telecom and energy have lagged

The chart ranks the performance of various sectors using the US universe as defined by Hartford Funds. To be included in the universe, a stock must have had an average daily trading volume over the last 6 months > $1.5 million and a total market capitalization > $500 million, resulting in a universe of approximately 2,500 stocks. Data source: Compustat. Calculations by Hartford Funds. For illustrative purposes only. Results are subject to change.

Past performance is no guarantee of future results.

Structural Factor Performance: Regions, Sectors, and Size

US market returns (%) by size quintiles


While long-term performance has been similar across market caps, large-cap companies have outperformed in 2017 (as of 9/30/17)

The chart illustrates the performance of companies ranked by size using the US universe as defined by Hartford Funds. To be included in the universe, a stock must have had an average daily trading volume over the last 6 months > $1.5 million and a total market capitalization > $500 million, resulting in a universe of approximately 2,500 stocks. Each quintile represents 20% of the universe. Data source: Compustat. Calculations by Hartford Funds. For illustrative purposes only. Results are subject to change.

Past performance is no guarantee of future results.

Structural Factor Performance: Regions, Sectors, and Size

The cyclical nature of developed markets (ex US) sector performance (1/1/07-9/30/17)


Information technology has been the best-performing sector in 2017, while energy has lagged

The chart ranks the performance of various sectors using the developed markets (ex US) universe as defined by Hartford Funds. To be included in the universe, a stock must have had an average daily trading volume over the last 6 months > $1.5 million and a total market capitalization > $500 million, resulting in a universe of approximately 2,500 stocks. Data source: Compustat. Calculations by Hartford Funds. For illustrative purposes only. Results are subject to change.

Past performance is no guarantee of future results.

Structural Factor Performance: Regions, Sectors, and Size

Developed markets (ex US) returns (%) by size quintiles


While long-term performance has been similar across market caps, the smallest companies have outperformed YTD, and over the past 1 year, 3 years, and 5 years (as of 9/30/17)

The chart illustrates the performance of companies ranked by size using the developed markets ex US universe as defined by Hartford Funds. To be included in the universe, a stock must have had an average daily trading volume over the last 6 months > $1.5 million and a total market capitalization > $500 million, resulting in a universe of approximately 2,500 stocks. Each quintile represents 20% of the universe. Data source: Compustat. Calculations by Hartford Funds. For illustrative purposes only. Results are subject to change.

Past performance is no guarantee of future results.

Excess Factor Performance: US Markets

The cyclical nature of factor-based portfolios


Excess factor returns* of US factor-based hypothetical portfolios (1/1/07-9/30/17)

See the Glossary below for definitions.
*Excess factor returns are factor returns after subtracting market beta (i.e., the returns of a market index). Market beta is represented by the MSCI USA Index.
The chart ranks the performance of various factor-based hypothetical portfolios using the US universe as defined by Hartford Funds. Portfolios were rebalanced monthly.
From the date of each rebalance, to be included in the universe, a stock must have had an average daily trading volume over the last 6 months > $1.5 million and a total market capitalization > $500 million, resulting in a universe of approximately 2,500 stocks. Value, Momentum, Quality, Small Size, and Low Volatility represent factor-based portfolios that select the companies in the first quintile when ranked from highest to lowest score based on each respective factor, and equal-weights them. The portfolios are theoretical and assume no fees, trading costs, or any short selling restrictions. Actual results may differ significantly. Performance is based on annual “total returns,” which includes reinvested dividends but not interest, capital gains, taxes or transaction costs. Data Sources: Compustat and MSCI. Calculations by Hartford Funds. For illustrative purposes only. Results are subject to change.

MSCI USA Index is designed to measure the performance of the large- and mid-cap segments of the US market. MSCI performance is shown gross of dividend withholding tax. Annual Returns for MSCI USA Index are shown from 2007 to 2016. Index is unmanaged and not available for direct investment. Past performance is no guarantee of future results.

Excess Factor Performance: US Markets

Q3 factor-based portfolio performance


Factor-based portfolios turned in mixed results, with momentum and small size turning in positive performance while value struggled (7/1/17-9/30/17)

See the Glossary below for definitions.
The chart ranks the performance of various factor-based hypothetical portfolios using the US universe as defined by Hartford Funds. Portfolios were rebalanced monthly. From the date of each rebalance, to be included in the universe, a stock must have had an average daily trading volume over the last 6 months > $1.5 million and a total market capitalization > $500 million, resulting in a universe of approximately 2,500 stocks. Value, Momentum, Quality, Small Size, and Low Volatility represent factor-based portfolios that select the companies in the first quintile when ranked from highest to lowest score based on each respective factor, and equal-weights them. The portfolios are theoretical and assume no fees, trading costs, or any short selling restrictions. Actual results may differ significantly. Performance is based on annual “total returns,” which includes reinvested dividends but not interest, capital gains, taxes, or transaction costs. Market return is represented by the MSCI USA Index, which is designed to measure the performance of the large- and mid-cap segments of the US market. MSCI performance is shown gross of dividend withholding tax. Data Sources: Compustat and MSCI. Calculations by Hartford Funds. For illustrative purposes only. Results are subject to change.

Index is unmanaged and not available for direct investment. Past performance is no guarantee of future results.

Excess Factor Performance: US Markets

Historical excess returns of factor-based portfolios


Value has turned in the strongest excess factor returns over the past 10 years, while small size has delivered the highest excess returns over the past year (as of 9/30/17)

The chart ranks the performance of various factor-based hypothetical portfolios using the US universe as defined by Hartford Funds. Portfolios were rebalanced monthly. From the date of each rebalance, to be included in the universe, a stock must have had an average daily trading volume over the last 6 months > $1.5 million and a total market capitalization > $500 million, resulting in a universe of approximately 2,500 stocks. Value, Momentum, Quality, Small Size, and Low Volatility represent factor-based portfolios that select the companies in the first quintile when ranked from highest to lowest score based on each respective factor, and equal-weights them. The portfolios are theoretical and assume no fees, trading costs, or any short selling restrictions. Actual results may differ significantly. Performance is based on annual “total returns,” which includes reinvested dividends but not interest, capital gains, taxes or transaction costs. Data source: Compustat. Calculations by Hartford Funds. For illustrative purposes only. Results are subject to change.

Past performance is no guarantee of future results.

Excess Factor Performance: US Markets

Range of excess returns in factor-based portfolios: Current vs historical (Calendar quarters from 1/1/07-9/30/17)


The Q3 return for momentum was significantly above its long-term average

The chart ranks the performance of various factor-based hypothetical portfolios using the US universe as defined by Hartford Funds. From the date of each rebalance, to be included in the universe, a stock must have had an average daily trading volume over the last 6 months > $1.5 million and a total market capitalization > $500 million, resulting in a universe of approximately 2,500 stocks. Value, Momentum, Quality, Small Size, and Low Volatility represent factor-based portfolios that select the companies in the first quintile when ranked from highest to lowest score based on each respective factor, and equal-weights them. The portfolios are theoretical and assume no fees, trading costs, or any short selling restrictions. Actual results may differ significantly. Performance is based on annual “total returns,” which includes reinvested dividends but not interest, capital gains, taxes or transaction costs. Data source: Compustat. Calculations by Hartford Funds. For illustrative purposes only. Results are subject to change.

Past performance is no guarantee of future results.

Excess Factor Performance: US Markets

Value and momentum sub-factor portfolios


(10/1/07-9/30/17)

See the Glossary below for definitions.
Earnings Yield and Dividend Yield refer to the impact of specific underlying stocks on the performance of the hypothetical portfolios and do not reflect the earnings yield or dividend yield of Hartford ETFs or their indices. Short-term momentum measures recent price appreciation over the last 6 months, excluding the most recent month, and long-term momentum measures recent price appreciation over the last 12 months, excluding the most recent month.
The chart illustrates sub-factor performance of value and momentum factor-based hypothetical portfolios using the US universe as defined by Hartford Funds. Portfolios were rebalanced monthly. From the date of each rebalance, to be included in the universe, a stock must have had an average daily trading volume over the last 6 months > $1.5 million and a total market capitalization > $500 million, resulting in a universe of approximately 2,500 stocks. Value and Momentum represent factor-based portfolios that select the companies in the first quintile when ranked from highest to lowest score based on each respective factor, and equal-weights them. The portfolios are theoretical and assume no fees, trading costs, or any short selling restrictions. Actual results may differ significantly. Performance is based on annual “total returns,” which includes reinvested dividends but not interest, capital gains, taxes or transaction costs. The Cap-Weighted US universe, as defined by Hartford Funds, includes approximately 2,500 stocks as ranked by total market cap. Components are weighted according to the total market value of their outstanding shares. MSCI USA Index is designed to measure the performance of the large- and mid-cap segments of the US market. MSCI performance is shown gross of dividend withholding tax. Data Source: Compustat and MSCI. Calculations by Hartford Funds. For illustrative purposes only. Results are subject to change.

Index is unmanaged and not available for direct investment. Past performance is no guarantee of future results.

Excess Factor Performance: Developed Markets (ex US)

Q3 factor-based portfolio performance


Momentum was the best-performing factor-based portfolio, while low volatility lagged (7/1/17-9/30/17)

The chart ranks the performance of various factor-based hypothetical portfolios using the developed markets (ex US) universe as defined by Hartford Funds. Portfolios were rebalanced monthly. From the date of each rebalance, to be included in the universe, a stock must have had an average daily trading volume over the last 6 months > $1.5 million and a total market capitalization > $500 million, resulting in a universe of approximately 2,500 stocks. Value, Momentum, Quality, Small Size, and Low Volatility represent factor-based portfolios that select the companies in the first quintile when ranked from highest to lowest score based on each respective factor, and equal-weights them. The portfolios are theoretical and assume no fees, trading costs, or any short selling restrictions. Actual results may differ significantly. Performance is based on annual “total returns,” which includes reinvested dividends but not interest, capital gains, taxes or transaction costs. Market return is represented by the MSCI World ex USA Index, which captures large- and mid-cap representation across 22 of 23 developed market countries excluding the United States. MSCI performance is shown net of dividend withholding tax. Data Sources: MSCI and Compustat. Calculations by Hartford Funds. For illustrative purposes only. Results are subject to change.

Index is unmanaged and not available for direct investment. Past performance is no guarantee of future results.

Excess Factor Performance: Developed Markets (ex US)

Historical excess returns of factor-based portfolios


While quality has the highest long-term excess returns, momentum has had the strongest excess returns year to date (as of 9/30/17)

The chart ranks the performance of various factor-based hypothetical portfolios using the developed markets (ex US) universe as defined by Hartford Funds. Portfolios were rebalanced monthly. From the date of each rebalance, to be included in the universe, a stock must have had an average daily trading volume over the last 6 months > $1.5 million and a total market capitalization > $500 million, resulting in a universe of approximately 2,500 stocks. Value, Momentum, Quality, Small Size, and Low Volatility represent factor-based portfolios that select the companies in the first quintile when ranked from highest to lowest score based on each respective factor, and equal-weights them. The portfolios are theoretical and assume no fees, trading costs, or any short selling restrictions. Actual results may differ significantly. Performance is based on annual “total returns,” which includes reinvested dividends but not interest, capital gains, taxes or transaction costs. Data source: Compustat. Calculations by Hartford Funds. For illustrative purposes only. Results are subject to change.

Past performance is no guarantee of future results.

Excess Factor Performance: Developed Markets (ex US)

Range of excess returns in factor-based portfolios: Current vs historical (Calendar quarters from 1/1/07-9/30/17)


The Q3 return for momentum was significantly above its long-term average

The chart ranks the performance of various factor-based hypothetical portfolios using the developed markets (ex US) universe as defined by Hartford Funds. Portfolios were rebalanced monthly. From the date of each rebalance, to be included in the universe, a stock must have had an average daily trading volume over the last 6 months > $1.5 million and a total market capitalization > $500 million, resulting in a universe of approximately 2,500 stocks. Value, Momentum, Quality, Small Size, and Low Volatility represent factor-based portfolios that select the companies in the first quintile when ranked from highest to lowest score based on each respective factor, and equal-weights them. The portfolios are theoretical and assume no fees, trading costs, or any short selling restrictions. Actual results may differ significantly. Performance is based on annual “total returns,” which includes reinvested dividends but not interest, capital gains, taxes or transaction costs. Data source: Compustat. Calculations by Hartford Funds. For illustrative purposes only. Results are subject to change.

Past performance is no guarantee of future results.

Excess Factor Performance: Developed Markets (ex US)

Value and momentum sub-factor portfolios


(10/1/07-9/30/17)

See the Glossary below for definitions.
Earnings Yield and Dividend Yield refer to the impact of specific underlying stocks on the performance of the hypothetical portfolios and do not reflect the earnings yield or dividend yield of Hartford ETFs or their indices. Short-term momentum measures recent price appreciation over the last 6 months, excluding the most recent month, and long-term momentum measures recent price appreciation over the last 12 months, excluding the most recent month.
The chart illustrates sub-factor performance of value and momentum factor-based hypothetical portfolios using the developed markets ex-US universe as defined by Hartford Funds, which includes the top 2,000 stocks of the large-cap universe as ranked by free-float market cap. Portfolios were rebalanced monthly. From the date of each rebalance, to be included in the universe, a stock must have had an average daily trading volume over the last 6 months > $1.5 million and a total market capitalization > $500 million, resulting in a universe of approximately 2,500 stocks. Value and Momentum represent factor-based portfolios that select the companies in the first quintile when ranked from highest to lowest score based on each respective factor, and equal-weights them. The portfolios are theoretical and assume no fees, trading costs, or any short selling restrictions. Actual results may differ significantly. Performance is based on annual “total returns,” which includes reinvested dividends but not interest, capital gains, taxes or transaction costs. The Cap-Weighted Developed Markets (ex-US) universe, as defined by Hartford Funds, includes approximately 2,500 companies across 22 countries. Components are weighted according to the total market value of their outstanding shares. MSCI World ex USA Index captures large and mid cap representation across 22 of 23 developed market countries excluding the United States. MSCI performance is shown net of dividend withholding tax. Data Sources: Compustat and MSCI. Calculations by Hartford Funds. For illustrative purposes only. Results are subject to change.

Index is unmanaged and not available for direct investment. Past performance is no guarantee of future results.

What are factors?


Factors are the “building blocks” of securities. Equities exhibit positive or negative exposures to these factors, which can explain the drivers of risk and return.

Source: Hartford Funds. For illustrative purposes only.

Defining the five-factor investment portfolio


While there are dozens of factors that drive investment returns, we believe the five factors below have been well documented by academic research, economic logic, and empirical evidence to be the most impactful drivers of long-term returns.

See the Glossary below for definitions.
Source: Hartford Funds. For illustrative purposes only.

Unintended factor exposure can create conflicts within a portfolio


Focusing on a single factor may result in unintended negative exposure to other important factors

As of 6/30/17. Data updated annually. Factor-based hypothetical portfolios were constructed using the Developed Markets (ex-US) universe as defined by Hartford Funds, which currently covers approximately 1,500 companies across 22 countries. Portfolios were rebalanced monthly. From the date of each rebalance, to be included in the universe, a stock must have had an average daily trading volume over the last 6 months > $1.5 million and a total market capitalization > $500 million. Low Valuation, High Momentum, High Quality, Small Size, and Low Volatility portfolios select the companies in the first quintile when ranked from highest to lowest score based on each respective factor, and equal-weights them. Companies within top quintiles are equal-weighted. The portfolios are theoretical and assume no fees, trading costs, or any short selling restrictions. Actual results may differ significantly. Performance is based on monthly total excess returns relative to the MSCI World ex USA Index, which includes reinvested dividends but not interest, capital gains, taxes or transaction costs. MSCI performance is shown net of dividend withholding tax. Data sources: Compustat and S&P Capital IQ. Calculations by Hartford Funds. For illustrative purposes only. Results are subject to change.

The space between active and passive


Hartford Multifactor ETFs are structured differently than passive cap-weighted ETFs. They seek to track indices that are designed to provide the outperformance potential of an active manager with the transparency, tax-, and cost-efficiency of an ETF.

Ordinary brokerage commissions may apply.

Hartford Multifactor Emerging Markets Equity ETF

ROAM: Addressing country risk


ROAM seeks to track an index that is designed to provide greater diversification than passive capitalization-weighted strategies by investing in emerging market countries that we believe are truly still emerging.

As of 9/30/17. Data Sources: Bloomberg and Hartford Funds. The chart compares the Hartford Multifactor Emerging Markets ETF (ROAM) to the capitalization-weighted MSCI Emerging Markets Index, which is a free-float-adjusted market-capitalization index designed to measure equity market performance of emerging markets. Country identifications sourced by Bloomberg differ from MSCI’s representation. Adjustments for these differences would increase the capitalization-weighted index’s concentration in China and ROAM’s relative underweight to China would be larger. Holdings subject to change.

Hartford Multifactor Developed Markets ETF

RODM: Addressing valuation and volatility risk


See the Glossary below for definitions.

An important point of distinction: RODM’s index methodology seeks to reduce volatility by selecting securities with lower correlations instead of limiting stock selection to a single factor (volatility) used in other popular approaches. Hartford Funds’ approach seeks to achieve volatility targets while avoiding unintended risks and gaining exposure to potentially return-enhancing factors: value, momentum, and quality.

As of 9/30/17. Valuation Chart at Left: Compares the Hartford Funds Value Factor Score, a composite measure of relative valuation based on five measures of value, of the stocks that comprise RODM with the stocks within the MSCI World ex USA Index. Data Source: S&P Capital IQ/Compustat. Calculations by Hartford Funds. Volatility Chart at Right: Data reflects standard deviation of RODM and the MSCI World ex USA Index since ETF Inception (2/25/15) through 9/30/17. Data Sources: Bloomberg and Hartford Funds. Past performance is no guarantee of future results.

Hartford Multifactor Global Small Cap ETF

ROGS: Addressing valuation risk


ROGS seeks to track an index that is designed to provide the growth potential of small-capitalization stocks with significantly better valuations and less volatility than passive capitalization-weighted indexes.

P/E ratio (price-to-earning ratio) is the ratio of a stock’s price to its earnings per share.
MSCI USA Small Cap Index is designed to measure the performance of the small cap segment of the US equity market.
MSCI ACWI Small Cap Index captures small cap representation across developed market and emerging market countries.
MSCI performance is shown net of dividend withholding tax for all of the indices listed above.
Data Source: Bloomberg, Hartford Funds analysis as of 9/30/17; holdings subject to change. Indexes are unmanaged and not available for direct investment.

Hartford Multifactor REIT ETF

RORE: Addressing concentration risk


Only 10 real estate investment trusts (REITs) account for more than 1/3 of the capitalization-weighted MSCI US REIT Index, potentially resulting in higher risk and inadequate diversification relative to RORE’s diversified approach.

As of 9/30/17. REIT stands for Real Estate Investment Trust and is a company that owns or manages income-producing real estate. REITs are dependent upon the financial condition of the underlying real estate. Risks associated with REITs include credit risk, liquidity risk, and interest-rate risk. Top 10 holdings for RORE as of 6/30/17 were Summit Hotel Properties Inc, DuPont Fabros Technology Inc, Gaming and Leisure Properties Inc, CareTrust REIT Inc, CoreSite Realty Corp, EastGroup Properties Inc., Xenia Hotels & Resorts Inc, CyrusOne Inc, Equity Lifestyle Properties Inc, and Duke Realty Corp. Data Sources: MSCI, Bloomberg, and Hartford Funds.

Hartford Multifactor US Equity ETF

ROUS: Addressing concentration risk


ROUS seeks to track an index that is designed to provide greater market-capitalization diversification than capitalization-weighted strategies, which have high concentrations in mega-cap stocks.

As of 9/30/17. The chart above depicts the number of holdings and position sizes in the MSCI USA Index (grey) and Hartford Multifactor US Equity ETF (ROUS, in green).
The bar chart above illustrates the allocation differences between ROUS and the MSCI USA Index. Holdings subject to change. Data Sources: Bloomberg, Hartford Funds.
Analysis: Hartford Funds.

Performance of 15 developed markets: Largest market cap to smallest

Performance of 16 emerging markets: Largest market cap to smallest

The cyclical nature of US sector performance

US market returns (%) by size quintiles

The cyclical nature of developed markets (ex US) sector performance

Developed markets (ex US) returns (%) by size quintiles

The cyclical nature of factor-based portfolios

Q3 factor-based portfolio performance

Historical excess returns of factor-based portfolios

Range of excess returns in factor-based portfolios: Current vs historical

Value and momentum sub-factor portfolios

Q3 factor-based portfolio performance

Historical excess returns of factor-based portfolios

Range of excess returns in factor-based portfolios: Current vs historical

Value and momentum sub-factor portfolios

What are factors?

Defining the five-factor investment portfolio

Unintended factor exposure can create conflicts within a portfolio

The space between active and passive

ROAM: Addressing country risk

RODM: Addressing valuation and volatility risk

ROGS: Addressing valuation risk

RORE: Addressing concentration risk

ROUS: Addressing concentration risk

Glossary of terms:

Beta is a measure of risk that indicates the price sensitivity of a security or a portfolio relative to a specified market index.
Correlation is a statistical measure of how two investments move in relation to each other. A correlation of 1.0 indicates the investments have historically moved in the same direction; a correlation of -1.0 means the investments have historically moved in opposite directions; and a correlation of 0 indicates no historical relationship in the movement of the investments.
Dividend Yield is a ratio that indicates how much a company pays out in dividends each year relative to its share price.
Earnings Per Share is a ratio that gauges how profitable a company is per share of its stock.
Earning Yield is the earnings per share for the most recent 12-month period divided by the current market price per share. The earnings yield (which is the inverse of the P/E ratio) shows the percentage of each dollar invested in the stock that was earned by the company.
EBIDTA (earnings before interest, tax, depreciation and amortization) is a way to measure a company’s operating performance without having to factor in financing decisions, accounting decisions, or tax environments.
Enterprise Value is a measure of a company’s total value, often used as a more comprehensive alternative to equity market capitalization. The market capitalization of a company is its share price multiplied by the number of outstanding shares. Enterprise value is calculated as the market capitalization plus debt, minority interest, and preferred shares, minus total cash and cash equivalents.
Excess Factor Performance is the performance of factor-based portfolios relative to a benchmark (e.g., MSCI Indexes).
Operating Cash Flow is a measure of the amount of cash generated by a company’s normal business operations and is used as an indicator of whether a company is able to generate sufficient positive cash flow to maintain and grow its operations. This metric is believed to be a more accurate measure of how much cash a company has generated or used than traditional profitability measures such as net income or EBIT (earnings before interest and tax).
Price-to-book ratio is the ratio of a stock’s price to its book value per share.
Risk Premia is the return in excess of a risk-free rate of return that an investment generates.
Sharpe Ratio measures risk-adjusted performance. A higher Sharpe ratio indicates better its risk-adjusted performance, while a negative Sharpe ratio indicates that a risk-free asset would have performed better than the security being analyzed.
Standard Deviation measures the dispersion of a set of data from its mean and is used to measure the volatility of an investment. A high standard deviation indicates an investment has historically been more volatile, while a low standard deviation indicates an investment has historically been less volatile.
Hartford Multifactor Emerging Markets ETF (ROAM): Seeks to provide investment results that, before fees and expenses, correspond to the total return performance of Hartford Risk-Optimized Multifactor Emerging Markets Index, which tracks the performance of emerging market equity securities.
Hartford Multifactor Developed Markets (ex-US) ETF (RODM): Seeks to provide investment results that, before fees and expenses, correspond to the total return performance of the Hartford Risk-Optimized Multifactor Developed Markets (ex-US) Index, which tracks the performance of companies located in major developed markets of Europe, Canada, and the Pacific Region.
Hartford Multifactor Global Small Cap ETF (ROGS): Seeks to provide investment results that, before fees and expenses, correspond to the total return performance of Hartford Risk-Optimized Multifactor Global Small Cap Index, which tracks the performance of small cap companies in the US, developed and emerging markets.
Hartford Multifactor REIT ETF (RORE): Seeks to provide investment results that, before fees and expenses, correspond to the total return performance of Hartford Risk-Optimized Multifactor REIT Index, which tracks the performance of publicly traded real estate investment trusts (REITs).
Hartford Multifactor US Equity ETF (ROUS): Seeks to provide investment results that, before fees and expenses, correspond to the total return performance of Hartford Risk-Optimized Multifactor US Equity Index, which tracks the performance of publicly traded large-cap US equity securities.
Risks Common to ROAM, RODM, ROGS, RORE, and ROUS: All investments are subject to risk, including the possible loss of principal. There is no guarantee any Fund will achieve its stated objective. Due to the investment strategy of these Funds, they may make higher capital gain distributions than other ETFs. Please read each Fund’s prospectus for specific details regarding each Fund’s risk profile.
Additional Risks for ROAM: Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. These risks are generally greater for investments in emerging markets. Diversification does not eliminate the risk of experiencing investment losses.
Additional Risks for RODM: Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Diversification does not eliminate the risk of experiencing investment losses.
Additional Risks for ROGS: Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. These risks are generally greater for investments in emerging markets. Small-cap securities can have greater risk and volatility than large-cap securities. Diversification does not eliminate the risk of experiencing investment losses
Additional Risks for RORE: A concentration in real estate securities, such as REITs, may subject the Fund to risks associated with the direct ownership of real estate as well as the risks related to the way real estate companies are organized and operated. Real estate is sensitive to changes in interest rates and general and local economic conditions and developments. The fund is non-diversified, so it may be more exposed to the risks associated with single issuers than a diversified fund.
Additional Risks for ROUS: Diversification does not eliminate the risk of experiencing investment losses.

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The Indexes are calculated and distributed by Solactive AG, a firm retained and paid by the Indexes’ Provider (Lattice Strategies). Lattice Strategies is responsible for the methodology and selection of each index component. The Indexes are calculated as price and total return indexes.

Various indexes are included for reference. Reference to an index or benchmark does not imply that the strategy will achieve returns, experience volatility, or have other results similar to the index. Indexes do not include fees and expenses typically associated with client accounts and an investor cannot invest directly in an index. Bloomberg is the source for index data. Indexes do not necessarily reflect liquidity and/or tradability constraints.

The MSCI World ex USA Index is a free float-adjusted market capitalization index that is designed to measure global equity performance. The MSCI USA Index is a free float adjusted market capitalization index designed to measure large and mid cap segments of the US. The MSCI ACWI Small Cap Index is a free float-adjusted market capitalization index that is designed to measure global small cap equity performance. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure emerging markets equity performance. The MSCI US REIT Index is a free float-adjusted market capitalization index that is comprised of equity REITs.

The MSCI information may only be used for your internal use, may not be reproduced or re-disseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties or originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.msci.com)

Hartford Funds does not provide legal or tax advice; please consult your own legal and tax advisers for information regarding the legal and tax consequences of any investment. Investors should consult with an investment advisor; investment decisions should be made based on the investor’s specific financials needs and objectives, goals, time horizon and risk tolerance.

Diversification does not eliminate the risk of experiencing investment losses.

204089    HFA000206   1/31/18