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Hartford Schroders International Stock Fund

November 2017 Monthly Update

Performance (%)
% (as of 12/31/2017)
Average Annual Total Returns % (as of 12/31/2017)
YTD 1YR 3YR 5YR 10YR SI
Hartford Schroders International Stock  I 29.69 29.69 8.49 7.79 2.68 7.74
BENCHMARK 25.03 25.03 7.80 7.90 1.94 ---
Morningstar Foreign Large Blend Category 25.42 25.42 7.49 7.04 1.46 ---
Performance (%)
% (as of 12/31/2017)
Average Annual Total Returns % (as of 12/31/2017)
YTD 1YR 3YR 5YR 10YR SI
Hartford Schroders International Stock  I 29.69 29.69 8.49 7.79 2.68 7.74
BENCHMARK 25.03 25.03 7.80 7.90 1.94 ---
Morningstar Foreign Large Blend Category 25.42 25.42 7.49 7.04 1.46 ---
SI = Since Inception. Fund Inception: 12/19/1985
Operating Expenses:   Net 0.95% |  Gross  1.12%

Performance prior to 10/24/16 for Class I-shares reflects the performance, fees, and expenses of the Investor Class of the predecessor fund Schroder International Alpha Fund. If Class I fees and expenses were reflected, performance would have differed. SI performance is calculated from 12/19/85.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s 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.

 

Performance Review

Global equities posted modest gains in November amidst continued positive growth data and progress on US tax reform. Political uncertainty in Germany around the formation of a coalition and the pace and progress of Brexit negotiations weighed on European markets, although the positive trend in economic activity continued. Oil prices rose for the fifth straight month, but inflationary pressures remained largely subdued. Wage inflation remains muted, and weaker industrial production data in China during the month led to softer metals prices. However, the Federal Reserve (Fed) reinforced expectations of a December rate hike due to stable US growth data.

While all major sectors gained in November, the strongest gains were generated in the telecommunications and consumer staples sectors as the tepid inflation data tempered expectations for interest rate hikes and supported bond proxy sectors. The technology and materials sectors were relative laggards as investors took profits in stocks with strong momentum. This affected tech names most notably, while weaker macro data from China weighed on materials stocks. Regionally, North America posted robust gains on the tax proposals and positive macro data. Japan advanced on solid earnings progression and improving macro sentiment as well as from a weaker yen.   

 

Portfolio Positioning

The Fund (Class I Shares) returned 0.30% in November, underperforming its benchmark, the MSCI EAFE Index, which returned 1.05%. Performance was hindered primarily by stock selection in industrial and consumer discretionary names. Stock selection elsewhere was generally more supportive, with positions in the materials sector notably stronger. By region, Asia ex Japan exposure was positive for returns, but offset by emerging market positions.

Among the detractors, Norsk, along with other metals stocks, moved lower on fears over weaker Chinese demand given softer macro data. These fears are not specific to Norsk and appear overdone, as we believe overall consumer demand remains strong. Performance was helped by our position in Tencent, as its latest results indicated sharply higher advertising sales and massive expansion in gaming revenues driven by smash hit “Honor of Kings.”    

 

Market Outlook

Overall, we remain optimistic when looking at prospects for 2018, but we are cognizant of potential risks. Dispersion and volatility are likely to rise as the market cycle matures. One of the main risks is complacency itself. While stock valuations are fundamentally supported, they are undeniably elevated when compared with long-term averages. This suggests there is little room for disappointment.

Our investment philosophy remains predicated on the notion of “un-anticipated growth.” The market is often myopic, focused on the “now,” and failing to look ahead. The relative strength of individual business models is often over-looked, as is the potential for change to create new opportunities in areas hitherto seen as ex-growth, or dull. As ever in global economies, there are a number of structural trends that could be important drivers for equities next year.

It’s our view that innovation is always at the heart of sustained growth. For companies to enhance the durability of their earnings over the long term, we believe they need to deliver innovation. Companies that innovate successfully are likely to be significantly rewarded by investors; those that don’t will almost certainly be overwhelmed by the pace of change.

We believe well-managed companies with cultures that support ongoing innovation, performance, and accountability, should be better placed to deliver strong returns irrespective of the economic cycle. Our focus will continue to be on searching for these individual situations that fit our investment philosophy on a global basis, rather than attempting to time allocations to regions or sectors. In a globalized world, there are always opportunities at the company level.

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Quarterly Fund Outlook & Commentary
Product Manager John Chisholm, CFA

 

 

Important Risks: 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. 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. Small- and mid-cap securities can have greater risk and volatility than large-cap securities. The Fund may be adversely affected when certain large shareholders purchase or redeem large amounts of shares of the Fund.

The views expressed herein are those of Schroder Investment Management North America Inc. (Schroders) are for informational purposes only, and are subject to change based on prevailing market, economic, and other conditions. They may not reflect the views of Hartford Funds or any other sub-adviser to our funds and should not be construed as research or investment advice or as an offer or solicitation to buy or sell any security.

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