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Floating Rate: Strong Fundamentals, Even Stronger Outlook

June 2021 

Assets are flowing into floating-rate funds in 2021 as we continue to see a “duration rotation”: investors looking for income with less interest-rate risk.

From our sub-adviser, Wellington Management
David Marshak
Managing Director, Portfolio Manager for the Hartford Floating Rate Fund and Hartford Floating Rate High Income Fund

 

More than $19 Billion Has Flowed Into Bank-Loan Funds Year-to-Date

Many investors are opening their first-quarter statements to see red in their fixed-income returns. With a strong fundamental outlook, less rate risk, and over 4% yield,1 we have seen investors turning to bank loans to respond to the threat of rising rates.



1 Source: S&P/LSTA Leveraged Loan Index, 3 year average yield to maturity as of 4/30/21.

2 Source: Lipper FMI, as of 4/30/21.

3 As of 4/30/21

4 Correlation results based off monthly index returns from June 1996 through April 2021. Bank loans are represented by the Credit Suisse Leveraged Loan Index, equities by the S&P 500 Index, investment grade credit by Bloomberg Barclays US Corporate Index, and treasuries by the Bloomberg Barclays US Treasury Index.

Important Risks: Investing involves risk, including the possible loss of principal. Security prices fluctuate in value depending on general market and economic conditions and the prospects of individual companies. • Loans can be difficult to value and less liquid than other types of debt instruments; they are also subject to nonpayment, collateral, bankruptcy, default, extension, prepayment, and insolvency risks. • Fixed income security risks include credit, liquidity, call, duration, event and interest-rate risk. As interest rates rise, bond prices generally fall. • Investments in high-yield (“junk”) bonds involve greater risk of price volatility, illiquidity, and default than higher-rated debt securities. • Derivatives are generally more volatile and sensitive to changes in market or economic conditions than other securities; their risks include currency, leverage, liquidity, index, pricing, regulatory, and counterparty risk. • Foreign investments may be more volatile and less liquid than US investments and are subject to the risk of currency fluctuations and adverse political, economic, and regulatory developments. • The Fund’s investments may fluctuate in value over a short period of time. • Diversification does not ensure a profit or protect against a loss in a declining market.

Additional risks for Hartford Floating Rate High Income Fund:

• Restricted securities may be more difficult to sell and price than other securities. • The Fund may have high portfolio turnover, which could increase its transaction costs and an investor’s tax liability.

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

Additional Information Regarding Bloomberg Barclays Indices Source: Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

The views expressed herein are those of Wellington Management, are for informational purposes only, and are subject to change based on prevailing market, economic, and other conditions. The views expressed may not reflect the opinions of Hartford Funds or any other sub-adviser to our funds. They should not be construed as research or investment advice nor should they be considered an offer or solicitation to buy or sell any security. This information is current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management or Hartford Funds.

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