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Hartford Schroders International Multi-Cap Value Fund

July 2019 Monthly Update

Performance (%)
% (as of 7/31/2019)
Average Annual Total Returns % (as of 7/31/2019)
YTD 1YR 3YR 5YR 10YR SI
Hartford Schroders International Multi-Cap Value  I 7.81 -7.63 4.12 1.07 6.31 4.25
Benchmark 12.23 -2.27 7.20 2.12 5.42 ---
Morningstar Foreign Large Value Category 8.12 -6.89 4.59 0.46 4.34 ---
Performance (%)
% (as of 6/30/2019)
Average Annual Total Returns % (as of 6/30/2019)
YTD 1YR 3YR 5YR 10YR SI
Hartford Schroders International Multi-Cap Value  I 11.02 -1.63 6.95 1.47 7.59 4.52
Benchmark 13.60 1.29 9.39 2.16 6.54 ---
Morningstar Foreign Large Value Category 10.66 -2.09 6.82 0.43 5.53 ---
SI = Since Inception. Fund Inception: 08/30/2006
Operating Expenses:   Net 0.86% |  Gross  0.86%
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 Multi-Cap Value Fund. If Class I fees and expenses were reflected, performance would have differed. SI performance is calculated from 8/30/06.

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

International markets, represented by the MSCI ACWI ex USA Index, declined modestly in the month of July (-1.21%), though the Index is still up 12.23% for the year. The US Federal Reserve (Fed) cut interest rates by 0.25% in July and subsequent comments from the Fed chairman, Jerome Powell, dampened the market’s enthusiasm somewhat when he said that the move was not the beginning of a long series of rate cuts. The financials (particularly banks) and real estate sectors performed poorly as a result of this news.

The technology sector once again leads the MSCI ACWI ex USA Index, with semiconductors as the best performing industry in the Index over the month. Consumer staples, particularly food and beverage products, also performed well over the month.

In the UK, Boris Johnson was confirmed as the new Prime Minister, raising the possibility of a more extreme Brexit outcome. The drop in sterling was a boost to companies with overseas earnings. Outside of the UK, European equities fell as fears of global slowdown loomed.

From a style perspective, the MSCI ACWI ex USA Growth1 and MSCI ACWI ex USA Quality2 Indices performed better than the broader index while the MSCI ACWI ex USA High Dividend Yield3 and MSCI ACWI ex USA Value Index4 lagged the broader index for the month. The MSCI ACWI ex USA Growth Index is now 9.44% ahead of MSCI ACWI ex USA Value Index, year-to-date.

The growth theme continued to be a headwind for the strategy into July. Over the month, the Fund (Class I Shares) returned -2.90% in July, underperforming its benchmark.

Overweight positions in financials were the largest detractors. These holdings were most negatively affected by the interest rate cuts. Regionally, our holdings in UK financials suffered, given Brexit worries and falling interest rates, but this was partially offset by consumer discretionary holdings in the country, particularly UK retail names. Continental Europe holdings dragged as this region was negatively affected by the increasing probability of economic slowdown.

Our best performing stocks relative to both indices came from within the technology sector, particularly from emerging Asian hardware companies. Versus the MSCI ACWI ex USA Value index, our stock selection within both materials and energy added value as our focus on higher quality names benefited within two sectors that came under selling pressure over the month.    

 

Portfolio Positioning

The Fund remains highly diversified from a country and sector standpoint. The largest weights remain in financials, materials, and energy. Energy and industrials retain large overweight positions versus the benchmark.

Regionally, the strategy is overweight both the UK and Japan. We are overweight Taiwan and Korea; however, we are underweight Asian emerging markets due to our lower allocations to China and India. 

The Fund offers a balanced approach to both defensive and deep value. Our research and models find deep value holdings in continental Europe and emerging markets, and more defensive value positions in continental Europe and emerging markets. We continue to find deep value opportunities in financials and defensive areas of the market.

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1 MSCI ACWI ex USA Growth Index is a free-float adjusted market-cap weighted index designed to capture large- and mid-cap securities that exhibit overall growth style characteristics across developed and emerging market countries, excluding the U.S.

2 MSCI ACWI ex USA Quality Index, which is based on MSCI ACWI ex USA Index, aims to capture the performance of quality growth stocks by identifying stocks with high quality scores based on high return on equity (ROE), stable year-over-year earnings growth, and low financial leverage.

3 MSCI ACWI ex USA High Dividend Yield Index is designed to reflect the performance of equities in the MSCI ACWI ex USA Index (excluding REITs) with higher dividend income and quality characteristics than average dividend yields that are both sustainable and persistent.

4 MSCI ACWI ex USA Value Index is a free-float adjusted market-cap weighted index designed to capture large- and mid-cap securities that exhibit overall value style characteristics across developed and emerging market countries, excluding the U.S.

Indices are unmanaged and not available for direct investment. Diversification does not ensure a profit or protect against a loss.

 

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. ● Foreign investments may be more volatile and less liquid than U.S. investments and are subject to the risk of currency fluctuations and adverse political and economic developments. These risks may be greater for investments in emerging markets or if the Fund focuses in a particular geographic region or country. ● Small- and mid-cap securities can have greater risks and volatility than large-cap securities. ● Different investment styles may go in and out favor, which may cause the Fund to underperform the broader stock market.

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.

Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI's express written consent.

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