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Hartford Schroders International Multi-Cap Value Fund

August 2019 Monthly Update

Performance (%)
% (as of 9/30/2019)
Average Annual Total Returns % (as of 9/30/2019)
YTD 1YR 3YR 5YR 10YR SI
Hartford Schroders International Multi-Cap Value  I 7.96 -5.61 3.60 1.98 5.16 4.21
Benchmark 11.56 -1.23 6.33 2.90 4.45 ---
Morningstar Foreign Large Value Category 8.85 -4.61 4.12 1.34 3.50 ---
Performance (%)
% (as of 9/30/2019)
Average Annual Total Returns % (as of 9/30/2019)
YTD 1YR 3YR 5YR 10YR SI
Hartford Schroders International Multi-Cap Value  I 7.96 -5.61 3.60 1.98 5.16 4.21
Benchmark 11.56 -1.23 6.33 2.90 4.45 ---
Morningstar Foreign Large Value Category 8.85 -4.61 4.12 1.34 3.50 ---
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, returned -3.09% during a volatile August, although the Index is still up 8.76% year-to-date. Weighing on returns were mounting fears of a global recession and further escalation in the US-Chinese trade war. Alongside the US dollar, gold was the main beneficiary of the flight to safe haven assets as US bonds yields tumbled.

Defensive areas of the market performed the best with the MSCI Minimum Volatility Index1—a proxy for defensive equities—outperforming the broad market by 2.7% led by staples, healthcare, and utilities. In contrast, investors’ dislike of more cyclical areas, such as resources, as commodity prices plummeted, and financials (particularly banks), was evident despite their compelling valuations. This was also clear in regional performance with the MSCI Emerging Markets2 Index falling by 4.88% in the month.

The Fund (Class I Shares) returned -4.01% in August, as the growth theme continued to be a headwind over the course of 2019. August was no exception, resulting in underperformance against its benchmark, the MSCI ACWI ex USA Index. The Fund continues to outperform year-to-date versus the MSCI ACWI ex USA Value3 counterpart, returning 3.48% versus 2.71%.

Underweight positions in more defensive areas, such as staples, were the largest detractors as investors sought out what they perceived to be safer assets, such as mega-cap consumer names in Europe.

Detractors in financials were widespread. Banks were some of the worst performers in the month due to their sensitivity to both weakening growth and falling interest rates, despite the fact that in many cases, valuations already reflected these concerns. In many instances, the good (higher quality names) are simply being punished alongside the bad. Asset managers and life & health insurers also suffered from investor concerns about future investment performance.

Our longstanding positions in high-quality and attractively-valued Japanese telecoms, as well as avoiding more expensive technology companies, partially offset this.    

 

Portfolio Positioning

The Fund remains highly diversified from a country and sector standpoint. The Fund’s largest weights remain in financials, industrials, and energy. 

Regionally, the Fund is overweight both the UK and Japan albeit with broad risk-adjusted exposure. We are overweight Taiwan and Korea. However, we are underweight Asian emerging markets (EM) 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 and defensive value holdings in continental Europe and EM.

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1 The MSCI Minimum Volatility Indexes are designed to serve as transparent benchmarks for minimum variance (or managed volatility) equity strategies.

2 MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index that is designed to measure equity market performance in the global emerging markets.

3 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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