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Client Conversations: Duration Risk Is Rising: Are You Prepared?

February 2019

Rising interest rates may have a significant effect on fixed-income investments.

Client Conversations gives financial advisors an easy way to communicate with clients on topics influencing financial markets; it highlights common investor behaviors and offers ways to address the challenges investors face. Share this article with your clients, and remember to follow your firm's policies that govern sharing content with clients and prospects.


The Bloomberg Barclays US Aggregate Bond Index is a widely used proxy for the US bond market. With interest rates beginning to rise, there’s a warning light flashing within the Index. Duration, which measures the sensitivity of bonds within a portfolio to interest rates, recently exceeded six years in the Index for the first time since 1978.

 

Duration of the Bloomberg Barclays US Aggregate Bond Index (1/1/78–12/31/18)

Data Sources: Bloomberg and Hartford Funds, 1/19. For illustrative purposes only. Indices are unmanaged and not available for direct investment.
Bloomberg Barclays US Aggregate Bond Index is composed of securities from the Barclays Government/Credit Bond Index, Mortgage-Backed Securities Index, Asset-Backed Securities Index, and Commercial Mortgage-Backed Securities Index.

 

Select Hartford Funds with short duration*

December 31, 2018

  Ticker Effective Duration in Years Morningstar Category Overall Rating Cat. Size 3 Year Rating Cat. Size 5 Year Rating Cat. Size 10 Year Rating Cat. Size
Fixed-Income Fund                    
Hartford Short Duration Fund HSDIX 1.58 Short-Term Bond ★★★★ 472 4 472 4 405 4 263
Hartford Short Duration ETF HSRT 1.62 Short-Term Bond
Hartford Municipal Short Duration HMJIX 2.47 Muni National Short ★★★★
180 4 180
Hartford Floating Rate Fund HFLIX 0.40 Bank Loan ★★★★ 213 4 213 3 196 4 81
Hartford Floating Rate High Income Fund HFHIX 0.42 Bank Loan ★★★★ 213 5 213 4 196

*Funds listed have a duration of three years or less; duration is subject to change. View the full list of Hartford Funds.

Talk to your financial advisor today about how to prepare your portfolio for rising interest rates

Client Conversations gives financial advisors an easy way to communicate with clients on topics influencing financial markets; it highlights common investor behaviors and offers ways to address the challenges investors face. Share this article with your clients, and remember to follow your firm's policies that govern sharing content with clients and prospects.


Performance data quoted represents past performance and does not guarantee future results. Other share classes may have different ratings. The Morningstar RatingTM for funds, or “star rating”, is calculated for funds and separate accounts with at least a 3-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. Star rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance (without adjusting for any sales load, if applicable), placing more emphasis on downward variations and rewarding consistent performance. 5 stars are assigned to the top 10%, 4 stars to the next 22.5%, 3 stars to the next 35%, 2 stars to the next 22.5%, and 1 star to the bottom 10%. Overall Morningstar Rating is derived from a weighted average of the performance figures associated with its 3-, 5-, and 10-year (if applicable) Morningstar Rating metrics. For more information about the Morningstar Fund Ratings, including their methodology, please go to global.morningstar.com/managerdisclosures. © 2019 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/ or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

Investing involves risk, including the possible loss of principal. There is no guarantee a fund will achieve its stated objective. A fund’s share price may fluctuate due to market risk and/or security selections that may underperform the market or relevant benchmarks. • Fixed income security risks include credit, liquidity, call, duration, and interest-rate risk. As interest rates rise, bond prices generally fall. • 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 are generally greater for investments in emerging markets. • Investments in high-yield (“junk”) bonds involve greater risk of price volatility, illiquidity, and default than higher-rated debt securities. • Municipal securities may be adversely impacted by state/local, political, economic, or market conditions. • Loans can be difficult to value and highly illiquid; they are subject to credit risk, bankruptcy risk, and insolvency. • Hartford Short Duration ETF is new and has a limited operating history.  As part of its investment strategy, the Fund may allocate a portion of its assets among specialist portfolio managers. The net asset value (NAV) of the Fund’s shares may fluctuate due to changes in the market value of the Fund’s holdings. The Fund’s share price may fluctuate due to changes in the relative supply of and demand for the shares on an exchange. The Fund is actively managed and does not seek to replicate the performance of a specified index. • Privately placed, restricted (Rule 144A) securities may be more difficult to sell and price than other securities. • In certain instances, unlike other ETFs, the Fund may effect creations and redemptions partly or wholly for cash, rather than in-kind, which may make the Fund less tax-efficient and incur more fees than a more conventional ETF. • The risks associated with mortgage related- and asset-backed securities as well as collateralized loan obligations (CLOs) include credit, interest-rate, prepayment, liquidity, default and extension risk. • 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, and counterparty risk.

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

Investors should carefully consider a fund’s investment objectives, risks, charges and expenses. This and other important information is contained in the fund’s prospectus and summary prospectus (if available), which can be obtained by visiting hartfordfunds.com. Please read it carefully before investing.

This information should not be considered investment advice or a recommendation to buy/sell any security. In addition, it does not take into account the specific investment objectives, tax and financial condition of any specific person. This information has been prepared from sources believed reliable but the accuracy and completeness of the information cannot be guaranteed. This material and/or its contents are current at the time of writing and are subject to change without notice. This material may not be copied, photocopied or duplicated in any form or distributed in whole or in part, for any purpose, without the express written consent of Hartford Funds. 

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