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Hartford World Bond Fund Monthly Positioning & Outlook

Tickers: A: HWDAX C: HWDCX F: HWDFX I: HWDIX R3: HWDRX R4: HWDSX R5: HWDTX R6: HWDVX Y: HWDYX

 

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Market Commentary

  • A combination of better economic news and a renewed commitment by major central banks to stabilize inflation expectations were positive for risk assets.
  • Global sovereign yields moved higher during the month. Credit spreads tightened amid a strong rally in global equity markets, driven by robust US economic data, improving growth prospects in China and Europe, and progress in US-China trade negotiations. Some political pressure in Europe was alleviated as the Brexit deadline was extended to October 31.
  • The US dollar (USD) appreciated against most major currencies, supported by stronger-than-expected economic data and a move toward more dovish monetary policy by several major G10 central banks. The New Zealand dollar, Canadian dollar, Australian dollar, and Swedish krona weakened as their respective central banks adopted more dovish policy stances.

Portfolio Performance

  • Hartford World Bond Fund’s performance was positive over the month with opportunistic sources of return contributing and global government core strategies detracting.
  • In global government core rates, our exposures to select dollar-bloc economies detracted because the US Federal Reserve’s (Fed) willingness to let inflation run higher drove yields higher.
  • In core currency, our non-USD exposure detracted as the USD rallied versus most major currencies over the month.
  • Macro-driven duration1 strategies were marginally positive. Our underweight to US duration contributed as interest rates were driven up by higher growth without inflation and the Fed signaling more patience and willingness to let inflation run higher. Our overweight to Australian duration contributed as Australian front-end yields were weighed down by a dovish Reserve Bank of Australia and lower-than-expected inflation.
  • Macro-driven currency strategies were neutral over the period.
  • Within opportunistic sources, emerging markets (EM), high yield, and securitized strategies all contributed to total-return performance.
Monthly     Quarterly
Performance (%)
Average Annual Total Return
As of 4/30/19 MTD YTD 1 Year 3 Year 5 Year Since Inception
(5/31/11)
Hartford World Bond Fund I 0.09 1.56 4.97 2.58 2.25 3.24
Hartford World Bond Fund F 0.09 1.58 5.13 2.67 2.30 3.27
Hartford World Bond Fund Y 0.09 1.56 4.98 2.65 2.35 3.33
FTSE World Government Bond Index -0.50 1.24 -0.18 0.37 0.27 --
Morningstar Category: World Bond 0.07 2.85 1.31 2.13 1.21 --
Bloomberg Barclays US Aggregate Bond Index 0.03 2.97 5.29 1.90 2.57 --

Expenses

  Net Gross
Class I    0.76%    0.76%  
Class F    0.67%  0.67%
Class Y    0.74%  0.78%

Expenses as shown in the Fund’s most recent prospectus. Gross expenses do not reflect contractual fee waivers or expense reimbursement arrangements. Net expenses reflect such arrangements only with respect to Class Y. These arrangements remain in effect until 2/29/20 unless the Fund’s Board of Directors approves an earlier termination.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of the investment will fluctuate so that investors' 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.

Share Class Inception: I, Y – 5/31/11; F – 2/28/17

Performance shown prior to the inception of a class reflects performance and operating expenses of another class(es) (excluding sales charges, if applicable). Had fees and expenses of a class been reflected for the periods prior to the inception of that class, performance would be different. Since inception (SI) performance is from 5/31/11. Performance and expenses for other share classes will vary. Additional information is in the prospectus. Performance and expenses for other share classes will vary. Additional information is in the prospectus.


Portfolio Positioning & Market Outlook

  • Portfolio duration decreased to 3.28 years at month end, largely due to the decrease in our strategic market exposures. Improving global growth suggests rate cuts in the US are not imminent, justifying our lower-duration position.
  • In core currency, we decreased our non-USD exposure as the USD continues to strengthen versus most major currencies.
  • In opportunistic macro-duration strategies, we are tactically trading duration because the global cycle is being led by momentum in EM, which is now stronger than in developed markets for the first time since April 2013. There is a risk that global growth fails to respond to looser Chinese policy and the global cycle fails to stabilize. The potential triggers for this outcome include weakening fiscal and monetary multipliers and a breakdown in trade talks, which would hit global supply chains and global capital expenditures. Therefore, we have a steepening bias in the US and are overweight duration in the UK and Australia.
  • In opportunistic currency strategies, we are tactically trading perceived safe-haven currencies, including the USD and Japanese yen. The USD’s valuation is high but any re-escalation of trade uncertainty should keep the USD supported.

Sector Exposure (%)

As of 4/30/19

april2019-worldbond-fig-2

Contribution to Duration (%)

As of 4/30/19 Fund Benchmark2
Canada 18.47 1.32
New Zealand 14.50 0.00
Sweden 13.86 0.22
Australia
12.83 1.43
United Kingdom 12.02 8.81
United States 11.56 28.73
Norway 8.14 0.13
Denmark
4.50 0.48
Singapore 3.90 0.28
South Africa
-4.12 0.44

Currency Exposure (%)

As of 4/30/19 Fund Benchmark2
US Dollar 89.94 37.88
Japanese Yen 12.39 18.82
South African Rand 0.52 0.47
Mexican Peso 0.38 0.68
Russian Ruble 0.29 0.00
Indian Rupee 0.28 0.00
Hungarian Forint -0.44 0.00
Turkish Lira -0.50 0.00
Polish Zloty -0.53 0.52
Euro Currency -2.06 31.39

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. The Fund may allocate a portion of its assets to specialist portfolio managers, which may not work as intended. ● Fixed income security risks include credit, liquidity, call, duration, and interest-rate risk. As interest rates rise, bond prices generally fall. ● Obligations of U.S. Government agencies are supported by varying degrees of credit but are generally not backed by the full faith and credit of the U.S. Government. ● Investments in high-yield (“junk”) bonds involve greater risk of price volatility, illiquidity, and default than higher-rated debt securities. ● Mortgage related- and asset-backed securities’ risks include credit, interest-rate, prepayment, 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. ● 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. ● The Fund may invest in a smaller number of issuers, so it may be more exposed to risks and volatility than a more broadly diversified fund. ● Restricted securities may be more difficult to sell and price than other securities.

1Duration is a measure of the sensitivity of an asset or portfolio’s price to nominal interest rate movement

2Benchmark is the FTSE World Government Bond Index

 

The Hartford World Bond Fund (the “Fund”) has been developed solely by Hartford Funds. The Fund is not in any way connected to or sponsored, endorsed, sold or promoted by the London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). FTSE Russell is a trading name of certain of the LSE Group companies. All rights in the FTSE World Government Bond Index (“WGBI” or the “Index”) vest in the relevant LSE Group company which owns the Index. FTSE Russell® is a trade mark of the relevant LSE Group company and is used by any other LSE Group company under license. The Index is calculated by or on behalf of FTSE Fixed Income, LLC or its affiliate, agent or partner. The LSE Group does not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the Index or (b) investment in or operation of the Fund. The LSE Group makes no claim, prediction, warranty or representation either as to the results to be obtained from the Fund or the suitability of the Index for the purpose to which it is being put by Hartford Funds.

 

Index Definitions

FTSE World Government Bond Index is a market-capitalization weighted index consisting of government bond markets. Country eligibility is determined based on market capitalization and investability criteria. All issues have a remaining maturity of at least one year.

Bloomberg Barclays U.S. Aggregate Bond Index is composed of securities from the Bloomberg Barclays Government/Credit Bond Index, Mortgage-Backed Securities Index, Asset-Backed Securities Index, and Commercial Mortgage-Backed Securities Index.

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.

Indices are unmanaged and not available for direct investment.

All rights in the FTSE World Government Bond Index (the “Index”) vest in the applicable company in the London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”) which owns the Index.  FTSE® and Russell® (together “FTSE Russell”) are trademarks of the relevant LSE Group company and are used by any other LSE Group company under license. The LSE Group does not accept any liability whatsoever to any person arising out of the use of, reliance on or any error in the Index.  The LSE Group makes no claim, prediction, warranty or representation as to the results or the suitability of the Index for the purpose to which it is being used by Hartford Funds

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