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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

  • An improved tone in the US-China trade dialogue, positive developments around Brexit negotiations, and policy accommodation by major central banks helped to chart an upbeat course for most fixed-income spread sectors over the month.
  • Most global sovereign yields increased, following progress around Brexit and US-China trade talks. US Treasury yields fluctuated during the month amid weak economic data, a relaxing of trade tensions, and a possible pause in the Fed’s easing cycle. German and UK gilt yields moved higher, largely tracking favorable political developments as the UK and EU agreed to a Brexit deal.
  • The US dollar (USD) weakened as soft US data fueled expectations of a dovish US Federal Reserve (Fed), while positive developments elsewhere (Brexit deal, China trade talks) supported a rally in most foreign currencies. The British pound experienced the largest monthly rise in a decade, following Brexit deal developments. The euro (EUR) rallied following signs of a potential breakthrough on Brexit, as a deal was agreed upon between the EU and the UK. The USD weakness following the Fed decision overrode the deteriorating eurozone economic data. The Swedish krona and Norwegian krone (NOK) ended lower versus the EUR, driven by weaker data. The NOK was the notable decliner despite few monthly headlines.

Portfolio Performance

  • On a total return basis, Hartford World Bond Fund (Class I Shares) performance was negative over the month with global government core exposure contributing and opportunistic sources detracting from performance. The Fund underperformed on an excess return basis relative to the FTSE World Government Bond Index due to the Fund’s higher exposure to the USD during a period when the USD weakened versus most foreign currencies.
  • In global government core rates, our exposure to select European and China-linked economies detracted as most global sovereign yields increased given the progress around US-China trade talks and Brexit.
  • Macro-driven duration1 strategies detracted. Our overweight duration positions in the US, New Zealand, and Sweden detracted as global sovereign yields increased on positive geopolitical developments. Partially offsetting this was our underweight to UK gilts as the positive Brexit developments helped send UK yields higher during the month.
  • Our macro-driven currency strategies detracted from performance. The primary detractor was our overweight to the Japanese yen (JPY) versus the EUR. The EUR rallied following positive developments on an EU-UK Brexit deal. JPY returns were weak as positive developments (Brexit deal, China trade talks) and dovish Bank of Japan policy guidance supported most higher-beta2 and European currencies against the JPY. Partially offsetting performance was positive results from our tactical overweight to the Swiss franc.
  • Within opportunistic credit sources, our exposures to securitized and high-yield credit contributed to total returns.
Monthly     Quarterly
Performance (%)
Average Annual Total Return
As of 10/31/19 MTD YTD 1 Year 3 Year 5 Year Since Inception
(5/31/11)
Hartford World Bond Fund I -0.09 4.18 6.02 3.19 2.52 3.35
Hartford World Bond Fund F 0.00 4.25 6.11 3.29 2.59 3.39
Hartford World Bond Fund Y -0.09 4.19 6.04 3.23 2.62 3.44
FTSE World Government Bond Index 0.54 6.84 9.92 2.55 1.96 --
Morningstar Category: World Bond 0.88 6.48 7.80 2.98 1.96 --
Bloomberg Barclays US Aggregate Bond Index 0.30 8.85 11.51 3.29 3.24 --

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.

Fund Inception: 05/31/2011
Share Class Inception:
I, Y – 05/31/11; F – 02/28/17

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 increased to 4.20 years at month end, largely driven by the increase in our opportunistic duration strategies. In macro duration, we remain long duration broadly as the global cycle continues to moderate.
  • In core currency, we increased our non-USD exposure as signs of rising US political risk and shifting growth leadership (emerging markets, Europe economic data bottoming) increase the probability that USD is peaking.
  • In opportunistic currency strategies, we are long JPY as a hedge against global growth slowdown, political uncertainty, and an accommodative Fed.

Sector Exposure (%)

As of 10/31/19

wb-figure-2-10.31.19

Contribution to Duration (%)

As of 10/31/19 Fund Benchmark3
United States 41.53 29.92
Sweden 17.60 0.19
New Zealand 17.19 ---
Canada 15.86 1.28
Australia
14.21 1.35
South Korea
7.05 ---
Austria
2.82 1.53
Mexico
-2.88 0.45
South Africa -2.94 0.39
United Kingdom
-10.83 8.88

Currency Exposure (%)

As of 10/31/19 Fund Benchmark3
US Dollar 62.90 38.99
Japanese Yen 21.35 18.45
Euro Currency 6.88 31.01
Swiss Franc 6.55 ---
Australian Dollar 5.36 1.63
Indian Rupee 0.53 ---
UK Sterling 0.49 5.20
Mexican Peso -0.76 0.69
Turkish Lira -1.60 --
South African Rand -1.82 0.45

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 measures the sensitivity of an asset or portfolio's price to nominal interest rate movement.

2Beta is a measure of risk that indicates the price sensitivity of a security or a portfolio relative to a specified market index.

3Benchmark is the FTSE World Government Bond Index

 

 

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.

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.

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.

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