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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

  • Fixed-income spread1 sectors benefited from a plausible ‘phase one’ trade deal between the US and China. The Conservative party won a large majority in the UK General Election, heralding a more stable Brexit course. Organization of Petroleum Exporting Countries (OPEC) and Russia agreed on further oil supply cuts.
  • Most global sovereign yields increased, driven by a softening of US-China trade tensions and reduced risk of a disorderly Brexit. Australian yields increased the most among major developed markets, helped by better-than-expected employment data. Growing signs that the United States-Mexico-Canada-Agreement (USMCA) will go into effect and the Bank of Canada’s upbeat tone on the domestic economy helped lift Canadian yields.
  • The US dollar (USD) weakened significantly. A breakthrough in the US-China trade negotiations supported a rally among most higher-beta2 currencies, such as emerging-market currencies, the Australian dollar, the New Zealand dollar, and the Norwegian krone (NOK). Downbeat domestic US activity data and a patient Federal Reserve (Fed) also weighed on the USD. Oil-linked currencies including the NOK, Colombian peso, and Brazilian real outperformed. Oil prices rose 5.7% on the back of an agreed OPEC supply cut and an improved global demand outlook.

Portfolio Performance

  • On a total return basis, Hartford World Bond Fund performance was positive over the month with global government core exposure and opportunistic sources contributing. The Fund outperformed on an excess return basis relative to the FTSE World Government Bond Index, primarily due to the Fund’s lower duration3 positioning, which limited the negative impact of rising sovereign yields.
  • In global government core rates, performance was negative as sovereign yields increased on positive news surrounding global trade.
  • Core currency contributed as the portfolio’s non-USD exposure appreciated while the USD weakened significantly amid downbeat US activity data and a patient and dovish Fed.
  • Our macro-driven currency strategies contributed. The primary contributor was our overweight to the Japanese yen versus the USD.
  • Macro-driven duration strategies detracted from performance. Our overweight duration positions in Australia and New Zealand detracted. Global sovereign yields moved higher in these countries, driven by favorable developments in US-China trade negotiations and Australian employment data that surprised to the upside.
  • 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 12/31/19 MTD YTD 1 Year 3 Year 5 Year Since Inception
(5/31/11)
Hartford World Bond Fund I 0.43 3.95 3.95 3.51 2.44 3.26
Hartford World Bond Fund F 0.54 4.04 4.04 3.63 2.51 3.30
Hartford World Bond Fund Y 0.53 4.06 4.06 3.62 2.53 3.36
FTSE World Government Bond Index 0.28 5.90 5.90 4.12 2.03 --
Morningstar Category: World Bond 1.21 6.83 6.83 4.03 2.30 --
Bloomberg Barclays US Aggregate Bond Index -0.07 8.72 8.72 4.03 3.05 --

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 marginally decreased to 2.54 years, largely driven by decreased exposure to the US and Sweden in our core country exposure. We maintained an underweight in opportunistic sources due to global economic data slowly improving and policy uncertainty reducing.
  • In core currency, we increased our non-USD exposure as growth stabilization outside the US and a high hurdle for Fed rate hikes should result in dollar weakness against major foreign currencies.
  • Our exposure to credit sectors remains opportunistic in nature. We remained positive toward high-yield and securitized credit.

Sector Exposure (%)

As of 12/31/19

wb-figure-2-12.31.19

Contribution to Duration (%)

As of 12/31/19 Fund Benchmark4
Canada 27.94 1.31
New Zealand 24.77 ---
Australia 20.95 1.37
Sweden 14.37 0.19
South Korea
12.69 ---
Austria
4.38 1.47
Denmark
3.25 0.46
Germany -2.93 4.97
United Kingdom
-5.15 8.79
United States
-5.67 29.91

Currency Exposure (%)

As of 12/31/19 Fund Benchmark4
US Dollar 49.00 38.90
Japanese Yen 20.93 18.56
Euro Currency 9.72 30.73
Australian Dollar
7.73 1.61
Swiss Franc
7.35 ---
Swedish Krona
4.49 0.28
Norwegian Krone
2.68 0.20
Indian Rupee
0.48 ---
Thai Baht 0.40 --
South African Rand -1.85 0.51

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.

1Spreads are the difference in yields between two fixed-income securities with the same maturity, but originating from different investment sectors.

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

3Duration is a measure of the sensitivity of an investment’s price to nominal interest-rate movement.

4Benchmark 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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