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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

  • Spread sectors performed well on an excess return basis, though many fixed-income sectors generated negative total returns as global sovereign yields rose substantially. Spreads tightened modestly, supported by largely positive economic data releases, prospects of additional fiscal stimulus, and continued vaccine distribution.
  • Most global sovereign yields rose, driven by progress in vaccine rollouts and higher fiscal spending expectations. US Treasury nominal yields moved higher. Federal Reserve Chair Powell acknowledged the move as a sign of confidence in the US economic recovery. Australian 10-year yields increased the most among major economies. The Reserve Bank of Australia conducted an unscheduled bond buying operation late in the month as short-end yields rose above its policy target. UK gilt yields and breakevens soared supported by hawkish remarks from the Bank of England.
  • The US dollar ended mixed. The British Pound Sterling (GBP) was supported by the rapid pace of the vaccine rollout in the United Kingdom. The Bank of England rhetoric indicated a limited scope for further interest rates cuts. The Australian dollar (AUD) gained as a surge in commodity prices likely buoyed sentiment, though rising US Treasury yields caused the AUD to pare previous gains. The New Zealand Dollar (NZD) gained in line with commodity prices and strong employment data. The New Zealand government adjusted the Reserve Bank of New Zealand remit to account for housing, suggesting a more hawkish monetary policy stance could begin at the central bank. The Brazilian real (BRL) underperformed after the government removed the CEO of state-controlled Petrobras, Brazil’s largest oil producer, over fuel price disagreements. The Chinese Renminbi (CNY) declined early in the month as the People's Bank of China injected liquidity to ease funding stresses.

Portfolio Performance

  • On a total return basis, the Hartford World Bond Fund performance was negative on the month as rates and currency detracted while credit contributed. On a relative basis the portfolio outperformed the benchmark1 due to the Fund’s lower duration2 positioning.
  • In duration, performance was negative. Our positions in Australia and New Zealand detracted as global sovereign bonds experienced their first significant post-COVID-19 selloff driven by positive vaccine rollouts and higher fiscal spending expectations.
  • Macro-driven duration strategies contributed. Our short duration biases in 10-year US, UK, Australia and New Zealand bonds were the primary contributors, as global sovereign bonds experienced their first significant post-COVID-19 selloff driven by positive vaccine rollouts and higher fiscal spending expectations. The above positive results were partially offset by negative performance from our long to long-end duration in select dollar bloc economies (US, Australia).
  • In opportunistic credit strategies, our allocations to high-yield and securitized credit sectors contributed as spreads tightened modestly over the month.
Monthly     Quarterly
Performance (%)
Average Annual Total Return
As of 2/28/21 MTD YTD 1 Year 3 Year 5 Year Since Inception
(5/31/11)
Hartford World Bond Fund I -0.37 -0.19 1.22 2.97 2.70 3.03
Hartford World Bond Fund F -0.37 -0.19 1.38 3.06 2.78 3.08
Hartford World Bond Fund Y -0.28 -0.09 1.32 3.00 2.78 3.12
FTSE World Government Bond Index -2.42 -3.67 3.36 3.33 3.12 --
Morningstar Category: World Bond -1.53 -2.26 5.39 2.82 3.80 --
Bloomberg Barclays US Aggregate Bond Index -1.44 -2.15 1.38 5.32 3.55 --

Expenses

  Net Gross
Class I    0.74%    0.74%  
Class F    0.65%  0.65%
Class Y    0.75%  0.75%

Expenses as shown in the Fund’s most recent prospectus.

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 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

  • Over the month we retained the Fund’s duration of 2.01 years. We have a short duration bias in the UK as our near-term cycle outlook reflects improving global growth driven by vaccine rollouts and additional fiscal stimulus. We are tactically trading duration in US and Europe as we expect a multi-speed rebound in this economic normalization environment.
  • In market currency, the Fund marginally increased its non-USD exposure. We are tactically managing our US dollar exposure given that in the near-term, rising US yields and the prospect of a return to US growth outperformance could led to broad USD strength. In tactical currency strategies, we hold short positions in Latin America and CEEMEA (Central and Eastern Europe, Middle East and Africa) foreign exchange markets (FX), as rising US yields, faltering risk appetite, and idiosyncratic political concerns could pressure select emerging-market countries.
  • The Fund’s exposure to credit sectors remains opportunistic in nature. We remain long investment grade, high-yield, and securitized.

Sector Exposure (%)

As of 2/28/21

wb-figure-2-2.28.21

Contribution to Duration (%)

As of 2/82/21 Fund Benchmark1
Canada 25.71 1.31
United States 19.54 27.85
Australia 19.39
1.81
China 15.62 ---
Norway
14.99 0.11
New Zealand
13.71 ---
South Korea
11.01 ---
Euro Currency -4.37 ---
Germany
-8.89 6.06
United Kingdom
-23.14 8.36

Currency Exposure (%)

As of 2/28/21 Fund Benchmark1
US Dollar 95.63 35.56
Chinese Renminbi 4.85 ---
South Korean Won 3.02 ---
Canadian Dollar
2.80 1.64
Norwegian Krone
1.24 0.19
Japanese Yen
-0.49 17.25
Australian Dollar
-0.72 2.23
South African Rand
-1.32 ---
Euro Currency
-2.15 34.57
Offshore Chinese Renminbi -2.82 ---

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. ● 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, economic and regulatory developments. These risks may be greater, and include additional risks, for investments in emerging markets or if the Fund focuses in a particular geographic region or country. ● 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, regulatory and counterparty risk. ● 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. ● 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. ● The purchase of securities in the To-Be-Announced (TBA) market can result in higher portfolio turnover and related expenses as well as price and counterparty risk. ● The Fund may have high portfolio turnover, which could increase its transaction costs and an investor’s tax liability. ● Diversification does not ensure a profit or protect against a loss in a declining market.

1Benchmark is the FTSE World Government Bond Index.

2Duration is a measure of the sensitivity of an investment’s price to nominal interest-rate movement.

 

 

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.

The views expressed herein are those of Wellington Management, are for informational purposes only, and are subject to change based on prevailing market, economic, and other conditions. The views expressed may not reflect the opinions of Hartford Funds or any other sub-adviser to our funds. They should not be construed as research or investment advice nor should they be considered an offer or solicitation to buy or sell any security. This information is current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management or Hartford Funds.

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