- The health crisis held a tight grip on the global economy; nevertheless, credit markets benefited from optimism over vaccine rollouts, a second US fiscal stimulus package, and the Brexit deal. The EU and China endorsed a landmark investment agreement.
- Global sovereign yield movements were mixed. The US Treasury yield curve steepened moderately, led by the long end, in response to the growth implications of further US fiscal stimulus and vaccine rollouts, and despite near-term data weakness and the surging virus cases. In Europe, gilt yields ended lower reflecting the various twists of the EU-UK trade deal and the surge in COVID-19 cases as a more contagious strain of the virus was identified. Australian 10-year yields moved slightly higher. The country’s third quarter GDP growth release beat consensus expectations.
- The US dollar (USD) weakened, while most foreign currencies rallied in line with equity and commodity markets. Increased COVID-19 global outbreaks, and the discovery of more contagious virus mutations, were more than offset by positive news surrounding vaccine rollouts, the Brexit deal, the EU-China investment deal, and the US fiscal spending package. The Australian dollar (AUD) was the best-performing G-10 currency as strong economic data and rising commodity prices offset virus concerns. The New Zealand dollar (NZD) ended higher, also helped by rising commodity prices. The Swedish krona (SEK) outperformed as economic data continued to surprise to the upside. The Riksbank pledged to continue monetary support for as long as necessary.
- On a total return basis, Hartford World Bond Fund performance was positive on the month as currency and credit contributed while duration1 detracted. On a relative basis the portfolio underperformed as the Fund’s higher USD exposure detracted. The USD declined as most foreign currencies rallied in line with equity and commodity markets.
- In core duration, performance was negative. Our positions in the AUD and NZD detracted as yields moved higher across the dollar bloc based on the effectiveness of their pandemic response.
- Core currency contributed to total returns due to our non-USD exposure. The key contributor was our exposure to the SEK, which outperformed as economic data continued to surprise to the upside, with unemployment data at 7.7% against a consensus forecast of 8.4% and retail sales also better than expected.
- Macro-driven currency strategies were negative. Our long USD versus the Euro and Swiss franc detracted. Most currencies rallied versus the USD in line with the ‘risk-on’ tone in equity and commodity markets as concerns about sharply worsening Covid-19 outbreaks in the US and abroad, as well as the discovery of more infectious virus mutations, were more than offset by positive news about vaccine rollouts, a Brexit deal, the EU-China investment deal, and the passage of the US fiscal spending package.
- Macro-driven duration strategies detracted. Our short position in UK duration detracted as Gilt yields ended lower reflecting the various twists of the EU-UK trade deal and the surge in COVID-19 cases following an identification of a new, more spreadable variant of the virus.
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 2/28/21 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 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
- During the month we decreased the Fund’s duration to 1.74 years, driven by a decrease in opportunistic duration. We are short US 30-year duration due to rising likelihood of an effective vaccine and prospects of further US fiscal stimulus and better growth prospects, all of which should steepen the US curve. We hold a moderate short duration bias in major economies as our quantitative models indicate that bond yields are too low and have not responded to the vaccine news in line with other risk assets.
- In core market currency, the Fund increased its non-USD exposure, diversifying into select trade and commodity-linked currencies as we continue to see scope for further USD depreciation in 2021 driven by numerous catalysts such as improving global cycle and rising commodity prices and the Fed's commitment to maintain easy setting despite improving fundamentals. In tactical currency strategies, we are underweight the South African rand as rising US yields could pressure select higher-beta emerging-market currencies.
- The Fund’s exposure to credit sectors remains opportunistic in nature. We remain long investment grade, high yield, and securitized.
Currency Exposure (%)
|As of 12/31/20||Fund||Benchmark2|
|Taiwan Dollar (New)
|South Korean Won
|Offshore Chinese Renminbi
|South African Rand||-1.26||---|
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 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. ● 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. ● 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. ● Diversification does not ensure a profit or protect against a loss in a declining market
1Duration is a measure of the sensitivity of an investment’s price to nominal interest-rate movement.
2Benchmark is the FTSE World Government Bond Index.
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.