- Global spread sectors continued to rally against a backdrop of dovish central-bank policy developments and seemingly positive strides in the US-China trade negotiations
- Most global sovereign bonds rose over the period. The US Federal Reserve (Fed) signaled a higher tolerance for temporarily overshooting its inflation target and the US Treasury yield curve steepened. Australian yields declined following dovish rhetoric from the Reserve Bank of Australia and less favorable trade outcomes with China, including reports that a Chinese port had banned imports of Australian coal indefinitely.
- The US dollar (USD) appreciated against major currencies, supported by dovish policy developments in other countries. The British pound (GPB) rallied after Prime Minister Theresa May’s comments led the market to anticipate a lower probability of a “no deal” Brexit outcome. The Norwegian krone and Swedish krona came under pressure due to lower-than-expected inflation prints.
- Hartford World Bond Fund’s performance was negative over the month with opportunistic sources contributing to performance and global government core strategies detracting
- In global government core rates, our exposures in Australia and New Zealand contributed as yields fell following dovish central bank rhetoric and the possibility of less favorable trade outcomes with China
- In core currency, our non-USD exposure detracted as the USD rallied versus most major currencies over the month
- Macro-driven duration1 strategies were beneficial. The largest contributor was our short duration position in the long end of the US curve. The US Treasury curve steepened, led by the long end, after the Fed hinted at reducing the maturity of its balance sheet and tolerating a temporary inflation overshoot. Our long Australian duration position also contributed as Australian yields declined over the month.
- Macro-driven currency strategies were positive. A long position in USD versus select developed markets (the euro (EUR), GBP, and the New Zealand dollar) currencies contributed.
- Within opportunistic sources, credit strategies were positive as our exposure to high yield benefitted as spreads tightened over the month. Our opportunistic emerging-market strategies also contributed driven by a tactical underweight in the South African rand and the Turkish lira.
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 slightly decreased to 3.12 years at month-end
- In opportunistic macro duration strategies, we are tactically trading duration given global growth is experiencing a late-cycle slowdown. We also have a steepening bias in US duration as the Fed appears likely to delay policy rate hikes and has signaled a higher tolerance for overshooting its inflation target.
- In core currency, we have been reducing our non-USD exposure as we favor safe-haven currencies given the market has moved to a late-cycle slowdown
- In opportunistic currency strategies, we have a short position in the EUR as we believe the European Central Bank is likely to delay rate hikes
Currency Exposure (%)
|As of 2/28/19||Fund||Benchmark2|
|Offshore Chinese Renminbi||0.46||0.00|
|South African Rand||-1.66||0.47|
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.
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.