- Credit markets benefited from improved economic data, though fears mounted over another surge of COVID-19 cases. Geopolitical events centered on Hong Kong, as the US suspended its preferential status and China passed the national security law.
- Most global sovereign yields movements were limited. The US Treasury yield curve was little changed on the month. Yields initially rose on better-than-expected jobs data and hopes of economic recovery, but then dipped after the Federal Open Market Committee ‘FOMC’ signaled its intention to keep policy rates low. The Japanese government bond yield curve steepened. Japan’s bond market came under pressure after increased planned issuance for the fiscal year ending March 2021 to fund stimulus spending.
- The US dollar (USD) and Japanese yen (JPY) ended lower versus most currencies. US dollar index movements responded to both fears of a “second wave” of COVID-19 cases and the potential speed of the economic recovery. The New Zealand dollar (NZD) was the strongest G10 performer and positive sentiment was particularly notable in New Zealand due to an absence of COVID-19 cases, allowing a rapid return of domestic economic activity. The Euro (EUR) rallied supported by evidence of an improvement in European activity indicators and a bigger increase in the European Central Bank’s (ECB) quantitative easing relative to market expectations.
- On a total return basis, World Bond Fund performance was negative on the month driven by negative returns in our core exposures while opportunistic strategies were moderately positive. On a relative basis the portfolio underperformed as both core and opportunistic currency strategies had a negative contribution, while the benchmark had a positive return primarily driven by its higher foreign currency exposure.
- In core duration1, performance was marginally positive as yields remained range bound, leading to moderately positive returns for global sovereign rates.
- Core currency detracted from total returns. Exposure to the JPY detracted on an absolute basis as perceived safe-havens ended marginally lower on the month, oscillating on sentiment shifts in relation to both fears of a “second wave” of COVID-19 cases and the potential speed of a recovery.
- Macro-driven currency strategies were negative. Our short EUR position detracted as the EUR rallied early in the month after ECB President Lagarde announced that “action had to be taken” and the ECB increased its asset purchase program by EUR600bn, a bigger increase in quantitative easing than expected. Macro-driven duration was moderately positive driven by duration positioning in the US.
- In opportunistic credit strategies, our allocations to both high-yield and securitized contributed as spreads continued to tighten due to improving economic data and the easing of lockdowns.
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
- Over the month we decreased the Fund’s duration to 2.59 years, driven by a reduction in our core duration position. In core duration the scope for a further fall in yields is limited unless central banks get more serious about negative rates. In opportunistic duration we remain long duration given the threat of a second wave and decline in GDP growth.
- In core market currency, the Fund increased its non-USD exposure to a broad set of currencies as reduced rate differentials and stretched long-term valuations support a weaker dollar.
- The Fund’s exposure to credit sectors remains opportunistic in nature. We remain overweight high-yield and securitized.
Currency Exposure (%)
|As of 6/30/20||Fund||Benchmark2|
|New Zealand Dollar
|South African Rand
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.
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.