- The pace of global growth moderated, primarily driven by weaker economic activity indicators in Europe. Market volatility continued. US trade policy and tariff concerns dominated the headlines. Political pressures escalated in Washington with several White House staff exits and new appointments made by President Trump.
- Most global sovereign yields fell, driven by worries of a global trade war. Fears about US technology sector regulation following data privacy concerns also triggered a flight to perceived safe haven sovereigns.
- The US dollar (USD) ended the period mixed versus most major currencies. Concerns over trade tensions and political uncertainty offset any positive impact of the Federal Reserve (Fed) rate hike. The British pound (GBP) and the euro (EUR) were the top-performing G101 currencies following positive developments in Brexit negotiations and European Central Bank (ECB) talk about a gradual withdrawal of monetary stimulus.
- Hartford World Bond Fund performance was flat over the course of the month as positive contribution from our global government core exposure sources of return were offset by our opportunistic sources
- Our core exposure contributed positively. Most developed market yields rallied during the month driven by concerns of a global trade war. Our core currency (FX) was neutral on the month in terms of performance contribution.
- Macro-driven currency strategies detracted. Our overweight to Swedish krona (SEK) vs GBP and EUR was the biggest detractor. The SEK declined. The Riksbank remained dovish with their policy report arguing that it would have been risky to change policy too quickly, despite inflation being close to target. The GBP and the EUR ended up as the top performing G10 currencies in March. Positive developments in Brexit negotiations and the ECB’s removal of an easing bias to quantitative easing (QE) were factors supporting these currencies.
- Macro-driven duration2 strategies were neutral. Our overweight to duration in Germany and New Zealand contributed to results, but it was largely offset by our underweight duration positions in the front-end and intermediate portions of the US curve.
Expenses3 % (Class A) Net Op. Exp.: 1.04% Gross Op. Exp.: 1.04%
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. For more current performance information to the most recent month-ended, click here.
Portfolio Positioning & Market Outlook
- Portfolio duration increased to 3.72 years at month end. Our active short positions moved to modest longs, primarily in Europe. We also increased our strategic duration exposure from 3 to 3.25 years in light of recent rise in global yields. However, we continue to maintain a conservative duration posture at the lower end of our range. Our USD hedge ratio has moved modestly lower, but continues to be high as a continued reversal in recent inflation softness and a pickup in wage pressures could trigger support for the USD.
- We still expect robust global growth, albeit at a slower pace as the strong momentum of the past nine months fades. We are managing duration tactically in this late-cycle moderating growth environment.
- Inflation will remain below ECB’s target, thus increasing the policy divergence with the Fed. We are underweight the euro, and overweight duration in France.
- Central banks of small open economies around Europe will engage with the cyclical upturn and reduce their assessment of downside risk. We are overweight the SEK.
- We remain overweight investment grade corporate credit with an emphasis on selective opportunities in the European banking sector. Despite the current mid-cycle economic slowdown in Europe, European banks should also experience further improvement in their credit fundamentals as non-performing loans continue to decline.
Currency Exposure (%)
|As of 3/31/18||Fund||Benchmark4|
|Offshore Chinese Renminbi||0.46||0.00|
|New Zealand Dollar||-0.53||0.00|
Important Risks: Investing involves risk, including the possible loss of principal. The fund seeks to achieve its investment objective by allocating assets among specialist portfolio managers. There is no guarantee a fund will achieve its stated objective. Security prices fluctuate in value depending on general market and economic conditions and the prospects of individual companies. ● 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. ● The fund may invest in a smaller number of issuers and focus on investments in particular geographic regions or countries, so it may be more exposed to risks and volatility than a more broadly diversified fund. ● Privately placed, restricted (Rule 144A) securities may be more difficult to sell and price than other securities.
1The Group of Ten (G10) is made up of eleven industrial countries: Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom, and the United States.
2Duration is a measure of the sensitivity of an asset or portfolio’s price to nominal interest rate movement.
3Expenses as shown in the fund’s most recent prospectus. Gross and Net expenses are the same.
4Benchmark is the Citigroup World Government Bond Index.
Index data for Citigroup World Government Bond Index © 2018 Citigroup Index LLC (“Citi Index”). All rights reserved. CITI is a trademark and service mark of Citigroup Inc. or its affiliates, is used and registered throughout the world, and is used with permission for certain purposes by Hartford Funds Management Group, Inc. Hartford World Bond Fund is not sponsored, endorsed, sold or promoted by Citi Index, and Citi Index makes no representation regarding the advisability of investing in such fund. Reproduction of the Citi Index data and information (collectively, “Citi Data”) in any form is prohibited except with the prior written permission of Citi Index. CITI INDEX GIVES NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF ACCURACY, ADEQUACY. MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. Citi Index is not responsible for any errors or omissions in, or for the results obtained from use of, Citi Data, and in no event shall Citi Index be liable for any direct, indirect, special or consequential damages in connection therewith.
Citigroup 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.
Indices are unmanaged and not available for direct investment.