- Global economic data weakness and dovish policy shifts by the US Federal Reserve (Fed), the European Central Bank (ECB), and other major central banks drove market results
- Most global sovereign yields fell sharply over the period amid a combination of dovish policy developments from major central banks and weaker global economic data. Australian and New Zealand yields were weighed down by softer-than-expected fourth quarter GDP growth and central bank rate expectations.
- The US dollar (USD) appreciated against most major currencies, supported by dovish central banks and soggy economic data across major economies, despite weakness in US data. The British pound was the worst-performing G10 currency versus the USD, weighed down by Brexit developments. The Japanese yen (JPY) was the best-performing G10 currency amid broader weakness and uncertainty on the US-China trade front. The pivot toward a more dovish policy stance by the ECB, Bank of Canada, and the Reserve Bank of New Zealand (RBNZ) pushed their respective currencies lower versus the greenback.
- Hartford World Bond Fund’s performance was positive over the month with global government core strategies and opportunistic sources of return contributing
- In global government core rates, our exposures to select dollar bloc economies contributed as yields were weighed down by weaker economic data and dovish central bank rhetoric
- In core currency, our non-USD exposure detracted as the USD rallied versus most major currencies over the month
- Macro-driven duration1 strategies were marginally positive. Our overweight positions in Australia, New Zealand, and Canada contributed. Australian and New Zealand yields were weighed down by softer-than-expected 4Q GDP growth and central-bank rate expectations. Specifically, the RBNZ made an assessment that the next rate move was more likely to be down. Partially offsetting performance was our underweight to US duration as the Fed surprised the market with a marked shift in the Fed funds projections: no hikes this year and just one in 2020.
- Macro-driven currency strategies were positive. Our overweight to the JPY versus the euro (EUR) contributed. The JPY was the best performing G10 currency amid uncertainty on the US-China trade front and weaker than expected data across major economies. Meanwhile, a dovish policy announcement from the ECB and signs of continued weakness in Eurozone manufacturing saw the EUR fall.
- Within opportunistic sources, emerging market (EM) strategies contributed to total returns
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 increased to 3.44 years at month-end, largely due to the increase in our strategic market exposures
- In core currency, we modestly increased our non-USD exposure as we continue to retain a moderately positive outlook on the JPY as a hedge against a global growth slowdown, trade war risks, and a dovish Fed
- In opportunistic macro-duration strategies, we are tactically trading duration given global growth is slowing. However, there are encouraging signs of stabilization in China. Additionally, the Fed is likely to delay policy rate hikes and signal a higher tolerance for overshooting its inflation target, therefore, we have a steepening bias in the US.
- In opportunistic currency strategies, we are tactically trading the USD as a dovish Fed suggests a weaker dollar. But, downside growth surprises and dovish policy developments elsewhere should be supportive of the USD.
Currency Exposure (%)
|As of 3/31/19||Fund||Benchmark2|
|South African Rand||-0.45||0.45|
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.
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