- Most spread sectors ended the month on a positive note and outperformed on an excess return basis. US Treasury yields increased on encouraging growth prospects, vaccine administration, and meaningful fiscal support.
- Global sovereign yields diverged. US and Canadian yields rose significantly relative to other major markets. US yields were supported by an acceleration of vaccine rollouts, expected drop in COVID-19 infections, and stronger growth prospects after the signing of the third pandemic relief package and news of a proposed infrastructure package. 10-year Treasury Inflation Protected Securities (TIPS) real yields and breakevens ended higher. Longer-dated bund yields inched higher. The European Central Bank increased the PEPP purchase rate, as renewed virus restrictions and stalling vaccine rollout weighed on Europe’s recovery. 10-year Japanese government bond yields bucked the trend and fell over the month. Canadian yields rose as employment data and retail sales beat expectations, even as the Bank of Canada reiterated the need for “extraordinary” policy support. Australian yields declined. The Reserve Bank of Australia announced additional purchases and said it expects to keep rates on hold until 2024.
- The US dollar gained versus most major currencies, supported by rising US Treasury yields and the US economic outperformance theme. Within the G10, the Japanese yen (JPY) and Swiss franc (CHF) underperformed. The Mexican peso (MXN) and Canadian dollar (CAD) rallied on hopes the fiscal impulse in the US has the scope to filter down into these countries. The Norwegian krone (NOK) was supported by an increasingly hawkish central bank. The Euro (EUR) fell as a new wave of COVID-19 infections swept across the continent, leading to tougher new restrictions. Germany’s Constitutional Court suspended the ratification of the EU recovery fund. The New Zealand dollar (NZD) slumped after Prime Minister Ardern announced new measures to curb the housing bubble.
- On a total return basis, Hartford World Bond Fund performance was positive on the month as currency and credit contributed while rates were neutral. On a relative basis to the benchmark1, the portfolio outperformed as the Fund’s tactical currency positioning benefitted performance.
- In duration2, performance was marginally positive driven by our exposure to dollar bloc (AUD, CAD) and commodity-linked countries such as China (CNY). Australian yields declined after the Reserve Bank of Australia (RBA) announced it would purchase AUD4bn of longer-dated bonds and that it does not expect to raise rates until 2024.
- Macro-driven duration strategies detracted. Our underweight duration bias in New Zealand duration detracted as Kiwi rates fell after the RBNZ announced targeted macroprudential tightening (rather than borrowing cost increases) to curtail exuberant house price inflation. Tactical positioning in the US detracted in aggregate, while an underweight to UK duration contributed.
- Macro-driven currency strategies contributed. Our underweight EUR positions contributed. The EUR fell as another wave of COVID-19 infections swept across the continent and led to the introduction of tougher restrictions. Our long bias in developed-market commodity-linked currencies (CAD, NOK) versus the lower-yielding currencies and perceived safe havens (CHF, JPY) also contributed. The JPY and CHF were the worst performing G10 currencies amid rising rates in North America.
Expenses as shown in the Fund’s most recent prospectus.
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 reduced the Fund’s duration to 1.81 years, driven by opportunistic macro strategies. We are underweight duration in the UK as the UK is moving out of Europe’s economic trajectory and getting closer to the US economic trajectory. We are tactically trading duration in US given the short-term impact on US growth could differ from previous relief packages especially if the tax raising proposal impacts US equities and broader risk sentiment.
- In strategic market currency, the Fund marginally reduced its non-USD exposure. We are tactically managing our US dollar exposure given that in the near-term, rising US yields and the prospect of a return to US growth outperformance could led to broad USD strength. In tactical currency strategies, we moderately favor DM commodity-linked currencies and are underweight select safe-haven and emerging-market currencies given supply bottlenecks and pent-up consumer demand will support commodity inflation, while US economic outperformance could pressure select high-beta3 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 3/31/21||Fund||Benchmark1|
|South Korean Won
|South African Rand
|Offshore Chinese Renminbi
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, economic and regulatory developments. These risks may be greater, and include additional risks, 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, regulatory 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. ● The purchase of securities in the To-Be-Announced (TBA) market can result in higher portfolio turnover and related expenses as well as price and counterparty risk. ● The Fund may have high portfolio turnover, which could increase its transaction costs and an investor’s tax liability.
1Benchmark is the FTSE World Government Bond Index.
2Duration is a measure of the sensitivity of an investment’s price to nominal interest-rate movement.
3Beta is a measure of risk that indicates the price sensitivity of a security or a portfolio relative to a specified market 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.