- Global credit spreads widened amid political gridlock and pivotal idiosyncratic events. The Democrats gained control of the House of Representatives in the US midterm elections, global trade tensions relaxed marginally, and oil prices declined sharply. In Europe, weaker growth persisted, while Brexit negotiations churned on.
- Most global sovereign yields fell over the period amid Brexit concerns, collapsing oil prices, and weaker economic results in Europe. US and Canadian yields fell the most among major developed markets, owing to geopolitical uncertainly and dovish central bank rhetoric.
- The US dollar (USD) ended the period mixed versus most major currencies. The New Zealand dollar (NZD) and Australian dollar (AUD) outperformed, buoyed by stronger-than-expected labor market data and improved sentiment on trade talks. The Norwegian krone (NOK) and Canadian dollar (CAD) were weighed down by a sharp decline in oil prices. The euro (EUR) and British pound (GBP) fluctuated on Brexit developments and Italian budget disputes, but ended the month largely unchanged.
- Hartford World Bond Fund performance was flat over the month with global government core strategies contributing to performance, while opportunistic sources of return detracted over the month
- In global government core rates, our exposures in the US and Canada contributed to performance as dovish rhetoric from the US Federal Reserve (Fed) and the Bank of Canada weighed on yields. Canadian yields were further driven lower by collapsing oil prices.
- Our core currency positions detracted primarily driven by our exposure to the Japanese yen (JPY). The JPY declined towards the end of the month following a fall in Japan’s manufacturing Purchasing Managers’ Index (PMI).1
- Macro-driven duration2 strategies were positive. Our tactical overweight positions in the front-end of the US curve benefited, particularly after the Fed’s marginally dovish rhetoric. Overweight duration positions in the front-end of the UK also contributed given the plunge in front-end gilt yields following Brexit uncertainty.
- Macro-driven currency strategies detracted. Our overweight to the Japanese yen (JPY) versus an underweight to European currencies detracted.
- Within opportunistic credit strategies, our high yield exposure detracted as spreads widened
Expenses3 (Class A) Net 1.04% Gross 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.
Portfolio Positioning & Market Outlook
- Portfolio duration increased to 4.24 years at month end, primarily driven by our opportunistic strategies. We have moved to a long duration position in the US driven by the combination of a slowing global cycle, rising political uncertainty, and a marginally dovish Fed statement.
- In opportunistic macro duration strategies, we continue to tactically manage duration given the global economy has entered a late-cycle stage, with slowing growth, rising inflation, tighter central bank policy, and intensifying trade friction. Additionally, as a result of the US policy mix of pro-cyclical fiscal stimulus alongside trade and immigration curbs, we see the potential for a boom-bust cycle and therefore have expressed a steepening bias in US duration.
- In currency, we are underweight the EUR and the GBP as the Italian budget discussions and Brexit uncertainty are likely to pressure European assets. Additionally, we hold an overweight to the USD as a result of continued above trend growth and a falling unemployment rate.
- Our exposure to credit sectors remains opportunistic in nature. We remain positive toward high yield and securitized credit, but have moved more cautious towards investment grade credit in anticipation of rising market volatility.
Currency Exposure (%)
|As of 11/30/18||Fund||Benchmark4|
|New Zealand Dollar||-2.34||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 Purchasing Managers’ Index is an indicator of economic health for manufacturing and service sectors.
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 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.
Indices are unmanaged and not available for direct investment.