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Market Commentary

  • US-China trade tensions eased in September despite reports that the US administration is considering investment restrictions on China. Geopolitical uncertainty increased as the US House of Representatives launched an official impeachment inquiry of US President Donald Trump and as key energy facilities in Saudi Arabia were attacked. In Europe, the eurozone economy continued to slow and Brexit remained a focal point.
  • Most global sovereign yields increased in a partial reversal of the significant price rally in August. UK gilts participated in the global yield sell-off in early September; however, a dovish tone from the Bank of England (BoE) and a larger-than-expected drop in Consumer Price Index1 put downward pressure on yields in the second half of the month. Italian yields fell after a new coalition government was announced.
  • The US dollar (USD) ended mixed. The US Federal Reserve’s (Fed’s) hawkish tilt versus the market’s expectations, an oil supply shock in the Middle East, and global growth concerns all supported the currency. The British pound was the best-performing G10 currency against the USD, following the passing of the Benn bill (designed to prevent a no-deal Brexit on October 31) and media reports of EU flexibility on the Irish backstop. The euro weakened as the European Central Bank (ECB) resumed quantitative easing and cut deposit rates amid disappointing economic indicators. The Japanese yen (JPY) fell versus the USD, with optimism for a US-China trade deal weighing on the JPY, which is perceived as a safe-haven currency.

Portfolio Performance

  • On a total return basis, Hartford World Bond Fund performance was negative over the month with global government core and opportunistic strategies detracting from performance. The Fund outperformed, however, on an excess return basis relative to the FTSE World Government Bond Index due to the Fund’s lower duration2 exposure during a period when rates sold off.
  • In global government core rates, total returns were negative as a partial reversal of the significant decline in sovereign yields seen in August weighed on fixed-income total returns.
  • In core currency, exposure to the JPY detracted as sentiment following the more optimistic outlook for a US-China trade deal weighed on the perceived safe-haven currency.
  • Macro-driven duration strategies detracted. Our long positions in the US hurt performance as yields rose, and a short to UK duration detracted as yields in the UK declined in the second half of September following a larger than expected drop in CPI and a dovish tone from the BoE.
  • Quantitative strategies were beneficial. The primary driver of performance was our directional short position which benefitted performance as global yields increased as a partial reversal of the rally which occurred in August. A tactical long US 10-year versus short Australia 10-year position also added to performance as spreads tightened in the pair.
  • Within opportunistic credit sources, our exposures to high-yield (HY) and securitized credit contributed. HY generated positive total returns following fresh monetary stimulus from both the Fed and the ECB.
Monthly     Quarterly
Performance (%)
Average Annual Total Return
As of 9/30/19 MTD YTD 1 Year 3 Year 5 Year Since Inception
(5/31/11)
Hartford World Bond Fund I -0.55 4.28 6.51 3.19 2.58 3.40
Hartford World Bond Fund F -0.61 4.25 6.61 3.26 2.63 3.43
Hartford World Bond Fund Y -0.64 4.28 6.54 3.26 2.67 3.49
FTSE World Government Bond Index -1.30 6.27 8.13 1.19 1.80 --
Morningstar Category: World Bond -0.54 5.55 5.85 2.18 1.81 --
Bloomberg Barclays US Aggregate Bond Index -0.53 8.52 10.30 2.92 3.38 --

Expenses

  Net Gross
Class I    0.76%    0.76%  
Class F    0.67%  0.67%
Class Y    0.74%  0.78%

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 3.56 years at month end, largely driven by the increase in our opportunistic duration strategies. In macro duration, we remain long given global growth continues to moderate. In strategic duration, we retain exposure to the dollar bloc countries—US, Australia, Canada, New Zealand—and added to our Sweden exposure both through sovereign and government-related securities.
  • In core currency, we increased our non-USD exposure as signs of intensifying US slowdown could weigh on the USD. In opportunistic currency, we favor the JPY due to elevated trade uncertainty.
  • Our exposure to credit sectors remains opportunistic in nature. We remained positive toward HY and securitized credit.

Sector Exposure (%)

As of 9/30/19

wb-figure-2-9.31.19

Contribution to Duration (%)

As of 9/30/19 Fund Benchmark3
United States 34.23 29.95
New Zealand 21.36 ---
Sweden 18.92 0.19
Canada 17.84 1.30
Australia
8.27 1.34
South Korea
6.14 ---
Austria
3.38 1.56
Poland
-5.18 0.24
South Africa -5.29 0.39
United Kingdom
-8.12 8.85

Currency Exposure (%)

As of 9/30/19 Fund Benchmark3
US Dollar 79.59 38.77
Japanese Yen 17.06 18.83
Australian Dollar 2.69 1.61
Canadian Dollar 2.09 1.56
UK Sterling 1.08 5.21
Polish Zloty 0.59 0.47
Norwegian Krone 0.43 0.19
Euro Currency -0.64 30.87
South African Rand -1.75 0.44
Turkish Lira -2.04 ---

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.

1The CPI in the United States is defined by the Bureau of Labor Statistics as “a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.”

2Duration measures the sensitivity of an asset or portfolio's price to nominal interest rate movement.

3Benchmark is the FTSE World Government Bond Index

 

 

Index Definitions

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.

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