As global economies change rapidly and investors increasingly seek alternative funds where they can put their money, The Hartford Mutual Funds has launched three new funds sub-advised by Wellington Management Co. that offer investors global exposure.
Launched on June 1, the three new funds are The Hartford Global Real Asset Fund, The Hartford Global All-Asset Fund, and, The Hartford International Value Fund. The Hartford Mutual Funds will host a conference call for advisors about the new funds on June 22.
“We’re early in the game, but we’re already seeing investors express a lot of interest,” said John Diehl, senior vice president of The Hartford Financial Services Group Inc.’s retirement division, in an interview. “Given the accelerated volatility in both the U.S. and international stock and bond markets, investors are interested in asset classes that can add greater portfolio diversification that protects against inflationary trends.”
The new funds’ asset allocations are based on where The Hartford Mutual Funds has seen investors seeking to put their money in the past year or two. Specifically, they want safe-harbor investments that do not correlate with volatile market movements in stocks and bonds.
“Investors are seeking alternatives to dampen the volatility in traditional stock and bond markets,” Diehl said.
At the same time, he noted that The Hartford is not telling its investors to move all of their money out of domestic stocks and bonds.
“The traditional stocks and bonds we offer across our family are still in great demand,” Diehl said. “Investors should look at these new funds as a diversifier and a complement to traditional funds.”
Mutual funds that invest in alternative assets are becoming more popular in recent years, and they’re not just a niche anymore, he added, pointing to the importance of non-correlating asset classes. Historically, non-correlating assets don’t move in lockstep with traditional stocks and bonds. So while rising interest rates are bad for bonds, they’re generally good for gold because commodities rise in price when inflation rises.
A recent study by mutual fund research firm Strategic Insight, “The Strategic Insight 2009 Fund Sales Survey: Perspectives on Intermediary Sales by Distribution Channel and Share Class” mirrors Diehl’s observation. Among its findings on fee-based fund sales, the study shows an increasing demand for mutual funds with alternative or uncorrelated investment strategies. Investors poured more than $110 billion into alternative strategies last year.
The Global Real Asset Fund is focused on inflation defense, Diehl said. It invests in commodities, natural resource equity plays, agriculture, and precious metals. The fund’s management team–which seeks a long-term total return that outpaces inflation by investing in a global mix of 40% to 70% of stocks, 20% to 50% of bonds, and 0% to 25% of commodities–is led by Scott Elliott, a senior vice president at Wellington Management with 20 years of professional experience. Other team members include Brian Garvey, Jay Bhutani, and Lindsay Thrift Politi.
The All-Asset Fund, also led by Elliott, has a broader mandate. Its adaptive investment approach gives portfolio managers the freedom to invest in any country, sector, or asset class, including stocks, bonds, cash, commodity-related instruments, currencies, and derivatives. Target asset allocation ranges are 40% to 80% of stocks, 20% to 60% of bonds, and up to 25% of commodities. Other team members include Garvey and Stephen Gorman.
Asked if there is anything that All-Asset Fund managers can’t invest in, Diehl replied that their autonomy and freedom to act is the key to the fund’s potential success.
“When you look at the breadth and reach of managers of Wellington, we feel that it provides us a competitive advantage,” Diehl said, noting that the fund’s managers face the enormous task of keeping up with economies, market movements, and investments all over the world. “I’m glad it’s not me–and I’m sure that goes on in the mind of the investor,” he said.
The International Value Fund offers investors the benefits of international exposure with a style-focused, large-cap value approach. The fund’s assets are 65% focused on large-cap value international companies that are out of favor but expected to become profitable again. The fund’s mandate says that while it must invest at least 65% of its assets in equity securities of foreign issuers, the fund is expected to be 100% invested in common stocks of international companies, except for a minimal cash position. The fund is managed by Toby Jayne, a Wellington vice president with 12 years of experience.
The Hartford Mutual Funds has $95.8 billion of assets under management (AUM) as of March 31, 2010. It was established in 1996 by its 200-year-old parent, The Hartford, a Simsbury, Connecticut, insurance-based financial services company.
Wellington Management, an independent and unaffiliated sub-advisor to The Hartford, is headquartered in Boston. With approximately $562 billion in client assets under management, Wellington serves as an investment advisor to more than 1,800 institutions located in over 40 countries.
Read a story about The Hartford’s recent reorganization from the archives of InvestmentAdvisor.com.