Today Hartford Funds is rolling out two investment-grade bond funds on the NYSE Arca exchange. The funds, the Hartford Corporate Bond ETF (HCOR) and the Hartford Quality Bond ETF (HQBD), are both actively managed and subadvised by institutional investment manager Wellington Management, which also subadvises a number of mutual funds for Hartford.
In fact, Hartford’s head of exchange-traded funds, Darek Wojnar, notes that its advisor customers who had switched to fee-only compensation still wanted to access similar strategies to the ones they had previously accessed via mutual funds, which was one of the reasons Hartford launched these two ETFs. The teams managing the ETFs also manage some of Hartford's mutual funds, and HQBD uses the same strategy as an existing fund but in an ETF wrapper.
“Clearly, Hartford Funds has a vast experience in delivering fixed income investments to investors through a mutual fund wrapper,” said Wojnar, who indicated that the new fixed-income ETFs were just the first of many anticipated active fixed-income and strategic-beta ETFs to come from Hartford. The firm already offers five multifactor equity ETFs with roughly $130 million in assets under management.
Wojnar characterized the two ETFs launching today as core bond offerings.
HCOR comes with an expense ratio of 0.44% and covers corporate investment-grade debt. The fund’s management team uses a bottom-up strategy to hone in on securities issued by firms with strong fundamentals and attractive total returns.
The prospectus notes that, although HCOR has no designated maturity range or sector restrictions, it will aim to achieve a dollar-weighted duration that falls within one year of that of the Bloomberg Barclays U.S. Corporate Bond Index. The benchmark had a duration of 7.19 years as of the end of 2016. Up to 20% of the fund’s portfolio may be invested in Treasurys or U.S. government debt securities.
The prospectus also says that the fund anticipates that the list of issuers covered in its portfolio will number 100 or fewer.
HQBD comes with an expense ratio of 0.39%. It has wider latitude than HCOR to invest in high-quality debt beyond the corporate segment. The prospectus note that it will likely have a significant allocation to agency and nonagency mortgage-backed securities and other mortgage-related debt. However, it may also invest in other forms of U.S. government debt such as Treasury obligations and agency debt, and in corporate and covered bonds. The fund can also make use of derivatives as well as repurchase transactions and agreements, among other investment vehicles.
HQBD’s dollar-weighted average duration will likely range from one to eight years, and the fund has no restrictions on its maturity, the prospectus said.