Hartford Total Return Bond ETF’s HTRB improved value-conscious approach, deep Wellington team, and topnotch resources make it a strong offering within the intermediate core-plus bond Morningstar Category.

Lead manager Joe Marvan has led this strategy since early 2012. Marvan heads the fixed-income group's broad market team; Wellington veterans and comanagers Campe Goodman, who heads the sector-rotation team, and Rob Burn, who brings a deep quantitative skill set to model credit valuations, are here for added support. While Marvan is ultimately responsible for all positioning, he leans on the sector specialists, who are also seasoned portfolio managers, to construct the portfolio. Key contributors include Kyra Fecteau, Connor Fitzgerald, and Jeremy Forester who do most of the heavy lifting on the strategy’s securitized credit, investment-grade credit, and rates sleeves, respectively. The team also relies on the firm's large analyst team, recently revamped fixed-income analytics and risk systems, and a strong quant research group to hone the portfolio.

That matters given the strategy's relatively broad mandate. The team manages the portfolio relative to the investment-grade Bloomberg US Aggregate Bond Index but also includes positions that can add volatility, such as nonagency mortgage-backed securities, nonagency commercial MBS, high-yield corporates and bank loans, emerging-markets debt, and currencies. For example, the strategy’s nonqualified mortgage exposure (3.6% of assets in September 2023) has helped boost relative returns in 2023 but was the largest drag in the portfolio in 2022. The team also uses credit and interest-rate derivatives to take long and short positions in various sectors, as well as agency mortgage TBA contracts, which can have a leveraging effect on the portfolio.

Still, the team has managed this flexibility well. The portfolio's ability to take risk in out-of-benchmark positions means it may underperform in rocky credit markets but do relatively well when credit rallies. For example, the ETF lost 7.5% from the Feb. 20-March 23 selloff in 2020, which was worse than half of distinct intermediate core-plus bond category peers because of its heavier stakes in nonagency residential MBS, commercial MBS, and high-yield corporate credit. Strong selections in investment-grade credit as well as a rally in the portfolio’s higher-yielding fare helped thereafter, as its 8.9% return for calendar year 2020 beat most rivals. 

The strategy has excelled in 2023. The exchange-traded fund’s 2.8% gain through November beat its typical peer by 41 basis points and its benchmark by 119 basis points thanks to thoughtful positioning within nonagency securitized and high-yield credit throughout the year.

Analyst Rating

A solid choice for core-plus exposure.

Senior Analyst

Mike Mulach

The strategy’s well-structured approach coupled with Wellington’s significant fixed-income platform enhancements support a Process upgrade to Above Average from Average. 

This strategy is benchmarked to the Aggregate Index but can travel much further afield. It incorporates a mix of investment-grade corporates, U.S. Treasuries, and agency mortgages, but includes out-of-benchmark stakes in nonagency MBS, high-yield bonds, foreign bonds (including emerging markets), collateralized loan obligations, and currencies. This typically results in underweightings in U.S. Treasuries and investment-grade corporate bonds in favor of securitized debt and high-yield corporates. That said, its Wellington subadvisor has kept moderate allocations in higher-yielding sectors and tactically increases exposure to lower-quality credits only when the team sees value there. The strategy can also deviate from the duration of its bogy by up to 1.5 years (although in practice it typically stays within a third of a year), and the team employs a wide array of derivatives to take long and short exposures to various sectors. Relative to category peers, the strategy tends to stand out for less exposure to BBB and below rated corporate debt in favor of a highly diversified sleeve of securitized credit. At times, this can hold the strategy back when credit markets are strong. 

Fortunately, the group has the experience and resources to exercise that flexibility sensibly. Wellington has long had solid fixed-income capabilities, but recent improvements have propelled its platform to be among the industry’s best. Notably, the firm’s hefty investments in its proprietary risk-management and analytics systems have started paying off. These systems help the team better understand the additional risks they incorporate into this portfolio and should lead to strong results going forward.

Above Average

Process

The strategy’s experienced team and topnotch resources support an Above Average People Pillar rating.

Lead manager Joe Marvan has led this strategy since early 2012. Marvan heads the fixed-income group's broad market team, while Wellington veterans and comanagers Campe Goodman, who heads the sector-rotation team, and Rob Burn, who brings a deep quantitative skill set to model credit valuations, are here for added support. While Marvan is ultimately responsible for all positioning, he leans on the sector specialists to varying degrees to construct the portfolio. While not named to this strategy, Kyra Fecteau, Connor Fitzgerald, and Jeremy Forester are key contributors here and do most of the heavy lifting on the strategy’s securitized credit, investment-grade credit, and rates sleeves, respectively.

The supporting specialist team is amid a generational shift. But the transition has gone smoothly, and the team remains capable. For example, Chris Jones, longtime Wellington veteran and former chair of the firm’s high-yield strategy group, retired in mid-2023 and shifted most of his responsibilities to high-yield veteran Mike Barry. Scott St. John, who remains chair of the U.S. corporate-bond strategy group, transitioned most of his responsibilities here to Fitzgerald also in 2023. After longtime manager Mike Garrett’s mid-2020 retirement, managers Brian Conroy and Cory Perry stepped in to cover agency MBS and securitized credit for the portfolio, respectively. But Perry transitioned his duties in 2023 here to securitized credit specialist Fecteau, who joined Wellington in 2021 with a deep background in ABS after holding a similar role at Loomis Sayles. 

The team is backed by a deep and experienced analyst bench that includes sizable supporting researchers, traders, and quant specialists. The securitized team has seen some recent turnover, but it remains sufficiently experienced and sizable. The firm’s risk and analytical tools have also significantly improved in recent years and stand above many peers.

People

Hartford Funds’ investors benefit from access to strong subadvisors at a reasonable cost. The firm earns an Above Average Parent Pillar rating.

Hartford’s industry relationships are key to its success. It maintains a long-standing partnership with standout investment manager Wellington Management Company, which has run the firm's equity and fixed-income funds since 1996 and 2012, respectively. Wellington now subadvises more than half of Hartford’s $124.1 billion in fund assets. In 2016, Hartford launched strategic-beta exchange-traded funds with its acquisition of Lattice Strategies and partnered with Schroders to expand its investment platform’s offerings, especially in non-U.S. strategies.

Hartford leaves most investment decisions to its subadvisors but collaborates with them on product development, risk oversight, and distribution. The firm reorganized its sales efforts and grew its product-management capabilities in 2013. Firm leadership has since added further resources to its distribution and oversight teams, while merging and liquidating subpar offerings, and has introduced new strategies. 

Hartford has sought to provide more-competitive fees. The firm has launched share classes without embedded distribution charges and reduced fees on other share classes. Still, as most shares remain in average or costlier fee groups, there is room for improvement.

Parent

Hartford Total Return Bond ETF

HTRB is an actively managed fund that invests in a wide array of global fixed income instruments considered attractive from a total-return perspective, with current income as a secondary goal.

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News for Hartford Total Return Bond ETF ETF (HTRB)