Hartford Multifactor US Equity ETF is a well-designed strategy that taps into a series of well-vetted risk factors, keeps volatility and uncompensated risks in check, and charges a low fee. 
This index strategy carefully mitigates risk. It constructs its portfolio with an optimizer that aims to reduce volatility by 15% relative to the broad market. The optimizer weighs stocks’ standalone risk and considers how their performance correlates with one another, a holistic tack that helps the fund weather downturns better than most. The index also ties its sector composition to the broad market, reducing sector risk that’s common among peers in the large-value Morningstar Category. Individual positions are limited to 1.5% of the portfolio to curb firm-level concentration. 
Optimization is an opaque approach, but it allows this fund to mind multiple sources of risk simultaneously.
Within the confines of these risk controls, the fund seeks to maximize its exposure to the value, quality, and momentum factors. Each has historically been tied to market-beating returns. The fund prefers stocks with well-rounded factor traits to those that only stand out in one area, which tends to precipitate more potent exposure.
The fund selects stocks based on a composite factor score that emphasizes value (50% of score) more heavily than momentum (30%) and quality (20%). This breakdown puts value front and center, but momentum and quality play critical roles. Those considerations help distinguish undervalued stocks from the ones that are cheap for good reasons. By emphasizing stocks whose attractive valuations come with sound fundamentals and strong recent performance, the fund should carve a long-term edge over the Russell 1000 Value Index, its category benchmark, and the broad large-cap market from which it’s carved.
This fund’s broad scope is an advantage as well. Unlike the Russell 1000 Value, it targets stocks from across the value-growth spectrum, so faster-growing companies can shoulder the load when value stocks slump. For example, semiconductor manufacturers Nvidia NVDA and KLA Corporation KLAC—rarely found in value portfolios—made key contributions over the past few years.
Like many funds that incorporate momentum, this portfolio turns over often and incurs higher transaction costs as a result. Still, this fund’s 0.19% expense ratio keeps costs low overall.

Analyst Rating

Measured.

Analyst

Ryan Jackson

Merck

Microsoft

Alphabet

UnitedHealth Group

Broadcom

JPMorgan Chase & Co

Johnson & Johnson

AbbVie

Apple

Walmart

This strategy earns an Above Average Process Pillar rating because it targets stocks with well-rounded factor characteristics and systematically dials back volatility, a combination that should breed an attractive risk/reward profile.

Above Average

Process

Despite recent turnover, the team at Mellon should continue to deliver tight index-tracking performance. However, the team does not stand out from its peers and the fruits of the expansion are yet to be fully realized, warranting an Average People Pillar rating. 
Marlene Walker-Smith is joined by a team of experienced managers on this strategy, following Thomas Durante's retirement in June 2021. David France, Todd Frysinger, Vlasta Sheremeta, and Michael Stoll are senior portfolio managers who have been with Mellon for 10 years or more. Daphne Du joined the team in April 2023. They worked behind the scenes on the equity index team prior to being named managers. Their wealth of experience and the team's supporting infrastructure should aid the expansion plans, which involve increasing headcount and consolidating trading, risk, and compliance systems. 
The managers draw on a team of analysts to anticipate index changes and handle corporate actions. While the analyst team has facilitated effective index tracking, it is smaller than the analyst teams of other index fund managers, so personnel turnover may have a bigger impact on operations. The managers' primary objective is to track the benchmark as closely as possible. Manager compensation is not tied to any specific tracking-difference targets, but the team is subject to separate risk oversight.

Average

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 Multifactor US Equity ETF

ROUS tracks an index of US large-cap stocks. The index relies on value, momentum and quality factors, among others.

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