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Revolutionizing Income Investments: Hartford ETF Paves Way for Growth

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Benjamin Hughes

May 6, 2024 - 18:23 pm

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Navigating the Fixed-Income Seas: Hartford Total Return Bond ETF Marks a Path to Sustainable Returns

In the vast array of finance options, the Hartford Total Return Bond ETF (HTRB) distinguishes itself as a beacon for investors navigating the fixed-income market. According to Campe Goodman, portfolio manager at Wellington, which serves as a sub-advisor on the fund, HTRB's strategy is to harness high-quality opportunities throughout the fixed-income world, aiming to deliver sustainable and replicable returns over the long term.

Trading under the ticker HTRB, this actively managed exchange-traded fund boasts a 30-day SEC yield of 4.92% and an adjusted expense ratio of 0.29%, both of which reflect data from industry analyst Morningstar. Goodman emphasized the ETF's prowess in identifying multiple pockets of value across various market segments, which differentiates it from its competitors.

Performance Amid Market Fluctuations

In the previous year, HTRB reported a total return of 7.15%, positioning it in the 23rd percentile amongst its category peers, according to Morningstar's analysis. Despite a modest dip of around 1% this year, the fund is performing well in the 38th percentile. Impressively, it has outperformed the Bloomberg U.S. Aggregate Bond Index, its benchmark, which has declined around 2% year-to-date.

Strategic Asset Allocation

The ETF's portfolio allocation is telling of its market strategy, with 51% invested in mortgage-backed securities and 25% in investment-grade credit, as per the fund's website. This tactful emphasis on securitized markets over the usual investment-grade corporate debt gives Hartford Total Return Bond ETF a competitive edge, as noted by Morningstar.

Goodman collaborates with three other seasoned portfolio managers, pooling diverse insights to steer the ETF. The management team capitalizes on the collective resources of Wellington, holding daily discussions with various departmental teams and a monthly meeting with specialists in high-yield or emerging markets.

"I have the ability to get ... a couple of the best people in the business from each of these different areas into a room and really hash out relative value," said Goodman. "That's very, very powerful."

A Vote of Confidence from Morningstar

Morningstar's senior fixed-income analyst, Mike Mulach, who has awarded HTRB a silver rating, voiced his growing confidence in Wellington's fixed-income platform. He endorsed the ETF for its robust management team and sound methodological approach, all at a reasonable cost.

Identifying Current Opportunities

In his current assessment, Goodman sees a notable opportunity in agency mortgage-backed securities. Given the unusually wide spreads due to ongoing interest rate volatility, this market segment holds promise provided there is no pronounced trend in rates, which typically favors the mortgage sector.

Goodman also expressed his fondness for structured finance, highlighting assets such as collateralized loan obligations, commercial mortgage-backed securities, and non-agency residential mortgage-backed securities. Furthermore, subprime auto asset-backed securities also stand out as attractive to him currently.

Seeking value on the below-investment-grade side proves more challenging, yet Goodman remains optimistic about finding compelling prospects. He highlighted Eastern Europe as a viable option within emerging markets and sees promise in the upper echelons of high-yield segments, specifically BB-rated credits.

"These entities often boast considerable equity value when compared with their debt structures," said Goodman. He underscored the misvaluation that can occur, referencing how the rating agencies may classify securities as double Bs, while from a market perspective, they possess qualities indicative of higher quality or triple Bs. Goodman perceives this discrepancy as an overlooked opportunity.

Preempting Federal Reserve Actions

A crucial part of the ETF's strategy involves anticipating US Federal Reserve interest rate movements. Should Goodman and his team surmise that a rate cut is looming, they would likely increase the fund's duration and potentially add more credit risk, contingent upon whether the rate reduction is a consequence of subdued inflation or a harbinger of recession—each scenario favoring different asset classes.

Goodman acknowledged the inherent uncertainty surrounding rate cuts and monetary policy directions. Consequently, the team is dedicated to prudent asset selection, seeking to optimize from a risk-return perspective. "We're trying to buy those assets that are optimized from a risk-return perspective," he elaborated.

Investing in Hartford Total Return Bond ETF

For investors looking to include HTRB in their portfolio or for further information on the ETF, details can be found on the fund's official website (links to fund resources were not provided in the original content). Industry analysis and reports provided by Morningstar also serve as valuable resources for evaluating the performance and positioning of the fund, and can be accessed through Morningstar's website.

Additionally, investors can review the ETF’s historical performance data, asset allocation, and management team to ensure an informed investment decision aligns with their financial goals and risk appetite. As with any financial decision, consulting with a financial advisor is recommended.

Conclusion

The Hartford Total Return Bond ETF emerges as a noteworthy contender within the fixed-income realm, acknowledged for its discerning approach to portfolio management and asset selection. With the backing of an experienced team and a strategic leverage of various market segments, HTRB is positioned to pursue longstanding, stable returns for its investors. As uncertainty lingers over the financial markets and the actions of the Federal Reserve, HTRB aims to stay agile and responsive, capitalizing on the dynamic nature of the bond market. It remains a significant option for investors keen on accessing the income market while seeking a transparent and strategic investment vehicle.

Overall, the detailed approach to managing the Hartford Total Return Bond ETF underscores the team's commitment to optimizing investments within the scope of an ever-changing economic landscape. As Goodman and his colleagues continue to navigate their way through the array of opportunities the fixed-income market presents, HTRB could potentially serve as a model for funds striving to achieve similar levels of success in the field of high-quality bond investments. By utilizing in-depth market analysis, collaboration with seasoned experts, and a keen eye for undervalued assets, the Hartford Total Return Bond ETF seeks to offer investors a path to both security and growth amidst the unpredictable tides of the global economy.