The Hartford launches three mutual funds

BOSTON — The Hartford Mutual Funds, where assets have more than quadrupled since 2000, added three funds last week, including two requested specifically by financial advisers.
The new offerings — a fund of funds, a high-yield-municipal-bond fund and a strategic-income fund — bring the total number of The Hartford’s funds to 54, said Jim Tracy, the fund group’s national sales director.
That number is up from 16 funds at the end of 2000, the year he joined The Hartford (Conn.) Financial Services Group Inc., an insurer and the fund unit’s parent company.
“We [needed] a broader array of product so that [a financial adviser] could build a portfolio for virtually any client using The Hartford mutual funds,” Mr. Tracy said.
The Hartford has been able to grow quickly, in part because of its relationship with Boston-based Wellington Management Co. LLP, which subadvises its equity funds, said Todd Trubey, a senior fund analyst at Chicago-based Morningstar Inc.
“They are pretty darn big for being pretty new to the game,” he said. “Their notion to introduce a line of mutual funds came from their success in variable annuities.”
The Hartford’s subadvisory relationship with Wellington on the VA side “really gave them quite a head start,” Mr. Trubey said, calling Wellington “an extremely high-quality place.”
Two of the three newcomers, the Hartford Checks and Balances Fund, a fund of funds, and the Hartford High Yield Municipal Bond Fund, were developed in response to adviser demand, Mr. Tracy said.
For two years, The Hartford promoted its Checks and Balances strategy to advisers. The strategy combines three funds: the Hartford Capital Appreciation Fund, the Hartford Dividend and Growth Fund and the Hartford Total Return Bond Fund.
“It’s very popular,” Mr. Tracy said.
“The one comment we’ve received virtually all the time is, ‘Boy, we wish you had this in a one-ticket drop,’” he said. “In other words, ‘I’d like to be able to just write one ticket and be able to buy all three funds.’”
The Checks and Balances Fund combines the three funds in equal parts to give investors exposure to domestic and international stocks, as well as bonds and cash. Incorporating the three funds into a single fund provides investors with automatic re-balancing, which they wouldn’t have if they invested in each fund individually, Mr. Tracy said.
“There’s tremendous tax efficiency in that, because we re-
balance those portfolios with daily inflows,” he said.
If an investor owned all three funds individually, the financial adviser, for example, might have to re-balance by selling shares of a fund that was performing well and by buying shares of another, Mr. Tracy said.
“That’s a taxable event,” he said, adding that the fund of funds’ tax efficiency likely will “more than compensate” investors for the 0.05% to 0.06% of additional expenses involved in its structure.
The company decided to offer the Hartford High Yield Municipal Bond Fund in part because many such funds are closed to new investors. Advisers who have used other Hartford fixed-income funds urged it to launch a high-yield fund, Mr. Tracy said.
A key reason that The Hartford decided to launch the third fund — the Hartford Strategic Income Fund — was because it wanted to leverage its fixed-income team, he said.
“We have tremendous expertise within Hartford Investment Management Co. to manage fixed income globally,” Mr. Tracy said.
The strategic-income fund combines high-yield and investment-grade securities to offer the potential for greater diversification with lower volatility. It also will include emerging- markets exposure, Mr. Tracy said.
“That marketplace has become extremely — not only popular, but I would say more viable — over the last five years,” he said.
The Hartford Mutual Funds, which began in 1996, saw assets increase to $42.6 billion as of March 31, from $10.4 billion in 2000.
Being a unit of The Hartford, which in its nearly 200-year history has insured such clients as Robert E. Lee and Babe Ruth, has perks, Mr. Tracy said. It also presents some challenges.
Hartford’s well-known brand helps “tremendously,” Mr. Tracy said. The disadvantage, however, is that when investors and advisers hear the Hartford name, they think of insurance products, he said.
“Because we are so dominant on the annuity and life side of our business, it’s really hard for us to get in the [financial adviser’s] mind that we also have a mutual fund family,” Mr. Tracy said. “But I think the advantage far outweighs the disadvantage.”