It's been a busy few months for The Hartford Financial Services Group Inc.
In August, the firm disbanded its distribution arm, Hartford Life Distributors, and decentralized its wholesalers according to channel across four new business units. To head the mutual fund business, The Hartford chose Jim Davey, head of the company's retirement division.
As one of his first moves on the job, Mr. Davey oversaw a reduction in fees on six of The Hartford's fixed-income funds that took effect Nov. 1. In July, The Hartford reduced fees on 36 equity funds.
Performance of the company's funds appears to be steady. As of Oct. 31, 163 of the firm's 421 mutual funds with three-year histories were in the top half of their categories or better, according to Morningstar Inc.
Nevertheless, observers noted that as an insurance company, The Hartford has tough road ahead in establishing itself as a mutual fund company.
“They have a strong lineup, particularly with Wellington Management [Co. LLP] as the subadviser of many of their funds,” said Morningstar fund analyst Katie Ruskewicz. “The thing is, people still think of them as a big insurance company.”
Jim Davey discussed some of the challenges he faces:
Q: Many people saw The Hartford's move to decentralize its wholesaling force as an about-face after consolidating distribution under Hartford Life Distributors Inc. in September 2009. What are you telling financial advisers about this?
A. The one thing you have to re-member is that we are specialists, not generalists, and that isn't changing. Second, with this new structure, wholesalers have better alignment with the business. Not only can they speak about the firm's mutual funds, but they can talk about the direction the firm is taking. They can say, “Hey, I was just at the home office, and this is what some of the product development team is saying.”
Third, I think it gets everyone who works in the mutual fund business better aligned, whether it's the sales team, the customer service [representatives]. They are all dedicated to this.
Q: How will your background in the retirement plan market shape the way you build the firm's mutual fund business?
A. I see some of our biggest opportunities in the investment-only space that supports retirement plans.
Sway Research [LLC] just had an estimate that 40% of the current mutual fund business in the retirement space is in the investment-only flows, and that has grown from 25%.
Q: What is your goal for building the investment-only business?
A. Our goal is to triple sales in this area from now to 2015.
Q: What new funds are you looking to launch?
A. We are definitely looking at fixed income. The other area is more alternative investments. We rolled out the Global All Asset Fund on June 1, and it already is at a run rate of $1 billion a year. So we will look to replicate that success.
Q: What are your plans for the exchange-traded-fund market?
A. We just filed for exemptive relief for ETFs, and I think it's something we should explore; they're a vehicle that folks use. If we did ETFs, it would be more ancillary or actively managed.We don't have any thoughts of doing an S&P 500 index ETF. But this is very preliminary still.
E-mail Jessica Toonkel at [email protected].
