Active Core Bond ETF Debuts

Hartford Funds rolls out a bond ETF that complements its existing core plus bond fund. 

Hartford Funds launched an actively managed core bond ETF today that complements one of its existing bond funds. The Hartford Core Bond ETF (HCRB) mainly targets investment-grade debt and can invest up to one-quarter of its portfolio in non-U.S. securities, with junk bonds limited to 5% of the portfolio.

HCRB comes with an expense ratio of 0.29% and lists on Cboe Global Markets, the parent company of ETF.com.

Hartford already offers the $675 million Hartford Total Return Bond ETF (HTRB). Both HTRB and HCRB are managed by Wellington Management. Tom McConnell, head of product innovation and implementation at Hartford Funds, notes that while HCRB is a core bond product, HTRB is a core plus bond strategy.

“Our clients do make the distinction between core plus and core intermediate bond strategies, with the latter having a higher credit quality profile. With core intermediate bond [HCRB] we really plan to meet the needs of clients that are seeking a closer alignment with investment grade benchmarks, and we think  it’s going to offer a better hedge to equity and risk-off environments,” he said.

Investment Approach

HCRB and HTRB use very similar investment processes, which is no surprise given that they are managed by the same firm. McConnell describes HCRB as a diversified portfolio that targets a duration generally within a year or so of the duration of the benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index.

The fund can invest in a wide range of debt securities, including U.S. government debt; corporate debt; asset-backed and mortgage-related securities; and sovereign and supranational debt, according to its prospectus.

“It’s the experience of Wellington we really lean on here. It’s a proven team. The broad markets team at Wellington is the manager of our total return bond strategy, which is core plus. We thought that they could leverage that experience into a companion product which is targeted at the core intermediate bond category,” he added.

HCRB is Hartford’s fifth actively managed bond ETF, and McConnell notes that the firm believes that managers can add alpha through active management in fixed income.

Contact Heather Bell at [email protected]