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Hartford Funds has launched the Hartford Short Duration ETF (HSRT US) on Cboe BZX Exchange, providing actively managed exposure to a fixed income portfolio with a low duration profile.
Vernon Meyer, chief investment officer of Hartford Funds.
Duration measures the sensitivity of a bond’s (or portfolio’s) value to changes in interest rates. In general, the higher the duration, the more a bond’s price will drop as interest rates rise (and the greater the interest rate risk).
“Lower duration and more frequent reinvestment are strong tools to help address rising rates within a fixed income allocation, and our actively-managed short duration ETF is designed to deliver both,” said Vernon Meyer, chief investment officer of Hartford Funds. “We see fixed income ETFs as being well-positioned for the current market, with the goals of providing income and stability to help round out a portfolio.”
“Lower duration and more frequent reinvestment are strong tools to help address rising rates within a fixed income allocation.”
-Vernon Meyer, chief investment officer of Hartford Funds
Sub-advised by Wellington Management Company, HSRT will typically invest in investment grade securities, but can also invest up to 35% of its value in non-investment grade fixed income securities. Bank loans may make up a further 35% of the fund’s portfolio although the prospectus notes that high yield bank loans fall under the limitations placed on non-investment grade securities.
Securities from US-based issuers will make up the majority of HSRT but the fund may also invest up to a quarter of its portfolio in foreign issuers.
The fund will also use derivatives – such as Treasury futures and interest rate swaps – to manage its interest rate risk and duration, maintaining a dollar-weighted average duration of less than three years. Its current effective duration is just 1.6 years.
HSRT’s expense ratio is 0.29%. It will seek to outperform, before fees, the return on the Bloomberg Barclays 1-3 Year US Government/Credit Index.
Wellington’s short duration investment team manages roughly $32 billion in assets. Timothy Smith, senior managing director and fixed-income portfolio manager at Wellington Management, will act as portfolio manager on the fund.