Hartford ETF Yields 4.92%, Targets MBS and Structured Finance

Key Takeaway

• Hartford Total Return Bond ETF (HTRB) boasts a 4.92% SEC yield, focusing on diverse fixed-income opportunities and outperforming its benchmark.
• With 51% in mortgage-backed securities and a preference for securitized markets, HTRB seeks value in agency MBS and structured finance.
• Managed by Wellington's experienced team, HTRB is praised for its strategic approach to finding value across various market segments.

Hartford Total Return Bond ETF's Strategy

Hartford Total Return Bond ETF (HTRB), managed by portfolio manager Campe Goodman and his team at Wellington, distinguishes itself in the bond market with a 30-day SEC yield of 4.92% and an adjusted expense ratio of 0.29%, as per Morningstar data. The fund's approach is to exploit various opportunities across the fixed-income market, rotating across different sectors to maximize returns. Last year, HTRB achieved a total return of 7.15%, ranking in the 23rd percentile among its peers, and despite a slight downturn this year, it continues to outperform its benchmark, the Bloomberg U.S. Aggregate Bond Index.

Diverse Portfolio Composition

HTRB's portfolio is heavily weighted towards mortgage-backed securities (51%) and investment-grade credit (25%), showcasing a strategic lean towards securitized markets over investment-grade corporate debt. This composition reflects the fund's strategy to find value across a broad spectrum of the fixed-income market. The ETF's top assets include a mix of Uniform Mortgage-Backed Security, Federal National Mortgage Association, U.S. Treasury Bonds and Notes, and Federal Home Loan Mortgage Corp, among others, highlighting its diversified investment approach.

Finding Value in Volatile Markets

Goodman identifies value in several areas of the fixed-income market despite ongoing interest rate volatility. Agency mortgage-backed securities, structured finance sectors like collateralized loan obligations, commercial and nonagency residential mortgage-backed securities, and subprime auto asset-backed securities are currently favored. Goodman also sees potential in the upper end of the high-yield segment, particularly BB-rated credits, which he believes offer high quality at a relative value, falling between the cracks of traditional rating assessments.

Anticipating the Fed's Next Move

The management team, including Goodman, is closely monitoring the Federal Reserve's monetary policy for cues on interest rate movements. Should the Fed signal a shift towards rate cuts, HTRB may adjust its strategy to increase duration and possibly add credit risk, contingent on the economic outlook. The team's focus remains on optimizing the fund's risk-return profile, navigating through market uncertainties with a well-constructed approach that has garnered increasing confidence from analysts like Morningstar's Mike Mulach.

Street Views

• Mike Mulach, Morningstar (Neutral on Hartford Total Return Bond ETF):

  "We like this ETF for its solid team and well-constructed approach at a reasonable cost."

Management Quotes

• Campe Goodman, Portfolio Manager at Wellington:

  "What you’ll see as really distinguishing us and, we hope, making our returns sustainable and reproducible long term really is our ability to exploit a lot of different opportunities and to rotate across different parts of the market... There are just so many different pockets of value. There’s so many different areas to explore." "We are seeing an enormous amount of volatility, but actually, if we don’t see a big trend in rates, then that tends to be very good for the mortgage sector." "They trade expensive for double Bs, but cheaper [for] triple Bs, and so that to us is a great example of something that’s falling through the cracks." "We’re trying to buy those assets that are optimized from a risk-return perspective."