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Brian Kraus, Hartford Funds
Brian Kraus, Hartford Funds

Runway ready for Hartford Funds’ ETF push

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USD131 billion fund firm Hartford Funds has found that its ETF business is ‘small, but quickly growing’ with assets of USD4.6 billion and a new initiative to spread the word on its ETF products.

Brian Kraus, SVP of Systematic ETFs at Hartford Funds explains that the firm has recently built out a dedicated sales team for its systematic ETFs, hiring 12 business developers who are geographically assigned across the country and engaging with advisers to explain the firm’s multi-factor and systematic ETFs.

“We are super excited about the runway we have for all our ETFs,” Kraus says.

He adds that the firm has a lot of faith and confidence in the role multi-factor portfolios can play in the context of a diversified portfolio. “When we look at the options investors have, we enjoy where multi-factors sit within that. They can go the traditional route of passive cap weighted ETFs for low cost, tax efficiency and predictability or at the other end of the continuum, they can go to an active manager and some of the benefits of that are risk management and trying to generate risk adjusted returns – multi-factor sits between those two options.”

Kraus explains that systematic ETFs is a fancy way of saying that they are invested using a set of rules. “Our multi-factor ETFs fall into that as we put a set of rules in place to de-emphasis some of the risks. It’s timely to say that in the US right now, the stockmarket is concentrated on seven stocks that drive returns of over 30 per cent of the capital allocation of the US equity market. Our systematic ETFs put in rules to make sure the portfolio steers away from that, and also enhances the value characteristics of a portfolio without sacrificing quality along the way.”

Kraus comments that the old school approach to investing using factors and being a value investor in particular often led to significant sector bets and unintentionally shorting other important factors such as quality or momentum.

“So we maximise value but we don’t take outsized sector bets because we don’t want to rob Peter to pay Paul.”

Within the firm’s ETF suite, half of the products are systematic and the other half are actively managed using an active sub adviser.

“Within the active ETFs we have a diversified suite of active as well as fixed income and there is lots of adviser and allocator interest in our actively managed fixed income ETFs,” he says.

“Advisers are very interested in allocating to active fixed income in this environment as there is a lot of uncertainty around the global fixed income market but they are attracted to being able to allocate to active managers in a vehicle that is offering attractive fees.”

Looking forward, the firm is looking to create new products where they don’t have them at the moment.

“We are really excited about the prospects for all our ETFs,” he says. “In this environment to make an investment to build out a sales team focused on our systematic ETFs is an indication of the company’s commitment to this business and we are already seeing good engagement in the field.”

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