Get documents about "THE HARTFORD MUTUAL FUNDS
Document Sample
First Quarter - 2011
THE HARTFORD MUTUAL FUNDS
Fund Manager Commentaries
Sub-advised by Hartford Investment Management
The Hartford Small/MidCap Equity Fund
Portfolio Management
Hugh Whelan, CFA Paul Bukowski, CFA
Managing Director Vice President
Professional Experience Since 1981 Professional Experience Since 1988
BS, Stanford University BA, University ofWisconsin
MS, Stanford University MBA, University of Chicago
MBA, The Wharton School at
the University of Pennsylvania
What did the market do and how did What is your outlook?
the Fund perform? Over the previous year or so, we observed two major
1
The Russell 3000 Index, a broad equity market influences on market leadership. First, the financial
index, returned 6.38% for the three month period crisis created an investment environment dominated
ending March 31, 2011. Over the period Value by macro economic views, often referred to as the
outperformed Growth, with the Russell 3000 Value “risk on/risk off” market, and was evidenced by
Index,2 and the Russell 3000 Growth Index3 returning elevated levels of correlation. Second, the recovery
6.47%, 6.30%, respectively. Large cap stocks, as created an abundance of earnings growth, typically
represented by the Russell 1000 Index4 returned generated by aggressive cost cutting, and could be
6.24%, edged out by small cap stocks over the seen in such indications as historically high positive
period with the Russell 2000 Index5 returning 7.94%. earnings surprises and low negative earnings surprises.
Under these conditions individual stock fundamentals
In this environment, The Hartford Small/Mid Cap were often overshadowed by speculative, macro
Equity Fund returned 9.17%% on a net basis, forces. The results of the first quarter break this
outperforming its benchmark, the Russell 2500 trend and indicate that a new leadership is taking
Index,6 which returned 8.70%, and outperforming hold – a leadership based on fundamentals.
the Lipper Mid-Cap Core Funds category, a group
of funds with investment strategies similar to those For example, investor reaction to the turmoil in the
of the Fund, which returned 7.81%. Middle East and North Africa and the earthquake in
Japan is illustrative of how the old “risk on/risk off”
Why did the Fund perform this way? trend is waning. Correlations initially rose, but then
quickly subsided to 12 month lows. This differs, for
The Fund outperformed its benchmark, the Russell example, from the sovereign debt crisis last year
2500 Index, due to strong security selection, when correlations rose and stayed elevated. Further-
particularly in the Health Care and Information more, the quarter has seen a return to more normal
Technology sectors. levels of earning surprises and analysts were, in
Among the largest contributors to relative performance aggregate, revising their estimates downward during
were overweights to Travelzoo (Information Technology) the quarter. This suggests that earnings growth
and Photronics (Technology). Travelzoo rose after it stability and other fundamental characteristics, such
announced that it has increased its subscriber base as operational efficiency and stability, will have
in the past year by 50%. Photronics climbed after greater significance in differentiating stocks. Results
raising its guidance. from the first quarter demonstrate that this is already
taking place. We think this leadership by fundamentals
Among the largest detractors to relative performance will continue. One risk to this strategy is that investors
were overweights Green Dot (Financial) and Quiksilver turn the “risk on” trade back on because of a liquidity
(Consumer Discretionary). Green Dot shares fell after event such as more quantitative easing or tax cuts.
analyst cut estimates and reduced their ratings on Another risk is that there is a major geopolitical
the stock. Quiksilver declined on reduced guidance. event that causes investors to turn “risk off” regardless
of stock fundamentals.
PAGE 1 OF 3 NOT VALID WITHOUT THE OTHERS.
Our team invests in companies that we believe have
compelling stock characteristics versus the Russell
2500 Index. The Team’s systematic approach weighs
more than 80 fundamental characteristics across four
broad categories, including business behavior,
management behavior, valuation and investor behavior.
This analysis is used to build a broadly diversified
portfolio of companies, with sector weightings
determined largely by the attractiveness of specific
stocks within the Fund’s investment universe.
We believe this approach will yield attractive
risk-adjusted returns relative to the Russell 2500
Index over the long term.
The Hartford Small/MidCap Equity Fund as of 3/31/11
Target Asset Allocation† Fund A-Share Average Annual Total Return
CB Richard Ellis Group, Inc. (CBG) 0.69%
Excluding Sales Charge
Rayonier, Inc. (RYN) 0.60%
YTD 9.17%
Walter Energy, Inc. (WLT) 0.50% 1Year 27.22%
Glimcher Realty Trust (GRT) 0.49% 3Y ear 6.42%
5Y ear 3.05%
Oneok, Inc. (OKE) 0.48%
Since Inception (1/01/05) 4.96%
Lear Corp. (LEA) 0.46%
Alexion Pharmaceuticals, Inc. Including Maximum Sales Charge of 5.5%
(ALXN) 0.44% 1Year 20.22%
Core Laboratories N.V. (CLB) 0.42% 5Y ear 1.89%
Seagate Technology (STX) 0.41% Since Inception (1/01/05) 4.01%
TRW Automotive Holdings
Corp. (TRW) 0.41%
Total 4.90%
† Subject to change. Percentages may be rounded.
Expenses
Performance data quoted represents past performance and
Net Op. Exp7 1.30% does not guarantee future results. The investment return and
principal value of an investment will fluctuate so that an in-
Gross Op. Exp8 1.45% vestor's shares, when redeemed, may be worth more or less
than their original cost. Current performance may be lower or
higher than the performance data quoted. For more current
performance information to the most recent month ended,
please see www.hartfordmutualfunds.com.
PAGE 2 OF 3 NOT VALID WITHOUT THE OTHERS.
1
Russell 3000® Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which rep-
resents approximately 98% of the investable U.S. equity market.
2
Russell 3000® Value Index measures the performance of those Russell 3000® Index companies with lower price-to-book ratios and
lower forecasted growth values. The stocks in this index are also members of either the Russell 1000® Value or the Russell 2000®
Value Indexes.
3
Russell 3000® Growth Index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and
higher forecasted growth values. The stocks in this index are also members of either the Russell 1000® Growth or the Russell 2000®
Growth indexes.
4
Russell 1000® Index represents the highest-ranking 1,000 stocks in the Russell 3000® Index, which represents about 90% of the total
market capitalization of that index. The Russell 1000® Index has a weighted average market capitalization of $81 billion; the median
market capitalization is approximately $4.6 billion and smallest company in the index has a market capitalization of $1.8 billion.
5
Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approxi-
mately 8% of the total market capitalization of the Russell 3000 Index.
6
Russell 2500® Index measures the performance of the small to mid-cap segment of the U.S. equity universe, commonly referred to as
"smid" cap. The Russell 2500® Index is a subset of the Russell 3000® Index. It includes approximately 2500 of the smallest securities
based on a combination of their market cap and current index membership.
The above indices are unmanaged and are not available for direct investment.
7
Net operating expenses are the expenses you are currently paying to own the Fund. If the net operating expenses shown are lower
than the gross operating expenses, then the net operating expenses reflect contractual fee waivers and expense reimbursements that
may not be renewed. Contractual waivers or reimbursements remain in effect until February 29, 2012, and automatically renew for
one-year terms unless terminated by the Fund’s Adviser (HIFSCO) or Transfer Agent (HASCO). For more information about the fee
arrangement and expiration dates, please see the expense table in the prospectus.
8
Gross operating expenses shown are before management fee waivers or expense caps. Performance information may reflect historical
or current expense waivers or reimbursements, without which, performance would have been lower. For more information on fee
waivers and/or expense reimbursements, please see the expense table in the prospectus.
The Fund invests in securities of small-cap and/or mid-cap companies, which can be riskier than stocks of larger companies, because
smaller companies can be young, may have limited business histories, and frequently rely on narrow product lines and niche markets.
The Fund may invest in foreign securities, which can be riskier than investments in U.S. securities (risks may include currency risk,
illiquidity risks, and risks from substantially lower trading volume on foreign markets).
The sub-adviser’s investment strategy will influence performance significantly and the Fund could underperform its peers or lose
money if that strategy does not perform as expected.
You should carefully consider the investment objectives, risks, charges, and expenses of The Hartford
Mutual Funds before investing. This and other information can be found in the fund’s prospectus or
summary prospectus, which can be obtained from your investment representative or by calling
888-843-7824. Please read them carefully before you invest or send money.
This information is written in connection with the promotion or marketing of the matter(s) addressed in
this material. The information cannot be used or relied upon for the purpose of avoiding IRS penalties.
These materials are not intended to provide tax, accounting or legal advice. As with all matters of a tax
or legal nature, you should consult your own tax or legal counsel for advice.
The Hartford Mutual Funds are underwritten and distributed by Hartford Investment Financial Services, LLC.
All information and representations herein are as of 3/11, unless otherwise noted.
MF 5990 4/11 102425-2
PAGE 3 OF 3 NOT VALID WITHOUT THE OTHERS.
