On Wednesday, Hartford Funds announced the listing of its first actively managed, semi-transparent exchange traded fund (“ETF”), which will be sub-advised by Wellington Management Company LLP. The Hartford Large Cap Growth ETF (CBOE: HFGO) seeks capital appreciation and is designed to deliver consistent, high active share, large-cap growth exposure that seeks to identify growth companies ahead of the market consensus.
This ETF is different from traditional ETFs. Traditional ETFs tell the public what assets they hold each day; this ETF will not. The fund may create additional risks for your investment. For example, you may have to pay more money to trade the ETF’s shares. This ETF will provide less information to traders, who tend to charge more for trades when they have less information. The price you pay to buy ETF shares on an exchange may not match the ETF’s portfolio value. The same is true when you sell shares. These price differences may be greater for this ETF compared to other ETFs because it provides less information to traders.
These additional risks may be even more significant in bad or uncertain market conditions. The ETF will publish on its website each day a “tracking basket” designed to help trading in shares of the ETF. While the tracking basket includes some of the ETF’s holdings, it is not the ETF’s actual portfolio. The differences between this ETF and other ETFs may also have advantages. By keeping certain information about the ETF secret, this ETF may face less risk that other traders can predict or copy its investment strategy.
This may improve the ETF’s performance. However, if other traders can copy or predict the ETF’s investment strategy, this may hurt the ETF’s performance. For additional information regarding the unique attributes and risks of the ETF, see the later discussion on the tracking basket and the risks of the ETF below.
HFGO will use the active equity ETF model created by Fidelity Investments, which employs an innovative “tracking basket” methodology. The methodology is designed to maintain the expected benefits of the ETF structure, provide appropriate information to market makers and authorized participants to promote efficient trading of shares, while shielding the fund’s portfolio and allowing the fund portfolio managers to add value through active management while protecting the fund’s portfolio from disclosure.
“We believe that this new fund, which offers active equity management in an ETF wrapper, has the potential to be an attractive option for both financial professionals and investors,” said Vernon Meyer, CIO at Hartford Funds. “We are not only pleased to further strengthen our sub-advisory relationship with Wellington, but also our partnership with Fidelity, whose active equity ETF model has allowed us to expand our offerings.”
Using a bottom-up stock selection process, HFGO seeks to achieve its investment objective by investing in a diversified portfolio of common stocks covering a broad range of industries, companies, and market capitalizations that Wellington believes exhibit long-term growth potential. The fund defines large-cap securities as companies with market caps within the collective range of the Russell 1000 Index and S&P 500 Index, which was between $529.7 million and $2.34 trillion as of September 30, 2021.
HFGO provides access to an experienced large-cap growth portfolio management team consisting of senior managing directors and partners Stephen Mortimer and Mario Abularach. Mortimer and Abularach also serve as the portfolio managers of The Hartford Growth Opportunities Fund, a mutual fund that uses a similar strategy.
HFGO is listed on Cboe BZX Exchange, Inc. and will use the Russell 1000 Growth Index as its performance benchmark.
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