Hartford Funds’ defensive value ETF is rallying alongside the broader market, highlighting the power of a multifactor strategy.
The recent rally of the Hartford Multifactor US Equity ETF (ROUS) demonstrates that it’s possible to limit downside risk but maintain upside potential. The fund aims to enable investors to access equity markets with potentially fewer drawdowns than benchmarks.
The defensive value ETF is a solution for investors looking to dampen volatility and position defensively but keep equity exposure.
ROUS climbed 4.1% last week, while the broader equity market, as measured by the S&P 500, climbed 4.6%. Notably, last week was the best week of the year for the stock market, as Treasury yields fell due to weak economic data.
The past week’s equity rally is a sharp pivot, as the end of October marked three consecutive months of declines for the broad benchmark.
The defensive value ETF limited losses during the broader market’s recent struggle. ROUS outpaced the S&P 500 by 151 basis points between August 1 and October 31. During the same period, the fund outperformed the Russell 1000 Value by nearly 300 basis points.
How ROUS Differs From Benchmarks
ROUS targets certain desired return-enhancing factors and reduces exposure to unrewarded risk exposures. The fund offers diversification benefits compared to a cap-weighted benchmark, reducing concentration risk at the sector, market cap, and individual stock levels.
This diversification helps to spread out risk. Being overly concentrated at the company level introduces significant idiosyncratic company risk to funds.
Traditional cap-weighted indexes have an overrepresentation of mega-caps while under-representing large-caps deeper within the universe. At the sector level, bubble events can enhance exposure at inopportune times.
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This article was prepared as part of Hartford Funds paid sponsorship with VettaFi. Hartford Funds is not affiliated with VettaFi and was not involved in drafting this article. The opinions and forecasts expressed are solely those of VettaFi. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, a recommendation for any product or as investment advice.