Hartford International Value Fund Commentary – Q2 2021
Thesis
Serving as a satellite holding, HILIX is a value style fund that takes advantage names that have underperformed recently and are cheaply priced. The team generates alpha by finding companies with strong fundamentals that are overlooked during times of low consensus expectations. We like that HILIX takes advantage of extremes and gains exposure to less efficient market caps by having more holdings and moderate active bets.
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Overview
In the second quarter of 2021, HILIX underperformed the benchmark (MSCI EFEA Index) by 13bps due to poor selection in Materials, Financials, and Information Technology. Overall sector allocation also detracted from returns, specifically an underweight in Consumer Staples and Healthcare, and an overweight to Communication Services. These negative returns were offset by strong selection in Energy, Industrials, and Communication Services. Positive allocation effect through an overweight in Information Technology and an underweight Utilities also contributed to performance. In general, Information Technology and Consumer Staples saw strong performance, while Utilities and Communication Services lagged relatively to the other sectors in the asset class. Regionally, stock selection was strong in Developed Europe & Middle East ex UK, UK, and Developed Asia Pacific ex Japan.
Q2 2021 Summary
- HILIX returned 5.04 %, while the MSCI EAFE Index returned 5.17%
- Top issuer contributors
- Pacific Basin Shipping – out-of-benchmark allocation
- Nokia – overweight
- Top issuer detractors
- JGC Holdings – out-of-benchmark allocation
Toyota Motor – not owning
Outlook
- We continue to hold this fund and believe in our thesis due to the fund’s value and bottom-up, fundamental approach
- The fund saw heavy underperformance during most of 2020, a strong rally in the first quarter of 2021, but has begun to underperform once again
- This fund is on our watch list as we are researching the “quality” of the underlying holdings and discussing whether a “deep” value strategy pairs well with our other funds in the asset class
- The fund continues to have its largest overweights in Energy and Communication Services, with underweights in Healthcare and Utilities
- Emerging Markets is also an overweight
- Europe and Asia pacific ex Japan is underweight
- Value tends to be overweight to cyclicals causing it to have times of strong underperformance and outperformance; historically it has proven to outperform through full market cycles
[Category Mutual Fund Commentary]
Micah Weinstein
Research Analyst
Direct: 617.226.0032
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109