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Thursday, December 8, 2011

Hartford Doubles Down With Wellington

Reported by Neil Anderson, Managing Editor

The Hartford [profile] and Wellington [profile] are taking their relationship to the next level. Yesterday the Hartford-based insurer revealed that, pending a review by its mutual funds' board of directors, Wellington will become the sole sub-advisor for Hartford's 77 funds, snatching the fixed income business from Hartford's own institutional asset manager, Hartford Investment Management Company. Wellington already handled the equity pieces of Hartford's funds.

Wellington spokeswoman Sara Sherman declined to comment for this story.

"We don't speak to the press about our client relationships," Sherman told MFWire.com.

To Sell or Not to Sell

The deal comes after more than half a year of on and off speculation about Hartford trying to sell its mutual fund business. In September Bloomberg claimed that Hartford's talks with private equity bidder Clayton Dubilier & Rice fell through [see MFWire.com, 9/28/2011].

So, how does the Wellington deal impact a potential sale of the Hartford mutual fund business? In Hartford's special investor day webcast today, Dave Levenson, president of the wealth management division (which includes mutual funds), didn't talk specifics, but he did reiterate that "shutting down or selling businesses that are not profitable or core" is still on the table.

"We will regularly evaluate all of our strategic options," Levenson said.

For potential bidders, the reduction from two to one sub-advisors may be attractive, but it also makes Wellington that much more indispensable.

"It makes it even clearer to buyers that Wellington has to remain the manager of the portfolios," one investment banker told MFWire.com. "On that basis, there are few buyers -- most groups run their own portfolios -- and a lower price. I think this business is now not for sale."

Why Wellington?

So why is Hartford doubling down with Wellington?

"Aligning more closely with a well-respected advisor like Wellington by designating them as our preferred sub-advisor is an important step toward our longer-term goal to create shareholder value," stated Liam McGee, chairman, president and CEO of Hartford. "The Hartford is accelerating its growth plans for the mutual funds business."

In today's webcast, Levenson told a questioning analyst that the deal "really has nothing to do with performance."

"The retail channel knows Wellington. It just does not know HIMCO," Levenson said. "Wellington is one of the top institutional fixed income managers in the country."

More Growth to Come

In the same release, Hartford also revealed plans to expand its mutual fund distribution team by up to 50 over the next few months. And Levenson anticipated further expansion of Hartford's fund lineup in the wake of the Wellington deal.

"We continue to build out our fixed income mutual fund lineup," Levenson said. "We become a broader and better-balanced mutual fund complex ... We aim to be a top-ten provider over the next several years."

In the first three quarters of 2011, Hartford's mutual fund business earned $78 million (against assets of almost $100 billion), 13 percent of the total for wealth management. Levenson claimed that Hartford is the only fund firm to make it from $0 to $50 billion in less than 15 years.

Company Press Release

HARTFORD, Conn., Dec 07, 2011 -- The Hartford is expanding its relationship with Wellington Management to accelerate growth in its mutual fund business. Pending a fund-by-fund review by The Hartford Mutual Funds' board of directors, Wellington Management will serve as the sole sub-advisor for The Hartford's funds, including both equity and fixed income.

"The Hartford is accelerating its growth plans for the mutual funds business," said The Hartford's Chairman, President and CEO Liam E. McGee. "Mutual Funds is a high growth, high ROE business. Aligning more closely with a well-respected advisor like Wellington by designating them as our preferred sub-advisor is an important step toward our longer-term goal to create shareholder value."

Boston-based Wellington Management is a global top-25 manager in terms of assets*. Wellington Management currently serves as the sub-advisor for 45 of The Hartford Mutual Funds' 77 funds**, and has been the primary manager for the company's equity funds. Pending the Mutual Fund board's review, The Hartford intends to transfer the management of all fixed income mutual funds to Wellington Management, which was recently appointed sub-advisor on the Total Return Retail, Total Return HLS, and the U.S. Government Securities funds.

In addition to the expanded relationship, The Hartford is taking a number of other steps to grow the mutual fund business, including adding up to 50 employees to its distribution team over the next several months. The Hartford Mutual Funds has selling agreements in place with approximately 1,000 firms today.

Hartford Investment Management Company (HIMCO) currently serves as sub-advisor for 31 funds managed by The Hartford Mutual Funds, and also manages The Hartford's general account investment portfolio and institutional third-party assets. As of Sept. 30, 2011, HIMCO had $165 billion in assets under management, with approximately $147 billion in fixed income, $6 billion in equity and $12 billion in alternative assets.

"Over the past two years, HIMCO has done a tremendous job improving The Hartford's own investment portfolio and delivering consistent, long-term returns that meet the needs of institutional investors. HIMCO is an important part of The Hartford and will focus its third-party asset management business on the institutional market, where it has a strong reputation for risk-managed performance," McGee said.

The Hartford Mutual Funds was established in 1996 and now has nearly $100 billion in assets under management. It offers an array of broad-mandate equity and fixed-income investment options. For more information, including current holdings, visit www.hartfordmutualfunds.com .

Wellington Management Company, LLP is a private Massachusetts limited liability partnership with 120 partners and approximately 500 investment professionals. Wellington has approximately US$640 billion in assets under management in equity, fixed income and multi-strategy investment approaches. For more information on the company, visit www.wellington.com .

*According to P&I/Towers Watson

**Of the 77 funds, The Hartford Mutual Funds directly manages the Checks and Balances fund.

About The Hartford

The Hartford Financial Services Group Inc. is a leading provider of insurance and wealth management services for millions of consumers and businesses worldwide. The Hartford is consistently recognized for its superior service and as one of the world's most ethical companies. More information on the company and its financial performance is available at www.thehartford.com . Join us on Facebook at www.facebook.com/TheHartford . Follow us on Twitter at www.twitter.com/TheHartford .


SOURCE: The Hartford Financial Services Group Inc. 

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