Hartford Financial Services Group Inc. last September put the brakes on its effort to sell its mutual-fund unit to private equity shop Clayton Dubilier & Rice LLC after banks cut back on lending for leveraged buyouts.
The firm in March confirmed its intentions announcing that it was trimming its focus to a few core business areas including property and casualty, group benefits and mutual funds. The group said it was selling off its individual annuity Woodbury Financial Services and retirement plan businesses.
At the time, the firm's chief executive Liam McGee said its decision to not sell its mutual fund business puts it "on the right path to unlock value and deliver superior, long-term returns for shareholders." In the same breath, McGee said the firm's mutual funds segment "is a high-return business, and we are enthusiastic about our strategy to accelerate sales growth with the expanded Wellington Management sub-advisory relationship."
Money Management Executive recently spoke to Joe Eck, vice president of Institutional Sales for The Hartford's mutual funds business, about the firm's decision to outsource its investment advisory practice and about its efforts to grow its defined contribution investment only business, which services 401(k) and other retirement plans.
Can you talk about why the firm decided to let Wellington subadvise on all its funds?
Up until that time frame, almost 100% of our sales were in equities. Now, Wellington is bringing fixed-income and asset allocation strategies to us; so we're already starting to see the fruits of that change in the investment only space. We've moved quite a bit of our strategies over to Wellington and that transition has gone very well. The nice thing about that is a lot of those strategies are clones of what Wellington has institutionally so institutions that use Wellington today have the option of using Hartford in a mutual fund format so we're starting to see the benefits of that transition.
What's the latest update on your DCIO efforts?
We decided to add nine individuals to the DCIO sales team and we made that decision at the end of last year. We've hired eight of those nine individuals as of May 21. Right now, we have four regional managers (John Carbone - East, Todd Williams - South, Chris Brunner - Midwest, Eric Weber - West) who are more institutional focused. Underneath each of them, we're adding an individual focused on the advisor segment in the eastern, western and southern territories (Greg Seaver - East, Mark Drake - South, Mike Deferro - West).
We're working on the Midwest as our last position to fill and we're down to a few final candidates, so I would expect to get someone on board there within the next three or four weeks. Internally, we went from one to two sales people. We also hired an individual who is working on technology for us. We're heavily focused on using tech like SalesForce and our iPads for presentations just to make us more efficient out in the field.
In total, there are a dozen external sales people calling on the consultants and 401(k) providers, and internally there are nine.
Any plans on adding more sales personnel?
At this point in time, you always like to have more, but I think we're in good shape. We've almost doubled the team so now we have to deliver on all of the commitments that we've made. And we're off to a good start in Q2 with everyone having just gotten in place within the last six weeks or so.
When we have these individuals with more tenure in those territories, I think we'll have nice growth in the advisor segment in the $100 million in assets and below. We do see some great opportunities in that market segment.
It sounds like you're getting your DCIO business off the ground nicely. What are some of the barriers you're facing currently?
From our perspective, we see very few barriers. There's always great competition in the asset management business, but when we look at Wellington as our investment engine, we feel very good about that.
Many of the strategies that they sell to the largest corporate pension plans are available in Hartford mutual funds. We've always had a great connection with Wellington's portfolio managers so all we're doing is bringing them down to the smaller end of the market.
In the fixed income space, what products are investors currently looking to get exposure to?
People are looking at global bond funds so last May we rolled out our World Bond Fund, which has gotten a lot of interest. Inflation hedging is still a hot topic for plan sponsors and unconstrained bonds are another topic that folks are looking at and, last but not least, general income strategies whether they be high quality dividend products. The activity has really picked up in Q2. I'd say it was a little quiet in Q1 and I relate that to markets doing well and now we're starting to see a lot of search activity.
In terms of unconstrained bond funds, do you have any alternative-type strategies in the works?
We do have some things on the table in the alternative bond space but I can't really comment on what we're doing there. I probably see that them less in DC plans than in our high-net worth business.
In addition to your relationship with Wellington, you guys are also moving your people closer to Wellington's office in Radnor, Pennsylvania. How is the move going?
We're well on our way but we're not complete yet. Slowly but surely, individuals are moving from our Simsbury, Connecticut, headquarters to Radnor.