Why Multifactor ETFs Deserve a Core Equity Allocation

It’s particularly hard to predict which factors will win, making it important for portfolios to get balanced exposure across multiple diversified return drivers. For a core equity allocation, investors may be better positioned in multifactor ETFs as opposed to trying to target single factors.

“Single factor ETFs can easily lag behind the broader market,” Todd Rosenbluth, head of research at VettaFi, said. “An approach that combines factors can serve as a core portfolio position.”

The Hartford Disciplined US Equity ETF (HDUS B) is a style-pure fund that seeks to deliver enhanced relative total returns and control uncompensated active risk relative to the broad market. Furthermore, the fund fits best as a U.S. core equity strategy.

HDUS targets a modest yield enhancement and volatility at or below market levels. Notably, the Hartford Funds’ style-pure core ETF typically yields 30% above the S&P 500.

The fund’s underlying index had a dividend yield of 2.19% as of the end of the third quarter. In comparison, the Russell 1000 was yielding 1.57% at the end of the third quarter, while the S&P 500 was yielding 1.62%.

Launched last November, HDUS has $96 million in assets under management. The fund has climbed 12.92% on a total return basis since its inception on November 17, 2022.

The ETF charges 19 basis points, thus making it a low-cost offering suitable for a buy-and-hold core allocation.

HDUS is part of Hartford Funds’ product suite of multifactor ETFs. The Hartford Multifactor US Equity ETF (ROUS A-) offers similar multifactor exposure to the U.S. equity market. However, ROUS positions exposure more defensively, potentially offering less upside potential (and downside risk) than HDUS.

For more news, information, and analysis, visit the Multifactor Channel.

Investing involves risk, including the possible loss of principal.

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.