Hartford Multifactor Small Cap ETF (ROSC)
AI Summary
The Fund seeks to track the Hartford Multifactor Small Cap Index, which is designed to provide exposure to U.S. small cap equities exhibiting attractive factor characteristics like value, momentum, and quality. The Index uses a rules-based, multi-layered approach to select and weight stocks while managing volatility and other risks. It aims to enhance returns and reduce volatility compared to a cap-weighted small cap index over a full market cycle.
The Index methodology employs proprietary quantitative models to score and rank stocks based on factors like value, momentum, quality, and volatility. Stocks with favorable factor exposures are overweighted, while those with unfavorable exposures are underweighted or excluded. The Index targets 250-350 holdings and is reconstituted semi-annually. It seeks to mitigate uncompensated risks like high concentration, valuation insensitivity, and liquidity issues present in cap-weighted benchmarks.
The Fund takes a passive, indexing approach to track the Hartford Multifactor Small Cap Index. It invests at least 80% of assets in Index constituents and can use derivatives, cash positions, and securities lending to enhance tracking. The Fund’s industry exposures will approximately match those of the Index.
Strategy Narrative (Prospectus)
The Fund seeks to provide investment results that, before fees and expenses, correspond to the total return performance of the Hartford Multifactor Small Cap Index (LROSCX) (the Index), which is designed to address risks and opportunities within the United States small cap universe by selecting equity securities of companies exhibiting a favorable combination of factor characteristics, including valuation, momentum, and quality. The Index seeks to enhance the return potential available from investment in a capitalization-weighted universe of U.S. small capitalization equity securities over a complete market cycle with up to 15% less volatility compared to that of the capitalization-weighted universe through the Index construction process.The Index is built with a rules-based, proprietary methodology, which employs a multi-layered risk-controlled approach that seeks to address the risks associated with the cap-weighted universe, accounting for liquidity and volatility risks. Specifically, the Index seeks to select companies exhibiting attractive risk premium profiles, including but not limited to, quality, momentum, and value, while managing overall volatility levels and other risks. The Indexs components are adjusted twice annually, with a reconstitution and rebalance occurring in March and September. The Index was established on June 28, 2019. Small cap securities are defined as the smallest up to 2,000 companies among the up to 3,000 largest U.S. companies by estimated free-float market capitalization. The capitalization range of the Index was $68 million to $10.8 billion as of December 31, 2023. The Index is expected to typically include 250-350 components. The components of the Index, the number of components and the degree to which these components represent certain industries, may change over time. The Index, developed by Lattice Strategies LLC (Lattice or the Adviser), seeks to address identified risks within its asset class. For example, company concentrations, valuation insensitivity, and other unmanaged risk factors may be addressed through the index management process.The Adviser uses a passive or indexing approach to try to achieve the Funds investment objective. The Fund does not try to beat the index it tracks and does not seek temporary defensive positions when markets decline or appear overvalued. Indexing may eliminate the chance that the Fund will substantially outperform the Index but also may reduce some of the risks of active management, such as poor security selection. Indexing seeks to achieve lower costs and better after-tax performance by keeping portfolio turnover low in comparison to actively managed investment companies.The Fund generally invests at least 80% of its net assets (plus the amount of borrowings for investment purposes) in securities of the Index and in depositary receipts representing securities of the Index. The Fund may invest the remainder of its assets in certain derivative instruments that may not be included in the Index, cash and cash equivalents, including money market funds, as well as in securities that are not included in the Index, but that the sub-adviser believes will help the Fund track the Index. The Fund may lend securities representing up to one-third of the value of the Funds total assets (including the value of the collateral received) in accordance with the Funds securities lending program and guidelines. To the extent that the Index concentrates (i.e., holds 25% or more of its total assets) in the securities of a particular industry or group of industries, the Fund will do so in approximately the same amount as the Index.The Index is sponsored by Lattice. Lattice determines the composition and relative weightings of the securities in the Index and publishes information regarding the market value of the Index. The Index is calculated and distributed by Solactive AG. Additional information on the Index can be found at hartfordfunds.com.