Hartford Financial Services Group Inc., the industry leader in variable annuities for many years, is setting bold goals for its mutual fund business.
The company has steadily built its decade-old fund business until - with $32.6 billion of assets under management at June 30 - it ranked as the 10th-largest among companies that distribute through third parties, according to Strategic Insight.
Scott Sanderson, a vice president of marketing and strategic relationships in Hartford's investment products division, said in an interview Monday that he wants the fund family to climb into the top five.
"Our goal had been to crack the top 10, and now we want to crack the top five," he said. "We have a ton of momentum."
Hartford has doubled the pace of its fund sales this year compared with 2005, and this performance, Mr. Sanderson pointed out, has come in a flat market. Second-quarter sales were $2.8 billion.
The Connecticut insurer has been able to gain distribution thus far by leveraging the success of its huge variable annuity business - it had assets under management of $106 billion at the end of June. Now the fund family has gained enough of a track record to make a statement for itself, Mr. Sanderson said.
Hartford can point to its funds' asset growth as well as a 10-year performance track record: 12 of its 14 portfolios have outperformed their peer groups in that time, according to Lipper Inc. "That's a bullet up-front to the broker," Mr. Sanderson said. "That 10-year anniversary gets us on the screens of a ton of brokers who were not going to look at us until now."
The company has also notched three straight years of customer service commendations from ratings firm Dalbar.
Hartford's mutual funds, which are distributed in about equal proportions through wire houses, independent advisers, and banks, help create the kind of well-rounded product roster that is attractive to many intermediaries, Mr. Sanderson said.
"It has certainly always been a positive in our corner," he said. "We have had many banks tell us they are looking for fewer but deeper relationships."
Success in both insurance and investment products sets Hartford apart from rivals, he said. "We think we are uniquely positioned to be able to distribute a broad spectrum of products," he added.
John Rhett, the chairman of SunTrust Banks Inc.'s investment services division in Atlanta, said that breadth is a key differentiator in a world awash in all kinds of investment choices.
"You can't learn all products and all things," said Mr. Rhett, whose retail brokerage unit is on pace to sell $2 billion of annuities and $2 billion of mutual funds this year. "You've got to find some really good partners." Hartford's mutual funds and variable annuities are among the bank's top sellers, he said.
Fund families with good performance across multiple asset classes are preferable to having just a standout portfolio or two, he added. This gives customers the chance to avoid paying commissions because they transfer in and out of funds within the same family.
It is also attractive to have a single relationship to manage on a bankwide level for mutual funds, variable annuities, and retirement products, he said.
Though it is tough for annuity companies to enter the mutual fund arena and vice versa, Hartford had an advantage in starting with variable annuities and adding a simpler product, mutual funds, Mr. Rhett said. And because Wellington subadvises the funds, they are more of a known quantity, he added.
One reason for Hartford's mutual fund success was the creation early in 2005 of a 96-person dedicated wholesaler force, divided evenly among the distribution channels.
Strong wholesaler support is a key in choosing which companies SunTrust will work with, Mr. Rhett said.
Hartford started its first seven funds in July 1996. Its funds today are modeled on the subadvisory model used for its variable annuities. The managers are Wellington Management Co. LLP for equities and Hartford Investment Management Co. for fixed-income products.
