Hartford Financial Services Group Inc., best known in the investment community for its insurance products and its variable annuities, is making steady inroads with its proprietary retail mutual funds.
By the end of the second quarter Hartford's retail fund assets had risen 40% from a year earlier, to $45.6 billion, according to the Simsbury, Conn., company. It ranked 35th in bond and equity fund assets under management, versus 37th last year and 40th in 2005, according to Financial Research Corp. of Boston.
The company has steadily built its decade-old fund business. It had $32.6 billion of assets under management at midyear last year and at the time ranked as the 10th-largest among companies that distribute through third parties, according to Strategic Insight.
"By and large, we're pleased with our performance," said Scott Sanderson, Hartford's vice president of marketing and strategic accounts.
Hartford launched its retail fund family in July of 1996 by introducing seven funds. The company now has 54 retail funds, including three launched in the second quarter.
The lineup is substantially completed, Mr. Sanderson said. "From here on out we may add a fund or two occasionally."
The funds are managed by Wellington Management Co. LLP and Hartford Investment Management Co.
Though it was started from scratch, Mr. Sanderson said, Hartford's retail mutual fund family had an important advantage: The success of the company's variable annuities opened doors at distributors.
However, he admitted that broker awareness of the mutual funds is growing gradually. An annual survey commissioned by Hartford showed that last year, a little more than half of brokers knew of the company's mutual funds, he said. That was up a few percentage points from the 2005 survey's results.
But Hartford, which sells its funds through banks, wire houses, and independent advisers, is satisfied with that result, because awareness is growing without an expensive advertising campaign, Mr. Sanderson said.
About 100 wholesalers act as intermediaries for Hartford with brokers. Those wholesalers are the main marketing tool for the mutual funds, he said.
The intermediary approach itself has been a selling point with brokers, Mr. Sanderson said. "We've always focused on the adviser-sold distribution model. You're not going to directly compete with us."
Hartford created its dedicated mutual fund wholesaler force two years ago, and even that was a "watershed" in the success of the business, Mr. Sanderson said.
But despite the rapid asset growth, Hartford does not plan more large-scale hiring of wholesalers, he said. "We're not for carving up territories to the point where it affects someone's ability to make a very good living at their craft."
He attributed part of the funds' success to efforts to keep costs down.
"Advisers know that expense drag impacts future results," Mr. Sanderson said. "We certainly don't have the cheapest expense ratios, but we are in the game and are looking constantly at how to use our scale to drive expenses down."
Mutual funds' expense ratios refer to their operating expenses and management fees. Among Hartford's actively managed funds, its equity portfolios have an average expense ratio of 1.3%, a little cheaper than the average for the rest of the industry, which is about 1.4%, according to Lipper & Co.
Hartford fixed-income funds have an average expense ratio of 1.2%, while the average for the rest of the industry's average is nearly 1%, according to Lipper.
But Hartford said that on an asset-weighted basis, the net expense ratios for all its retail funds declined 18% from 2002 through March 2007. Last year the net expense ratio was 1.18%, according to the company.
Hartford has active selling relationships with all but one of the nation's 50 largest banking companies, said Mr. Sanderson, who would not name the holdout.
