Hartford Financial Services Group Inc. says it wants to aggressively expand its mutual fund family — so much so that it is devoting its entire $20 million advertising budget to the product this year.
The Simsbury, Conn., company introduced three mutual funds this week and added six external managers to create its first multimanager variable annuity platform. John Walters, an executive vice president in The Hartford’s investment products division, said both the variable annuity and mutual fund businesses are at crucial points — and the company does not want to lose sight of the variable annuity products that have been its bread and butter.
“When we started the mutual fund business in 1996, we were trying to sell the story to people familiar with our annuity business, and that carried us a long way … ,” he said. “We have reached a point, though, where the next opportunity for growth is to reach out to the producers who aren’t familiar with our annuities.”
Mr. Walters said The Hartford plans to be aggressive with its mutual fund business, which had $26 billion of assets under management at March 31, and hopes to reach the Top 10 in gross sales within a few years. Last year, The Hartford said, it was ranked 14th, with $5.6 billion of sales.
The Hartford’s mutual funds more than doubled their assets under management last year, and Strategic Insight, a New York mutual fund research company, said the fund family reached $25 billion faster than any other.
To make the aggressive move it intends, Mr. Walters said, the company is spending $20 million on advertising for its mutual fund business. The Hartford, for example, was the only mutual fund sponsor for this year’s NCAA basketball tournament.
The company has quickly increased advertising spending the past two years. Data from TNS Media Intelligence, a New York firm that tracks advertising spending, showed The Hartford boosting ad spending by 259%, to $15.8 billion last year. The increase this year is 26.5%.
The company has also restructured its wholesaling force. The Hartford, which previously had wholesalers selling both annuities and mutual funds, has dedicated 90 people to mutual funds. It will also add products like the three portfolios announced Monday — The Hartford Floating Rate, Capital Appreciation II, and Select Mid-Cap Value funds.
Mr. Walters said the company could also add income-oriented funds to help retirees in the next few years or bolster its array of asset allocation funds or large-cap products. “This is not necessarily just about launching more products,” he said, however.
Mr. Walters said it is crucial for The Hartford to develop the mutual fund platform without costing the company its position as the top provider of variable annuities. Hartford Life has been the leader in individual annuity sales since 1993, according to the Variable Annuity Research and Data Service. It had $98 billion of variable annuity assets under management at March 31.
Also on Monday, the company added six investment managers to the two already serving its Director variable annuity products. The eight are from AllianceBernstein, Fidelity Investments, Lord Abbett, Oppenheimer Funds, Putnam Investments, Van Kampen, Wellington Management Co., and Hartford Investment Management Co.
Joseph P. LoRusso, the president of Fidelity Investments Institutional Services Co., said Tuesday that Fidelity has been working with The Hartford for a couple of years and began talks last year about a variable annuity platform partnership.
Fidelity will provide five variable insurance product portfolios to The Hartford’s multimanager platform. Mr. LoRusso said Fidelity’s VIP Portfolios have $54 billion of assets under management and are distributed through more than 50 insurance companies.
Taking a multimanager approach is crucial to gaining share, he said.
“I think that investors want choice no matter what the vehicle is, whether it is a variable annuity or a brokerage account,” Mr. LoRusso said. “I think The Hartford feels like offering investment choice can make the annuity a stronger product.”
Mr. Walters said, “We really want to maintain our position in the annuity business and build out our mutual fund and 401(k) business and related investment business like 529 college savings plans, all at the same time.”
