HARTFORD, Conn. -- The in-house investment management operation of Hartford Financial Services Group Inc. is now open for outside business, with a serious eye on gaining institutional money.
Hartford Investment Management Co. is opening offices in downtown Hartford, taking with it the $48.2 billion in assets under management from Hartford Financial. Hartford Investment Management is a wholly owned subsidiary of Hartford Financial Services, formerly ITT Hartford Group Inc.
Overall, the move is part of Hartford Financial's attempt to be a full-service financial company. But more specifically, the management fees paid by pension funds are attractive to the insurance parent.
Until recently, most of HIMCO's assets were managed with a focus on maximizing income, said HIMCO President Joseph H. Gareau. Now, the focus is on total return.
So HIMCO now can enter the fee-based business using its existing investment management team.
"We also have a new market-based compensation system for investment professionals that we believe is very competitive, a pay-for-performance system with bonus plans," Mr. Gareau said.
Most of HIMCO's assets are invested in a broad array of fixed-income products, including structured securities, using a relative value approach.
"We think few can offer the breadth of fixed-income capabilities that we have," said Andrew Kohnke, managing director. "We have just never marketed ourselves before."
Its broad fixed-income approaches include active and passive management, and core, targeted duration and immunized portfolios.
Also, the firm is adding international fixed income. It has hired bond manager Robert McHenry from Lombard Odier Investment Services Ltd. in London to build an international and global bond operation in Hartford.
Its sector-based strategies include asset-backed and commercial-backed mortgage securities, investment-grade corporates, BB high-yields, municipals, emerging markets, money market and structured cash and mortgage securities.
The firm uses a modified top-down approach, and executives say they don't rely on interest rate anticipation as a primary method of generating returns. Instead, they always maintain duration within 20% of the target.
A core fixed-income composite performance history as of Sept. 30 lists HIMCO's year-to-date results as 11.06%, compared with the Lehman Government/Corporate Index's 9.6%. Three-year annualized results are 10.1%, vs. 9.4% for the benchmark, while five-year results are 7.48% for HIMCO and 6.95% for the index. The composite includes a portfolio with a market value of $266 million and one with a market value of $194 million, both non-fee-paying accounts. The composite represents 6% of HIMCO's total assets under management.
HIMCO has about $4.5 billion invested in equities; it offers active and passive quantitative management in both growth and value styles.
Mr. Gareau said Hartford has spent $8 million to $10 million every year on technology for the investment unit, support that can continue. In addition, the parent might help HIMCO make acquisitions in the future if expansion is desired, he said.
HIMCO has about 12 lead portfolio managers in fixed income and three in equity, as well as analysts and research staff. An institutional sales staff and account servicing division has been created.
