August 13, 2019
John V. O'Hanlon, Esq.
Dechert LLP
One International Place, 40th Floor
100 Oliver Street
Boston, MA 02110-2605
Re: Hartford Schroders Opportunistic Income Fund, File Nos.
333-232663; 811-23457
Dear Mr. O'Hanlon:
We have reviewed the registration statement for Hartford Schroders
Opportunistic
Income Fund (the "Fund"), filed on Form N-2 with the Securities and Exchange
Commission on
July 16, 2019, and have the comments below. Comments given in one section apply
to other
sections in the filing that contain the same or similar disclosure. The
captions used below
correspond to the captions the Fund uses in the registration statement. All
capitalized terms not
otherwise defined herein have the meaning given to them in the registration
statement.
1. We note that you submitted an application for exemptive relief on
February 25, 2019 in
connection with the registration statement in order to issue multiple
classes of shares.
Please keep us informed regarding the ongoing status of the application.
COVER PAGE
2. The Fund should include a cross-reference to those sections of the
prospectus that discuss
the Fund's repurchase policies and the attendant risks. See Guide 10 to
Form N-2.
PROSPECTUS
Principal Investment Strategies
3. The disclosure states that "The Fund may originate loans . . . ." Please
also disclose the
following with respect to loans originated by the Fund. We may have more
comments
after reviewing your response.
John V. O'Hanlon, Esq.
August 13, 2019
Page 2
a. Description of overall loan selection process, including maturity
and duration of
individual loans, borrower and loan types and geographic location
of the
borrower;
b. Description of the Fund's underwriting standards for these loans;
c. Whether the Fund will be involved in servicing the loans and, if
so, a description
of its servicing obligations;
d. Whether the Fund will set up its own online lending platform to
originate these
loans, or if the Fund will purchase any of the loans through an
online lending
platform; and
e. Any limits on the amount of loans the Fund may originate to
issuers in the same
industry (e.g., no more than 25% of the Fund's assets).
4. Please confirm to us that expenses incurred by the Fund in originating
loans are reflected
in the fee table. Please also disclose a separate line item in the fee
table for loan
servicing expenses.
5. Tell us whether the Fund expects to originate subprime loans. If so,
please disclose (1) to
what extent the Fund expects to do so; and (2) any unique risks. We may
have more
comments after reviewing your response.
6. Please respond to the following comments regarding the Fund's procedures
for valuing
originated loans and liquidity. We may have more comments after
reviewing your
response.
a. Confirm that the Fund will update underlying valuation data with
respect to each
individual loan that it originates at least as often as it
calculates its net asset value;
b. Disclose that (i) originated loans will be valued on an
individual loan level, (ii)
fair valuation will be performed using inputs that incorporate
borrower level data,
which is updated as often as net asset value is calculated and
(iii) the type of
information that will be used to value the loans; and
c. How the Fund will comply with Rule 23c-3(b)(10)(i) under the 1940
Act, which
requires the Fund to maintain liquid assets to meet its
repurchase obligations. In
your response, confirm that the originated loans will be
considered illiquid for this
purpose.
7. The disclosure states, "The Fund may also use leverage (i.e., borrow
through the use of
reverse repurchase transactions or derivatives transactions or through a
bank) as part of
the portfolio management process, subject to the limits of the 1940
Act." Add a cross
John V. O'Hanlon, Esq.
August 13, 2019
Page 3
reference to the prospectus discussion regarding the risks associated
with a leveraged
capital structure. See Item 1.1.j of Form N-2 and Guidelines to Form
N-2, Guide 6.
8. The disclosure states that the Sub-Adviser "considers certain
environmental, social and/or
governance (ESG) factors when assessing investment opportunities as long
as those
factors are consistent with the Fund's investment strategy." The
language does allow an
investor to understand that the Fund's investments reflect ESG factors.
Please enhance
this disclosure by discussing more specifically how and when the
Sub-Adviser uses ESG
factors (e.g., by reference to a third-party rating or a screen), what
factors are considered,
and when those factors would and would not be "consistent with the
Fund's investment
strategy."
Pricing Table
9. In the pricing table, you should consider adding a footnote to provide,
on a per share and
total amount basis, the net proceeds to the Fund after deducting total
estimated offering
expenses.
10. Amounts borrowed to pay offering costs should be shown as a sales load.
Summary of Terms--Share Repurchase Program
11. Please confirm to the staff that the Fund will not issue in-kind
securities in exchange for
shares purchased from investors during the periodic repurchase periods.
Summary of Fees and Expenses
12. The fee table required by Item 3.1 of Form N-2 should state, as a
specific caption under
shareholder transaction expenses, the amount of any fees to be charged
to shareholders in
connection with the repurchase of their shares by the registrant.
13. Confirm interest and dividend expenses paid in connection with
securities sold short will
be included in other expenses in the fee table.
14. If acquired fund fees and expenses ("AFFE") are expected to exceed .01%
of the Fund's
average net assets, they should be reflected in a separate line item in
the fee table. If not,
please confirm that such fees are included in the line item for "Other
Expenses" in the
table. See Item 3, Instruction 10 of Form N-2.
Use of Proceeds
15. Please disclose any minimum required offering proceeds in order to
begin operating the
Fund. Also, disclose any arrangements to escrow proceeds prior to
reaching this
minimum required amount. See Instruction 5 to Item 1 of Form N-2.
John V. O'Hanlon, Esq.
August 13, 2019
Page 4
Types of Investments and Related Risks--Repurchase Offers Risks
16. Bolster the disclosure by adding language regarding the possible
decrease in share value
as a result of currency fluctuations between the date of tender and the
repurchase pricing
date if the registrant has invested all or a portion of its portfolio
in foreign markets. See
Guide 10 to Form N-2.
Types of Investments and Related Risks--Loans and Loan Participations Risk
17. Please consider whether the expected discontinuation of LIBOR is a
principal risk for the
Fund that should be given greater prominence. If you believe it is not,
explain to us why.
Please tailor your existing disclosure to describe more specifically
how the expected
discontinuation of LIBOR could affect the Fund's investments, or
explain to us why you
believe your existing disclosure is adequate. For example, additional
disclosure could
discuss (1) if the Fund will invest in instruments that pay interest at
floating rates based
on LIBOR that do not include a fall back provision that addresses how
interest rates will
be determined if LIBOR stops being published, how it will affect the
liquidity of these
investments; and (2) how the transition to any successor rate could
impact the value of
investments that reference LIBOR. See Staff Statement on LIBOR
Transition (July 12,
2019), available at:
https://www.sec.gov/news/public-statement/libor-transition.
Share Repurchase Program
18. If the Fund will set aside cash to meet its requirements under Rule
23c-3 of the 1940 Act,
please confirm that such cash will not include cash generated from
selling additional
shares or from income expected to be received during the tender period.
19. Please note that Rule 23c-2 under the 1940 Act requires interval funds
to file Form N-
23C-2 prior to making a repurchase and the staff will have the
opportunity to review and
comment on these filings.
Prior Performance of the Sub-Adviser
20. The disclosure states, "The following tables present the past
performance of a composite
of certain accounts (emphasis added) managed by Schroder Investment
Management
North America Inc., which serves as the sub-adviser to the Fund. The
Schroder
Opportunistic Long/Short Securitized composite consists of all fee
paying accounts
(emphasis added) under discretionary management by Schroders in the
Schroder
Opportunistic Long/Short Securitized investment strategy that have
investment
objectives, policies and strategies substantially similar to those of
the Fund." Confirm
that the composite includes all accounts managed by the sub-adviser
that have
substantially similar objectives, policies and investment strategies as
the Fund.
21. We note that the registration statement includes limited disclosure on
shorting, which
suggests that shorting will not be a principal strategy of the Fund. In
light of this, explain
John V. O'Hanlon, Esq.
August 13, 2019
Page 5
to us in greater detail why you believe the Fund has substantially
similar objectives,
policies, and investment strategies as the Schroder Opportunistic
Long/Short Securitized
composite. In your response, you should specifically address the
significance of shorting
to both the Fund and the accounts in the composite.
22. The Fund should represent supplementally that it has the records
necessary to support the
calculation of the performance as required by Rule 204-2(a)(16) under
the Investment
Advisers Act.
GENERAL COMMENTS
23. We note that portions of the filing are incomplete. We may have
additional comments on
such portions when you complete them in pre-effective amendments, on
disclosures made
in response to this letter, on information you supply to us, or on
exhibits added in any
pre-effective amendments.
24. Responses to this letter should be in the form of a pre-effective
amendment filed pursuant
to Rule 472 under the Securities Act of 1933. Where no change will be
made in the filing
in response to a comment, please indicate this fact in a letter to us
and briefly state the
basis for your position.
25. If you intend to omit certain information from the form of prospectus
included with the
registration statement that is declared effective in reliance on Rule
430A under the
Securities Act, please identify the omitted information to us
supplementally, preferably
before filing the pre-effective amendment.
26. We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
Should you have any questions prior to filing a pre-effective
amendment, please feel free
to contact me at 202-551-6769.
Sincerely,
/s/
Deborah L. O'Neal
Deborah
L. O'Neal
Senior
Counsel
cc: Keith A. OConnell, Branch Chief
Michael J. Spratt, Assistant Director