An incline in Parent Pillar rating is the primary driver of Touchstone US Large Cap Focused ETF's upgrade to a Morningstar Medalist Rating of Bronze from Neutral. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The strategy’s management team earns an Above Average People Pillar rating. The strategy earns an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight volatility exposure and liquidity exposure compared with category peers. High volatility exposure is attributed to companies with a higher standard deviation of returns. And a high liquidity exposure is rooted in stocks with higher trading volumes, lending managers more flexibility. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Microsoft

Apple

Alphabet

Amazon

Berkshire Hathaway Inc. - Ordinary Shares - Class B

UnitedHealth Group

Goldman Sachs

salesforce.com

Johnson & Johnson

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Touchstone US Large Cap Focused ETF earns an Average Process Pillar rating. 

The primary contributor to the rating is the parent firm's five-year risk-adjusted success ratio of 63%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The fund's concentrated portfolio, with its top 10 holdings accounting for 46% of assets, supports the rating. High-conviction picks court the risk of blowing up, but can also drive outperformance. Lastly, the process is limited by the small size of its portfolio management team of one.

 This strategy is similar to its Large Blend category peers in terms of market-cap and style exposure. Examining additional factor exposure, this strategy has consistently overweighted the volatility factor compared with Morningstar Category peers over the last few years, meaning it invests in stocks with a history of the higher standard deviation of returns. This orientation tends to pay off most prominently when markets are hot. In recent months, the strategy was more exposed to the Volatility factor compared with its Morningstar Category peers as well. Given the high trading volume of holdings, this strategy has been exposed to liquid assets during these years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. In the most recent month, however, the fund's Liquidity exposure was in line with the Morningstar Category average. This strategy also has tilted toward low-quality stocks, companies with higher financial leverage and lower profitability over these years. Lacking this ballast, the fund's prospects could rest on its ability to surpass peers during economic booms. In recent months, the strategy also had less Quality factor exposure than its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in communication services by 6.9 percentage points in terms of assets compared with the category average, and its healthcare allocation is similar to the category. The sectors with low exposure compared to category peers are industrials and consumer defensive, with industrials underweighting the average portfolio by 2.8 percentage points of assets and consumer defensive similar to the average. The portfolio is positioned across 48 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 46.3% of the portfolio's assets were concentrated in the top 10 fund holdings, as opposed to the category’s 49.5% average. And finally, in terms of portfolio turnover, this fund trades less regularly than the typical peer in its category, which may result in a lower cost to investors.

Average

Process

Touchstone US Large Cap Focused ETF earns an Above Average People Pillar rating as the solo portfolio manager listed has distinguished themself in a competitive industry. James E. Wilhelm brings over 18 years of portfolio management experience to the table. Across strategies managed, Wilhelm has an average Morningstar Rating of 3.9, indicating above-average risk-adjusted performance.  Isolating the analysis to the fund at hand, James Wilhelm has delivered inferior performance, lagging both the category benchmark and average peer over the past one-year period. Finally, the manager's personal investments in the fund are another factor of analysis. Unfortunately, James Wilhelm has not documented any personal investments in the fund. Manager investment is preferred because it aligns their interests with fundholders and demonstrates confidence in the strategy.

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

Above Average

People

Touchstone Investments' recent moves and other characteristics support an Average Parent rating, up from Below Average.
Touchstone has made a few recent moves. As part of a portfolio manager retirement, it made a subadvisor and style change on one of its international funds, hiring value-oriented LSV in place of Fort Washington Investment Advisors, which remains its largest subadvisory partner. (Touchstone and Fort Washington are both subsidiaries of parent company Western & Southern Financial Group.) This change also includes a reduction in the fund's expense ratio. Touchstone is also merging another international fund into one run by Sands Capital and lowering expenses on the R6 share class of the acquiring fund. While manager changes and fund mergers can be disruptive to investors, they are also often a response to poor long-term performance or small asset bases. Lower fees, though, are always a positive.
These moves acknowledge the competitive nature of the fund industry. To grow in this environment, Touchstone has firmly staked its ground on providing funds and exchange-traded funds that are "distinctively active." The firm deserves credit for a consistent and well-codified approach to manager research. A small investment team evaluates new managers and existing ones along five areas it thinks lead to outperformance: organizational stability, personnel, investment discipline, firm infrastructure, and results. Although Touchstone often makes investment-style and portfolio-manager changes to funds it has acquired—it has made two substantive acquisitions in the past five years—overall a patient mindset has resulted in long-term relationships with many subadvisors even when short-term performance is weak.

Parent

Touchstone US Large Cap Focused ETF

LCF is a concentrated portfolio of US-listed large-cap stocks selected based on high conviction that the businesses have a sustainable competitive advantage or have a high barrier to entry in place.  

Touchstone Dividend Select ETF

Touchstone Securitized Income ETF

Touchstone Ultra Short Income ETF

Touchstone Strategic Income Opportunities ETF

Touchstone Investments now has six actively managed ETFs. It seeks to bring its “distinctively active” mutual fund approach to meet advisors where they are focused.

Touchstone's Active ETF Lineup Is Focused on Income

Touchstone Investments announced the launch of its first of four new actively managed exchange traded funds. The Touchstone Strategic Income Opportunities ETF (NYSE Arca: SIO) trades on the New York Stock Exchange Arca.

Touchstone Launches First of 4 New Active ETFs

Expansion into ETFs provides the potential for a more tax-efficient, cost competitive and transparent way to access Touchstone's investment strategies CINCINNATI , July 25, 2022 /PRNewswire/ -- Touchstone Investments, known for its Distinctively Active® mutual funds, announced the launch of its first of four new actively managed exchange traded funds (ETFs) trading on the New York Stock Exchange Arca and Cboe BZA. The ETFs mark the natural expansion of Touchstone's Distinctively Active investment philosophy through an ETF structure, providing shareholders with more investment options.

News for Touchstone US Large Cap Focused ETF ETF (LCF)