An upgrade in Parent Pillar rating is the primary driver of Touchstone Dividend Select ETF's upgrade to a Morningstar Medalist Rating of Bronze from Neutral. The portfolio maintains a cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy's effective investment philosophy supports an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in quality exposure and yield exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a low yield exposure is rooted in holding fewer stocks with high dividend or buyback yields -- instead, typically holding stocks in an early stage of development. The strategy’s management team earns an Average People Pillar rating. 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

Broadcom

Oracle

QUALCOMM

Texas Instruments

Medtronic

BlackRock

Bank of America

KLA-Tencor

Johnson & Johnson

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

The leading factor in 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 beat their respective category's median Morningstar Risk-Adjusted Return for the period. The size of the portfolio management team also reinforces the process. With three portfolio managers, the fund is reasonably well-resourced. Lastly, the process is limited by the parent firm's five-year retention rate of 60%, which suggests it could do more to retain its portfolio managers.

 This strategy sticks with larger market-cap firms compared with the average fund in its peer group, the Large Value Morningstar Category. But in terms of style (value/growth) exposure, it does not have much of a bias and resembles the category's typical portfolio. Looking at additional factor exposure, this strategy has consistently favored low-quality stocks compared with Morningstar Category peers over the past few years. Such positions do not tend to provide much ballast for a portfolio. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. This strategy has also leaned away from the stocks of companies with high dividend or buyback yields over these years. Returning capital to shareholders often is not the highest priority of such businesses. The shares of such companies can deliver strong returns if they fulfill their growth projections, but they also carry more risk. Similarly, in recent months, the strategy also had less exposure to the Yield factor than peers. Given the low trading volume of holdings, this strategy has also tilted toward illiquid assets during these years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In recent months, the strategy also had less Liquidity 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 technology by 10.7 percentage points in terms of assets compared with the category average, and its consumer cyclical allocation is similar to the category. The sectors with low exposure compared to category peers are financial services and energy, underweight the average by 4.9 and 3.7 percentage points of assets, respectively. The portfolio is composed of 54 holdings and is diversified among those holdings. In its most recent portfolio, 23.9% of the portfolio's assets were concentrated in the top 10 fund holdings, compared to the category’s 27.4% average. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 16% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Above Average

Process

Touchstone Dividend Select ETF earns an Average People Pillar rating. Brendan M. White, the longest-tenured manager on the strategy, boasts over 25 years of listed portfolio management experience.  Brendan M. White has an experienced backdrop of support. The three listed managers boast 19 years of average listed portfolio management experience. As a team, they manage three investment vehicles together, with a Bronze asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha in aggregate. None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

 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.

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 Dividend Select ETF

DVND seeks current income and capital appreciation by actively selecting US large-cap companies with sustainable competitive advantages that pay reliable, growing dividends at reasonable valuations.

Touchstone US Large Cap Focused 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 has launched the third of its four new actively managed exchange traded funds. The Touchstone Dividend Select ETF (NYSE Arca: DVND) trades on the New York Stock Exchange Arca.

Touchstone Launches Its Dividend Select ETF

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 Dividend Select ETF ETF (DVND)