The guest on this episode of the "Behind the Ticker" podcast was Matt Barry, head of product management and ETF capital markets at Touchstone Investments. Touchstone is a $25 billion mutual fund manager that has historically focused on active management strategies. As Matt explained, Touchstone aims to beat benchmarks by looking meaningfully different than the benchmarks, using high conviction best ideas from 15 different subadvisors across various strategies.
About Matt Barry and Touchstone Funds
Seeing the continued growth in active ETFs, Touchstone has been building out an ETF platform over the last few years. They launched their first four active ETFs around a year and a half ago. Matt discussed how investor demand is driving the growth due to the structural benefits ETFs offer like tax efficiency, liquidity, and transparency while also providing exposure to active management strategies. Regulatory changes have also made it easier for active managers to launch ETFs.
Investment Strategy and Approach
Matt highlighted a few of Touchstone's newer active ETF strategies including HEAT, their climate transition fund, which is managed by Swiss firm Lombard Odier and invests in companies benefiting from the transition to a cleaner economy. Their ultra short income (TUC) and securitized income (TSEC) ETFs focus on securitized fixed income assets and are managed by the experienced structured credit team at Fort Washington. TSEC aims for a higher yield with the ability to allocate to some non-investment grade securitized debt.
In terms of distribution, Matt explained how Touchstone is leveraging their existing mutual fund distribution network and relationships with advisors. However, they have also worked on developing internal ETF expertise to ensure their wholesalers are fluent in discussing the ETF structure and considerations when speaking with advisors.
Portfolio Construction and Implementation
To learn more about Touchstone Investments please visit touchstoneinvestments.com
Deeper Dive: Insights from the Full Conversation
Beyond the headline strategy, the full conversation between Brad and Matt Barry covered several additional themes worth highlighting for advisors and investors.
On Process and Philosophy
Historically, the strategy is offered a similar yields to high yield corporate bonds but a much lower volatility profile. It's in the short-term bond category. So you're not taking a lot of interest rate risk there. For it's a pretty pretty compelling risk return profile on the pair with something like your high yield corporate bond portfolio. Yeah, no, that makes a ton of sense to me. Before I let you go, you had mentioned earlier that you've got a distribution team of about 50 and you guys have been around for a long time, a very robust mutual fund business.
So we have several hundred meetings a year with asset managers across asset classes. Sometimes at times in the past, we've had a particular search. Some of the mutual funds side a few years ago, an example of that, we looked in the liquid-alt space, ended up hiring a rescapable that to run our credit opportunity strategy consists of high yield bank loan CLOs in the below-investment grade space. Sometimes we had a very specific search and we're really happy with that measure and how they've performed there.
Market Context and Positioning
When we think secure ties investments, residential, mortgage-backed securities, commercial mortgage-backed securities, asset-backed securities, collateralized loan obligations, as kind of a key building blocks of that strategy. Historically secure ties investments have been a really interesting place to be from a risk return for a file perspective, rather something like the investment grade corporates or high-yield corporates. The team at Fort Washington has run ultra short-term, mutual fund for, well over a decade now. The team's been together for over 20 years, actually, it's a very stable team with a lot of experience, running short duration investments, specifically in secure ties.
So the niche that we're trying to fill there is more of a specialist manager, more cognizant of the capacity of our strategies who are to manage that, are some advisors continued off of the ability to add really strong alpha through risk to adjust your returns, also protect on the downside. And what that looks like varies a little bit depending on strategy, where some managers might be higher on the upside, others might focus more on the downside. It really varies in terms of managers across the breadth of our roster.
Before we get started, could you tell us a little bit about your background and how you got into the position that you are today? Yeah, so I'm Matt Barry. I run product management and ETF capital markets for Touchstone Investments. I've been with Touchstone, and also our parent company before that, for combined about 10 years now, joined after business school, and then Touchstone is about a $25 billion mutual fund manager. So historically, that's been our business as part of my time running product here.
Notable Insights
"The reality is that the world is getting warmer behind on some of the goals on climate change."
Key Takeaways
- As Matt explained, Touchstone aims to beat benchmarks by looking meaningfully different than the benchmarks, using high conviction best ideas from 15 different subadvisors across various strategies.
- The conversation explores important themes in active management relevant to today's advisor landscape.
- The conversation explores important themes in income investing relevant to today's advisor landscape.
What This Means for Advisors
For financial advisors evaluating options for client portfolios, this conversation with Matt Barry highlights important considerations around fixed income. Understanding the strategy behind each fund—not just the ticker—helps advisors make more informed allocation decisions and better communicate the rationale to clients.
The themes of fixed income and active management discussed in this episode are particularly relevant in the current market environment, where advisors are increasingly looking for differentiated solutions that go beyond traditional benchmarks.
Listen to the Full Episode
This article is based on an episode of Behind the Ticker, hosted by Brad Roth, Founder and CIO of THOR Financial Technologies. For the full conversation with Matt Barry, including additional nuances and details, listen on Spotify, Apple Podcasts, or watch on YouTube.