It is an active bond ETF that invests broadly across securitized fixed income assets such as residential and commercial mortgage-backed securities, asset-backed securities, and collateralized loan obligations. It pursues both income and capital appreciation.

It is well suited to investors who seek income from the securitized bond market while preferring active management to navigate credit and interest-rate risk.

It is an actively managed ETF run by Touchstone.

The fund typically invests a significant portion of its assets in securitized fixed income securities, spreading exposure across mortgage-backed, asset-backed, and collateralized loan obligation securities. Rather than tracking an index, the management team adjusts sector, credit, and duration allocations at its discretion to pursue risk-adjusted income.

• Broad diversified exposure across the securitized bond market
• Active management without index constraints enables a flexible response to credit and interest-rate conditions

Assets under management (AUM) stand at $168.7M, and the total expense ratio is 0.40% per year.

The expense ratio is somewhat higher than that of passive mortgage ETFs that track an index, but the distinguishing feature is the portfolio manager's discretion to adjust sector and credit exposure.

Performance of securitized bonds tends to be driven by the direction of interest rates and credit spread trends. Short-term volatility is shaped by policy-rate expectations and conditions in the mortgage and consumer credit markets, so the trend can vary by period.

Income demand tends to draw flows into bond ETFs in supportive environments, but in periods of interest-rate volatility, flows can diverge as investors weigh duration and credit risk. The credit structure unique to securitized assets also influences fund flows.

Broad diversified income exposure across securitized bonds and an active risk-management approach are the strengths, while credit and interest-rate risk together with a relatively high expense ratio are the weaknesses.

The three products shown in the table, MBB, VMBS, and SPMB, are lower-cost passive alternatives that track mortgage-backed securities indices, while JMTG and JMBS are actively managed mortgage bond ETFs with a similar management style. This ETF holds a broader range than just mortgages, extending into asset-backed and collateralized loan obligation securities, giving it a wider diversification footprint.

The following points should be reviewed before investing in TSEC. Because it is a securitized bond ETF, it is advisable to check the credit structure of the underlying assets, the interest-rate sensitivity driven by duration, and the level of the expense ratio associated with active management.

Securitized bonds are jointly exposed to the credit deterioration of underlying assets and rising interest rates. During periods of market stress, liquidity can contract and price volatility can widen, so even diversified bond allocations should be evaluated for their short-term loss potential.

The ETF is well suited to investors pursuing active income from a broadly diversified securitized bond allocation. For those who prioritize low cost, passive mortgage ETFs are an option, while investors seeking broad securitized exposure combined with manager discretion may consider TSEC.