With cash making a comeback as a valuable asset class in today’s high-interest-rate environment, Touchstone’s Ultra Short Income ETF (TUSI) offers a strategic cash management solution. Fund manager Laura Mayfield shares insights into how TUSI delivers yield, stability, and flexibility for advisors aiming to bring client cash under active management. TUSI’s ultra-short duration and high credit quality meet the needs of conservative investors and advisors seeking alternatives to traditional money markets.
Cash, long considered the least attractive asset class in wealth management, is experiencing a major resurgence. In the past, advisors avoided cash-focused investment products, as low interest rates offered negligible returns. Now, with interest rates on the rise, cash management has become a critical element of client portfolios.
Touchstone’s Ultra Short Income ETF (ticker: TUSI) is one exchange-traded fund that’s capitalizing on this shift, providing advisors with a competitive, yield-focused cash solution. Senior Portfolio Manager Laura Mayfield spoke with The Wealth Advisor’s Scott Martin about TUSI’s role as a higher-yielding alternative to money market funds, its active management approach, and its value as an adaptable cash solution in uncertain markets.
Cash’s Comeback as a Portfolio Essential
In the zero-interest-rate years, few advisors prioritized managing client cash, which earned negligible returns. However, as interest rates have climbed, cash management has regained attention, with advisors recognizing that a strong cash strategy can enhance client satisfaction and portfolio performance. “It’s just a great way to continue to generate an attractive yield without making a huge call that it is time to get back into longer duration, fixed income, or equities,” says Mayfield. With its ultra-short duration and focus on high credit quality, TUSI serves as a bridge between the safety of cash and the potential for yield—an approach that’s more relevant than ever.
TUSI’s Approach: Ultra-Short Duration, High Quality
TUSI is built with an average duration of only 0.6 years, meaning the fund is designed to consistently reinvest and remain adaptable to interest rate fluctuations. According to Mayfield, TUSI “is an ultra-short-duration fund. We traditionally have thought of it as a higher-yielding alternative to money markets or to cash management.” The fund’s portfolio maintains a double-A-minus credit rating, providing a robust solution that combines stability and outperformance over traditional money market funds.
The ETF focuses on high-grade amortizing securities, which allows it to generate stable cash flow while maintaining low volatility. “That helps reduce downside volatility and also buffer liquidity needs to support retention activity as needed,” says Mayfield. This approach makes TUSI a compelling option for conservative investors or for advisors looking to strategically manage client cash within a diversified portfolio.
Active Management for Consistent, Repeatable Returns
Active management is at the heart of TUSI’s ability to deliver returns that go beyond the static yields of money markets. By actively reinvesting cash flows into short-duration assets with appealing yields, TUSI remains nimble, adjusting to changing market rates without sacrificing stability.
“Our performance is primarily based on buying securities that we anticipate will have a specific cash flow profile, a specific yield to maturity as we hold them, and allowing those securities to mature in cash flow as expected over time,” explains Mayfield. “That’s what the performance track record is predicated on, and that is what generates the repeatability of our investment process.”
Fort Washington, TUSI’s sub-advisor, manages more than $20 billion in securitized products, bringing decades of experience in ultra-short duration investments to the fund. This expertise ensures that TUSI is well-positioned to deliver a competitive edge in cash management.
Outperforming Money Markets: Yield and Stability Combined
A major benefit of TUSI is its ability to generate yield above money markets without assuming additional risk. Currently, TUSI’s trailing-12-month yield sits at an impressive 6.89%, significantly higher than the average 5% return of most money market funds. The fund achieves this outperformance by leveraging two key components: distribution yield and total return. By buying securities at a discount and allowing them to mature at par, TUSI captures a reliable return without speculative risk.
“Our ETF is giving you not just that 5% handle distribution yield, but you’re also getting the total return component,” Mayfield notes. “Our portfolio is priced at a discount, and we have very short bonds that are maturing and paying off at par. So, you’re getting that distribution component of return, but also the mark-to-market component of return.”
This dual revenue model allows TUSI to offer higher returns without relying on interest rate predictions or high-risk strategies. Instead, it leverages a dependable, repeatable model that investors can trust to perform regardless of market conditions.
Who Benefits Most from TUSI?
With its flexibility and strong yield, TUSI appeals to a range of advisors. For those whose clients are cautious about market risks but still seek yield above cash, TUSI offers a balanced approach. Mayfield sees the fund as a “placeholder for clients until they get a more certain view of what they want to do. It’s just a great way to continue to generate an attractive yield without making a huge call that it is time to get back into longer duration, fixed income or equities.”
Advisors find it particularly useful as a tool to manage client cash, which often sits outside advisory portfolios in low-yield bank accounts. TUSI allows advisors to bring that cash under active management, enhancing both the client experience and overall portfolio strategy. “This seems like a beautiful way to bring that in,” Mayfield points out. By offering TUSI, advisors can provide returns on cash that are well above those from typical checking or savings accounts.
Navigating Uncertain Markets with TUSI’s Ultra-Short Duration
One of the most significant advantages of TUSI is its ability to mitigate volatility while still delivering competitive returns. As Mayfield explains, “We have a 0.6-year duration . . . versus the Bloomberg aggregate index over six years’ duration, and our yield to worst is higher, and the credit quality is the same.” With its short maturity structure, TUSI remains insulated from the impact of rising interest rates, making it ideal for periods of economic uncertainty.
This approach also means that TUSI experiences minimal drawdowns compared to other assets. “Even in our periods of greatest drawdown, we still have confidence that those securities we’ve put in this portfolio are money good to be paying this off at par,” says Mayfield. The result is a reliable “all-weather” strategy that adapts well to fluctuating market conditions.
Bringing Cash Under Active Management: A Win for Advisors
For many advisors, bringing cash into a managed portfolio has traditionally been challenging. TUSI provides a solution, allowing cash to be managed actively while delivering returns that exceed traditional cash options. This benefit is especially advantageous for advisors relying on cash sweeps or basic bank products, as TUSI’s competitive yields justify advisory fees and enhance client satisfaction.
“Cash can actually make money, and it justifies your fees,” says Mayfield. With TUSI, advisors now have a way to add value on client cash holdings while maintaining conservative risk parameters. This solution not only benefits clients but strengthens the advisor’s portfolio strategy by adding a robust, reliable yield component.
Why TUSI Stands Out in Cash Management
In a landscape where high-quality yields are increasingly hard to find without taking on excess risk, TUSI provides a repeatable, resilient model that adapts to interest rate changes without sacrificing stability. “We expect it to continue to perform in a variety of uncertain conditions going forward,” Mayfield says.
Cash is no longer just a passive holding; with TUSI, it can be an integral part of a portfolio that delivers value. Whether the market is calm or volatile, TUSI provides a solid, actively managed cash solution that enhances portfolio performance and keeps clients’ cash working.
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Disclosures
Investing involves risk, principal loss is possible.
TUSI Fund Risk:
The Fund invests in fixed-income securities which can experience reduced liquidity during certain market events, lose their value as interest rates rise and are subject to credit risk which is the risk of deterioration in the financial condition of an issuer and/or general economic conditions that can cause the issuer to not make timely payments of principal and interest also causing the securities to decline in value and an investor can lose principal. When interest rates rise, the price of debt securities generally falls. Longer term securities are generally more volatile. The Fund invests in mortgage-backed securities and asset-backed securities which are subject to the risks of prepayment, defaults, changing interest rates and at times, the financial condition of the issuer. The Fund invests in investment grade debt securities which may be downgraded by a Nationally Recognized Statistical Rating Organization (NRSRO) to below investment grade status. The Fund invests in non-investment grade debt securities which are considered speculative with respect to the issuers’ ability to make timely payments of interest and principal, may lack liquidity and has had more frequent and larger price changes than other debt securities. The Fund invests in U.S. government securities which are neither issued nor guaranteed by the U.S. Treasury and are not guaranteed against price movements due to changing interest rates.
The Adviser engages a sub-adviser to make investment decisions for the Fund’s portfolio; it may be unable to identify and retain a subadviser who achieves superior investment returns relative to other similar sub-advisers. Events in the U.S. and global financial markets, including actions taken to stimulate or stabilize economic growth may at times result in unusually high market volatility, which could negatively impact Fund performance and cause it to experience illiquidity, shareholder redemptions, or other potentially adverse effects. Financial institutions could suffer losses if interest rates rise or economic conditions deteriorate. The Fund’s service providers are susceptible to cyber security risks that could result in losses to a Fund and its shareholders. Cyber security incidents could affect issuers in which a Fund invests, thereby causing the Fund’s investments to lose value. The Fund invests in Collateralized Loan Obligations (CLOs) that have risks that largely depend on the type of underlying collateral and risks may include illiquidity, limited active market, the possibility that distributions from collateral securities will be insufficient to make interest or other payments, the potential for a decline in the quality of the collateral, and can bear the risk of default by the loans. The Fund invests in foreign securities which carry the associated risks of economic and political instability, market liquidity, currency volatility and accounting standards that differ from those of U.S. markets and may offer less protection to investors. The Fund invests in municipal securities which may be affected by uncertainties in the municipal market related to legislation or litigation involving the taxation of municipal securities or the rights of municipal security holders in the event of bankruptcy and may not be able to meet their obligations. The Fund may experience higher portfolio turnover which may lead to increased fund expenses, lower investment returns and higher short-term capital gains taxable to shareholders. The Fund invests in repurchase agreements which are considered loans by the Fund and may suffer a loss of principal and interest in the event of counterparty defaults. Current and future portfolio holdings are subject to change.
Touchstone exchange-traded funds (ETFs) are actively managed and do not seek to replicate a specific index. ETFs are bought and sold through an exchange at the then current market price, not net asset value (NAV), and are not individually redeemed from the fund. Shares may trade at a premium or discount to their NAV when traded on an exchange. Brokerage commissions will reduce returns. There can be no guarantee that an active market for ETFs will develop or be maintained, or that the ETF’s listing will continue or remain unchanged.
Please consider the investment objectives, risks, charges and expenses of the ETF carefully before investing. The prospectus and the summary prospectus contain this and other information about the Fund. To obtain a prospectus or a summary prospectus, contact your financial professional or download and/or request one at TouchstoneInvestments.com/resources or call Touchstone at 833.368.7383. Please read the prospectus and/or summary prospectus carefully before investing.
Touchstone ETFs are distributed by Foreside Fund Services, LLC.
Wealth Advisor and Touchstone Investments are not affiliated. Wealth Advisor and Foreside Fund Services, LLC, are not affiliated.
