N-CSR 1 tm247037d1_ncsr.htm N-CSR

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

 

Investment Company Act file number          811-08416          

 

                    Touchstone Variable Series Trust                    

(Exact name of registrant as specified in charter)

 

303 Broadway, Suite 1100
                    Cincinnati, Ohio 45202-4203                    
(Address of principal executive offices) (Zip code)

 

E. Blake Moore, Jr.

303 Broadway, Suite 1100
                    Cincinnati, Ohio 45202-4203                    
(Name and address of agent for service)

 

Registrant's telephone number, including area code: 800-638-8194

 

Date of fiscal year end: December 31

 

Date of reporting period: December 31, 2023

 

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

 

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

 

 

 

 

 

 

Item 1. Reports to Stockholders.

 

(a)The Report to Shareholders is attached herewith.

 

 

 

December 31, 2023
Annual Report
Touchstone Variable Series Trust
Touchstone Balanced Fund
Touchstone Bond Fund
Touchstone Common Stock Fund
Touchstone Small Company Fund

 

Table of Contents
This report identifies the Funds' investments on December 31, 2023. These holdings are subject to change. Not all investments in each Fund performed the same, nor is there any guarantee that these investments will perform as well in the future. Market forecasts provided in this report may not occur.
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Letter from the President
Dear Shareholder:
We are pleased to provide you with the Touchstone Variable Series Trust Annual Report. Inside you will find key financial information, as well as manager commentaries for the Funds, for the twelve months ended December 31, 2023.
In 2023, the U.S. Federal Reserve (Fed) increased interest rates to tackle ongoing inflation. For the first three quarters of the year, rates rose a full percentage point, following a four point increase in 2022. In the fourth quarter, the Fed paused rate hikes as inflation eased. While the possibility of a smooth economic transition emerged, the Fed noted that rates would stay "higher for longer" due to inflation still being above its two percent target. The pause in rate hikes led to a fourth-quarter rally in all asset classes, resulting in positive returns for U.S. stocks and fixed income for the year. Globally, developed markets didn't perform as well as the U.S., while emerging markets saw a late-year rally. China, India, and many other Asian emerging market countries finally experienced positive GDP growth in the third quarter after facing challenges in 2022 and the first half of 2023.
In 2023, the U.S. stock market, measured by the S&P 500® Index, saw a 26.29 percent increase. Unlike 2022, growth stocks outperformed value stocks across all market sizes. The Fed's decision to pause rate hikes particularly favored growth stocks, given their higher expected growth rates and longer term earnings growth. The difference between growth and value was most pronounced in large-cap stocks but narrowed in mid and small caps. Among domestic equities, large-cap growth stocks performed the best, especially the "Magnificent 7," largely benefiting from speculation about growth opportunities in artificial intelligence.
In the bond markets, the decision by the Fed to pause rate hikes, driven by easing inflation in the latter part of the year, led to a rally in both high-quality and lower-quality credit. Before the pause, most high-quality bonds were flat to negative in the first three quarters. On the other hand, lower-quality bonds performed well throughout 2023, thanks to the unexpectedly strong economy keeping defaults low. Throughout the year, credit spreads tightened, causing lower-quality bonds to outperform their higher-quality counterparts due to their higher yields. In 2023, the ICE BofA U.S. Cash Pay Index, representing lower-quality bonds, increased by 13.4 percent, while the Bloomberg U.S. Aggregate Bond Index, a broad measure of higher-quality bonds, rose by 5.53 percent.
In times like these, we're reminded of the crucial role played by financial professionals, the significance of trusting your investment strategy, and the risks associated with trying to time the market. Additionally, we hold the belief that more challenging environments present greater opportunities for active managers to enhance value, particularly those who are Distinctively Active with a high Active Share. Your ongoing support is very much appreciated. Thank you for choosing Touchstone as a part of your investment plan.
Sincerely,
E. Blake Moore Jr.
President
Touchstone Variable Series Trust
3

 

Management's Discussion of Fund Performance (Unaudited)
Touchstone Balanced Fund
Sub-Advised by Fort Washington Investment Advisors, Inc.
Investment Philosophy
The Touchstone Balanced Fund (the “Fund”) seeks to achieve its investment goal of providing investors with capital appreciation and current income by generally investing in a diversified portfolio comprising approximately 60 percent equity securities and 40 percent fixed-income securities.
With respect to equities, the Fund invests primarily in issuers having a market capitalization, at the time of purchase, above $5 billion. Equity securities include common stock and preferred stock. With respect to fixed-income, the Fund invests primarily in bonds, including mortgage-related securities, asset-backed securities, government securities (both U.S. government securities and foreign sovereign debt), and corporate debt securities.
Fund Performance
The Fund (Class I Shares) outperformed its blended benchmark, the 60 percent S&P 500® Index & 40 percent Bloomberg U.S. Aggregate Bond Index, for the 12 month period ended December 31, 2023.  The Fund’s total return was 18.61 percent while the total return of the blended benchmark was 17.67 percent.
Market Environment
The 12 months ended December 31, 2023 were volatile and marked by high inflation, aggressive central bank tightening, banking panic, and geopolitical conflict. While the first three quarters of 2023 were focused on the number of rate hikes, the sentiment and outlook changed significantly in the fourth quarter as the market looked toward rate cuts. The end to the hiking cycle was ratified as core inflation came down gradually over the year, which, along with strong growth data, supported a ‘soft landing’ becoming the consensus opinion.
Entering 2023, many economists were anticipating a recession due to a slowdown in economic growth brought about by a restrictive Federal Reserve (“Fed”) that raised rates by 525 basis points (bps) since 2022. As a result, the 10-year Treasury rose over 100bps to about 5% and caused tighter financial conditions. In addition to higher rates, bank-lending standards tightened over the previous 12 months, which was exacerbated by the banking crisis in March. Risk assets briefly sold off and there were expectations for a pause in rate hikes until the government showed that it would backstop the financial system, if needed. In contrast to all these negative factors, and market expectations, the labor market was resilient over the year. Job gains continued and the unemployment rate remained range bound. This strong labor market, in addition to excess savings, facilitated consumer strength, which supported economic growth.
Consumer spending surprised many market participants to the upside. While a robust labor market and wage gains certainly helped drive consumption, many Americans built up excess savings following dovish fiscal policy during the pandemic. However, savings have been reduced by inflated prices and higher rates, which continue to affect larger purchases, such as homes and home furnishings.
Nevertheless, by the end of the period market consensus was to avert a recession and for multiple rate cuts next year as inflation declines further. As a result, the longer part of the curve rallied and the 10 year ended below 4%, at 3.9%. Investment grade spreads (BBB Industrials) were range bound for most of the period until a late rally in the fourth quarter ended the year at the 26 percentile. High yield (single B corporates) tightened significantly and ended at their 10 percentile while equities followed suit and the S&P 500 ended within 1% of all-time highs.
Portfolio Review
The allocation effect was positive as the Fund had a higher allocation to equities, which outperformed fixed income. The Fund entered the period with a 6% overweight to equities and ended with a 3% overweight.  The fixed income segment of the Fund outperformed the blended benchmark, resulting in a positive impact to relative performance. Fixed income was a positive contributor due to the overweight to credit through investment grade corporates and emerging market debt.
Security selection within equities was slightly positive compared with the blended benchmark during the year.  Equity outperformance was primarily due to positive security selection within communication services and consumer discretionary sectors. Overweight positions in Meta Platforms Inc., Salesforce, Inc.  and Microsoft Corporation were the largest contributors to positive security selection during the year while an underweight to NVIDIA Corporation detracted, offsetting some of the positive selection.
4

 

Management's Discussion of Fund Performance (Unaudited) (Continued)
The Fund entered the year with a 66% weight in equities and ended the year with 63%, largely concentrated in U.S. large cap securities.  The Fund reduced its equity exposure throughout the year as it maintained a modest overweight to risk but acknowledged valuations becoming stretched, in light of strong performance.
Within fixed income, the Fund maintained most sector allocations including its overweight to investment grade credit as the team continues to find attractive bottom-up opportunities with favorable risk/reward characteristics. The Fund did reduce exposure to emerging market debt following strong performance and to moderate overall risk within the asset class. Spreads within emerging markets tightened over the course of the year skewing the risk/reward ratio to downside and not compensating investors for ongoing risks.
Activity within equities was below average for the year. The Fund initiated a few new positions during the year, including International Flavors & Fragrances Inc., The Charles Schwab Corporation, and Stanley Black & Decker, Inc.  We view these names as compelling idiosyncratic opportunities that should perform well even in a weakening economic environment.
Despite increased risks from tightening financial conditions and tight lending standards, the team continues to have a favorable long-term outlook for the U.S. economy and financial markets, but acknowledges valuations are priced for a soft landing.  Combining our economic outlook with expensive valuations, the strategy remains modestly overweight risk compared to the blended benchmark.
Outlook and Conclusion
We believe lower rates, if the Fed begins cutting in 2024, along with a robust labor market should provide a stable to growing environment. While the Fund is at the lower end of its risk budget, we would anticipate security selection to provide a significant opportunity to add value over the year. Broadly speaking, the team believes high quality sectors present the greatest opportunity given current valuations and considering risks are still elevated relative to market expectations. Additionally, if the economy slows more than expected, risk assets are likely to experience weakness and present an opportunity to add risk.
We believe the biggest concern for markets and the Fund are related to inflation and monetary policy. The Fed has tightened aggressively to combat inflation, which despite slowing over the year, has not reached the Fed’s target. If core inflation stays elevated while the labor market remains stable, this would pressure the Fed to keep rates high and cause the market to adjust its current expectations for the path of rates. The longer rates remain overly restrictive the greater the impact to businesses and consumers, which increases the odds of a larger economic slowdown. For the Fund, a steeper economic decline would likely lead to wider credit spreads and lower equity markets, negatively affecting the Fund’s performance. However, with a neutral portfolio risk budget, the Fund will be in a position to increase risk allocation in the event markets experience weakness.
Given our outlook for the economy, markets, and resulting risk positioning, we believe the Fund is appropriately positioned to generate compelling investment returns.  Our base case scenario assumes the economy avoids a deep recession, and markets will likely perform well over the medium-term. The Fund’s slight overweight to equities and credit sectors should perform well in a stable to improving economic environment. We believe the high conviction nature of the strategy should provide excess return through positive security selection in various economic environments.
The Fund is targeting a neutral risk position compared to the blended benchmark. Although near term recession risk has dropped, valuations have become stretched as the market anticipates rate cuts next year while inflation falls further.
Looking ahead, risks to strategy positioning are focused on the lagged effects of Fed tightening, tight credit conditions in bank lending, and the time horizon of how long rates will remain overly restrictive. Although recent data has been in line with expectations, overall growth is likely to continue at below-trend pace over coming quarters, with downside risk from the above factors. Inflation has declined from peak levels and is nearing the Fed’s target range. However, the Fed does not appear to believe the battle with inflation is over and they will likely lean hawkish until they are more confident on the lower trajectory. At current levels, we believe the biggest risk to markets is a sharper slowing in economic growth that would challenge the expectation of a soft landing. As our view of the economy and monetary policy changes, we will adjust positioning accordingly.
Sector positioning reflects generally expensive valuations, relative value, and opportunities within each sector.  During the period, the Fund reduced its exposure to equities slightly following strong performance within the sector.  The Fund ended the year with 63% invested in equities, a 3% overweight compared to the blended benchmark.
Within equities, the Fund remains overweight Communication Services, Health Care, and Financials.  The largest underweights are Utilities and Consumer Staples.  Although improving, our cautious economic outlook coupled with full valuations results in low risk levels within investment portfolios.  We believe valuations generally reflect a high probability of a soft landing with limited margin of safety at current levels, though there are still risks to the downside for the economy as policy remains restrictive and economic growth is set to slow. We are prioritizing high barrier to entry companies with high returns on capital and maintaining a defensive posture within the Fund.
5

 

Management's Discussion of Fund Performance (Unaudited) (Continued)
Within fixed income, the Fund remains underweight U.S. Government and Securitized while overweight Investment Grade Credit and Emerging Markets Debt. We are positioning slightly short duration compared to the blended benchmark as longer rates are now more fairly priced following the significant rally over the  fourth quarter of 2023. However, the market’s current expectations for rate cuts will likely shift with new economic data in 2024, which we expect will lead to volatility and present opportunities for tactical adjustments.
Comparison of the Change in Value of a $10,000 Investment in the Touchstone Balanced Fund Class I and the 60% S&P 500® Index & 40% Bloomberg U.S. Aggregate Bond Index
Average Annual Total Returns
Touchstone Balanced Fund 1 Year 5 Years 10 Years
Class I 18.61% 11.29% 7.80%
Class SC* 18.57% 11.29% 7.80%
60% S&P 500® Index & 40% Bloomberg U.S. Aggregate Bond Index 17.67% 9.98% 8.09%
* The chart above represents performance of Class I shares only, which will vary from the performance of Class SC shares based on the differences in fees paid by shareholders in the different classes. The inception date of Class SC shares was April 13, 2021. Class SC shares performance was calculated using the historical performance of Class I shares for the periods prior to April 13, 2021. The returns have been restated for fees applicable to Class SC shares.
Performance information does not reflect fees that are paid by the separate accounts through which shares of the Fund are sold. Inclusion of those fees would reduce figures for all periods.
Notes to Chart
S&P 500® Index is a group of 500 widely held stocks and is commonly regarded to be representative of the large capitalization stock universe.
Bloomberg U.S. Aggregate Bond Index is an unmanaged index comprised of U.S. investment grade, fixed rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and ten years.
6

 

Management's Discussion of Fund Performance (Unaudited)
Touchstone Bond Fund
Sub-Advised by Fort Washington Investment Advisors, Inc.
Investment Philosophy
The Touchstone Bond Fund (the “Fund”) seeks to provide as high a level of current income as is consistent with the preservation of capital. Capital appreciation is a secondary goal. Under normal circumstances, the Fund invests at least 80 percent of its assets in bonds. Bonds include mortgage-related securities, asset-backed securities, government securities (both U.S. Government and foreign sovereign debt) and corporate debt securities. The Fund primarily invests in investment-grade debt securities but may invest up to 30 percent of total assets in non-investment-grade debt securities rated as low as B by a Nationally Recognized Statistical Rating Organization (NRSRO).
Fund Performance
The Fund (Class I Shares) outperformed its benchmark, the Bloomberg U.S. Aggregate Bond Index, for the 12-month period ended December 31, 2023. The Fund’s total return was 6.07 percent, while the total return of the benchmark was 5.53 percent.
Market Environment
The 12 months ending December 31, 2023 were volatile and marked by high inflation, aggressive central bank tightening, banking panic, and geopolitical conflict. While the first three quarters of 2023 were focused on the number of rate hikes, the sentiment and outlook changed significantly in the fourth quarter as the market looked toward rate cuts. The end to the hiking cycle was ratified as core inflation came down gradually over the year, which, along with strong growth data, supported a ‘soft landing’ becoming the consensus opinion.
Entering 2023, many economists were anticipating a recession due to a slowdown in economic growth brought about by a restrictive Federal Reserve (“Fed”) that raised rates by 525 basis points (“bps”) since 2022. As a result, the 10-year Treasury rose over 100bps to about 5% and caused tighter financial conditions. In addition to higher rates, bank-lending standards tightened over the previous 12 months, which was exacerbated by the banking crisis in March. Risk assets briefly sold off and there were expectations for a pause in rate hikes until the government showed that it would backstop the financial system, if needed. In contrast to all these negative factors, and market expectations, the labor market was resilient over the year. Job gains continued and the unemployment rate remained range bound. This strong labor market, in addition to excess savings, facilitated consumer strength, which supported economic growth.
Consumer spending surprised many market participants to the upside. While a robust labor market and wage gains certainly helped drive consumption, many Americans built up excess savings following dovish fiscal policy during the pandemic. However, as savings are reduced by inflated prices and higher rates continue to affect larger purchases, such as homes and home furnishings, consumer spending habits are uncertain going forward. Additionally, even if consumers are willing to endure higher interest costs, they may be unable to borrow until banks ease lending standards.
Nevertheless, by the end of December market consensus was to avert a recession and for multiple rate cuts next year as inflation declines further. As a result, the longer part of the curve rallied and the 10-year ended below 4%, at 3.9%. Investment grade spreads (BBB Industrials) were range bound for most of the year until the late rally in the fourth quarter ending the year at the 26 percentile. High yield (single B corporates) tightened significantly and ended at its 10 percentile while equities followed suit and the S&P 500 ended within 1% of all-time highs.
Portfolio Review
Security selection was the largest contributor to performance during the period, driven by investment grade corporate and securitized allocations. The Fund’s holdings outperformed the benchmark as credit spreads tightened over the year and volatility performed well in the fourth quarter.
The Fund’s risk overweight positioning was a contributor to returns over the past year. The Fund’s risk budget target hovered at 40% for the majority of the period. 2023 was a volatile period but spreads were generally range bound around historical averages until a rally in the fourth quarter. The Fund’s overweight to investment grade credit and emerging markets debt were the primary contributors from an allocation perspective; however, the high yield credit default swap index position did detract from outperformance.
Duration and curve positioning were a slight detractor from performance. Rates were extremely volatile in 2023 as the economy was impacted by high inflation and restrictive monetary policy. The Fund was positioned long duration relative to the benchmark,
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Management's Discussion of Fund Performance (Unaudited) (Continued)
which hurt performance as rates rose, until the fourth quarter when rates declined meaningfully. However, duration positioning was tactically shifted short during the fourth quarter, which offset the positive contribution as rates continued to move lower.
During the past 12 months, the risk budget was initially 60% before quickly decreasing to 40% at the end of the reporting period. This reduction in risk appetite was due to changing macroeconomic factors and the Fed’s continued path of rate hikes. In general, credit spreads are in the 26-10 percentile relative to history, which shifts the risk/reward ratio to the downside.
The Fund maintained risk overweight positions in investment grade credit, securitized assets, and emerging markets debt. From an interest rate perspective, the Fund was biased long duration relative to the benchmark throughout most of the period. This shifted during the fourth quarter after rates declined and we believe long rates ended the period more fairly valued. The Fund ended fourth quarter positioned slightly short duration compared to the benchmark with an overweight to the intermediate part of the yield curve.
Overall, interest rate positioning of the Fund was a slight detractor over 2023. The Fund was biased long duration relative to the benchmark throughout most of the year, which detracted from performance as rates rose during the first nine months of 2023. However, rates came down meaningfully during the fourth quarter, which generated positive performance until duration positioning was shifted tactically short compared to the benchmark. This offset the positive contribution as rates continued to decline, resulting in a neutral impact for the fourth quarter.
The yield curve positioning of the Fund was a positive contributor to performance over the period. The Fund shifted its exposure to various parts of the curve over the course of the year, first benefitting from the curve flattening and, more recently, the curve steepening, which helped offset the total rate detraction. The curve flattened becoming more inverted as the Fed raised their Funds rate and then steepened over third quarter 2023 as the market priced in rates being higher for longer.
Outlook and Conclusion
From an absolute return perspective, we believe the return prospects for fixed income are attractive going forward. With the rise in interest rates across the yield curve, the yield offered by fixed income can now offer a buffer against price changes and, in the long-term, generate returns more consistent with historical averages for fixed income. The Fund’s positioning reflects our views and conviction of opportunities for overall risk appetite, sector relative value, and security selection.
The Fund is targeting a modest overweight to spread risk representing 40% of the risk budget. Credit spreads rallied in the fourth quarter from around historical averages and ended the year at the 26 and 10 percentiles, for investment grade and high yield, respectively. While recent economic data provides support for these levels, further upside is limited which is the basis for our modest risk overweight.
Sector positioning reflects generally expensive valuations, relative value, and opportunities within each sector. Allocations were generally unchanged over the year and primary risk exposures include:
The Fund remains overweight to investment grade credit. Within the allocation, the Fund is maintaining a risk overweight in sectors where compelling bottom-up opportunities exist such as utilities,  Real Estate Investment Trust ("REITs"), banks, health care, and media. Incremental changes will continue to consist of adding high quality, defensive positions as lower rated cyclicals are sold into strength.
Securitized products remain an overweight exposure relative to the benchmark. We continue to favor non-agency exposure and are positioned appropriately with overweight exposure to non-agency residential mortgage backed securities(“RMBS"), asset backed securities, and commercial mortgage backed securities (“CMBS”). We believe deep discount AAA-rated non-agency RMBS offers compelling value as does high-quality CMBS that has widened in concert with broader CMBS disruptions from distressed office properties across the sector.
The overweight allocation to emerging markets debt (“EMD”) was maintained. Throughout most of 2023, the high yield portion of the market offered better relative value while the investment grade portion remained expensive. EMD high yield spreads tightened over the fourth quarter but ended above median levels relative to history driven by continued cheapness in the lowest rated segments.
We believe bottom-up fundamental analysis within each sector will continue to present security selection opportunities for the Fund, which can add excess returns through different potential paths for the economy and markets.
As of the end of the reporting period, we are positioning the Fund slightly short duration relative to the benchmark with an overweight to the intermediate part of the yield curve. Positioning is also generally underweight long maturities relative to the index to benefit as the yield curve steepens. Following the significant rally in rates over the fourth quarter, we believe longer yields are now more fairly priced. However, the market’s current expectations for rate cuts will likely shift with new economic data in 2024, which we expect will lead to volatility and present opportunities for tactical adjustments.
8

 

Management's Discussion of Fund Performance (Unaudited) (Continued)
Looking ahead, risks to strategy positioning are focused on the lagged effects of Fed tightening, tight credit conditions in bank lending, and the time horizon of how long rates will remain restrictive. These factors could result in a significantly weaker economy and be a catalyst for wider credit spreads.
Although recent data has been in line with expectations, we believe overall growth is likely to continue at below-trend pace over coming quarters, with downside risk from the above factors. Inflation has declined from peak levels and is nearing the Fed’s target range. However, the Fed does not appear to believe the battle with inflation is over and they will likely lean hawkish until they are more confident on the lower trajectory. At current levels, the biggest risk to markets is a sharper slowing in economic growth that would challenge the expectation of a soft landing. As our view of the economy and monetary policy changes, we will adjust positioning accordingly.
We believe the Fund is positioned to perform well in a stable/improving environment for risk assets. As of the end of the reporting period, we are targeting using 40% of the risk budget. We believe valuations are generally a bit expensive given historical medians with risk/reward skewed to the downside. If conditions are stable to improving, the Fund is positioned well to benefit from the additional yield relative to the benchmark and small potential price appreciation if spreads grind tighter. If economic growth slows more than expected, the Fund is also in a position to add exposure opportunistically if risk assets experience weakness. Additionally, we believe positive security selection can benefit the Fund in many different market environments.
Comparison of the Change in Value of a $10,000 Investment in the Touchstone Bond Fund Class I and the Bloomberg U.S. Aggregate Bond Index
Average Annual Total Returns
Touchstone Bond Fund 1 Year 5 Years 10 Years
Class I 6.07% 1.82% 1.43%
Class SC* 5.77% 1.64% 1.19%
Bloomberg U.S. Aggregate Bond Index 5.53% 1.10% 1.81%
* The chart above represents performance of Class I shares only, which will vary from the performance of Class SC shares based on the differences in fees paid by shareholders in the different classes. The inception date of Class SC shares was July 10, 2019. Class SC shares performance was calculated using the historical performance of Class I shares for the periods prior to July 10, 2019. The returns have been restated for fees applicable to Class SC shares.
Performance information does not reflect fees that are paid by the separate accounts through which shares of the Fund are sold. Inclusion of those fees would reduce figures for all periods.
Note to Chart
Bloomberg U.S. Aggregate Bond Index is an unmanaged index comprised of U.S. investment grade, fixed rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and ten years.
9

 

Management's Discussion of Fund Performance (Unaudited)
Touchstone Common Stock Fund
Sub-Advised by Fort Washington Investment Advisors, Inc.
Investment Philosophy
The Touchstone Common Stock Fund (the “Fund”) seeks to provide investors with capital appreciation. The Fund invests at least 80 percent of its assets in large capitalization equity securities. The Fund’s sub-adviser, Fort Washington Investment Advisors, Inc., seeks to invest in companies that are trading below what is believed to be the estimate of the companies’ intrinsic value and have a sustainable competitive advantage or a high barrier to entry in place.
Fund Performance
The Fund (Class I Shares) outperformed its benchmark, the S&P 500® Index, for the 12-month period ended December 31, 2023. The Fund’s total return was 26.66 percent while the benchmark’s total return was 26.29 percent.
Market Environment
U.S. equities recorded positive returns in the first half of 2023 as rates pulled back, inflation readings came in lower than expected, and the labor market and consumer spending remained healthy. This was despite fears of a hard landing amid tightening financial conditions and a backdrop that included several large bank failures. U.S. equities were modestly lower in the third quarter. While earnings releases and corporate guidance generally exceeded expectations during the period, the significant rate move during the period provided a challenging backdrop for equities. The fourth quarter, however, brought a significant rebound as U.S. equities rallied to close out the period. The perceived Federal Reserve (“Fed”) pivot during the fourth quarter fueled a soft landing narrative for investors. The benchmark sectors that led the market higher during the period were Information Technology, Communication Services, and Consumer Discretionary. The Utilities sector was the worst performer for the index, followed by Energy, Consumer Staples, and Health Care.
Portfolio Review
Sectors in which the Fund outperformed the benchmark include Communication Services, Real Estate, Consumer Discretionary, Consumer Staples, and Materials. Sectors where the Fund underperformed were Information Technology, Energy, Financials, Industrials, and Health Care. Sector allocation contributed to performance for the period primarily due to the overweight to Communication Services and the underweight to Utilities.
The three stocks that contributed most to performance were Meta Platforms Inc. (“Meta”) (Communication Services sector), Salesforce Inc. (“Salesforce”) (Information Technology sector), and Microsoft Corp. (“Microsoft”) (Information Technology sector).
Meta’s stock did well due to continued strong performance of the business. Revenue growth is driven by strong consumer engagement with Meta’s services. Reels continues to grow at high rates driving incremental engagement and monetization opportunities across Instagram and Facebook. Management’s 2024 outlook suggests continued discipline in operating expenses, leading to higher expectations for operating margins. Salesforce’s shares outperformed due to stronger than expected growth in new bookings coupled with continued improvement in operating margins. Management indicated continued improvement in margins going forward, including contributions from a material increase in sales productivity. Microsoft’s stock benefited from stronger than expected growth in cloud revenues, including contributions from new artificial intelligence (“AI”) services. We continue to view the company is well positioned to deliver strong revenue growth over time as a result of its competitive positions in cloud infrastructure and AI services.
The three stocks that detracted the most from performance were Johnson & Johnson, BioMarin Pharmaceutical Inc. (“Biomarin”), and Bristol-Myers Squibb Company (“Bristol-Meyers Squibb”)  (all Health Care sector).
Healthcare as a whole underperformed in the period, with defensive names like Johnson & Johnson lagging amidst excitement about the new category of weight loss drugs. In addition, headlines around the company’s court proceedings with talc litigation continued to serve as an overhang for the shares during the period. Biomarin shares underperformed during the period. The company is in the process of launching two potential blockbuster drugs -- Voxzogo for Achondroplasia and Roctavian for Hemophilia A gene therapy. Shares experienced weakness throughout the year based on a few items. Early in the year, a potential Voxzogo competitor published phase 2 data that looked very good, though the numbers were small, and the product is a few years away from approval even if things go smoothly. Also in the first quarter, the U.S. Food and Drug Administration (“FDA”) pushed back the action date on Roctavian’s application by 90 days. Biomarin had said many times this was a likely outcome after the company provided additional phase 3 data but of course, an early approval would have been better. Additionally, Roctavian’s launch in Europe was slower than hoped, due to reimbursement negotiations. Also, there was disappointment regarding certain aspects of
10

 

Management's Discussion of Fund Performance (Unaudited) (Continued)
the detailed prescribing information when the FDA approved Roctavian, on June 29. We continue to see good risk-reward for the shares, taking into account these recent developments. Bristol-Myers Squibb shares underperformed along with other pharmaceutical stocks in a market that favored growth stocks over value. The company has launched several high-potential products over the last few years, and they are especially important given the company’s need to refresh its commercial portfolio as it faces significant patent expirations over the next several years. While we do not think these products will fully “fill the hole” from patent expirations, we do not see that as a strategic imperative, and believe the business as it stands is undervalued.
As the period came to a close, the strategy had an overweight in the Communication Services, Health Care, and Financials sectors and an underweight in the Consumer Staples, Consumer Discretionary, Information Technology, Real Estate, Energy, and Industrials sectors. The weight in the Materials sector was roughly in line with that of the index. The Fund held no positions in the Utilities sector.
During the period, the Fund added Stanley Black & Decker Inc. (Industrials sector), International Flavors & Fragrances Inc. (Materials sector), and The Charles Schwab Corp. (Financials sector) to the portfolio and removed Deere & Co. (Industrials sector), Fox Corp. (Communication Services sector), and AT&T Inc. (Communication Services sector) from the portfolio.
Outlook and Conclusion
Looking ahead, we continue to question whether a hard landing is still to come. Soft landings are typically preceded by the easing of lending standards while the tightening of lending standards precedes hard landings. We continue to believe bank-lending standards will stay tight in the coming quarters. As a result, we expect to see additional downside risk to growth and believe the path for a soft landing remains narrow mainly due to the lag effects of higher interest rates. Consistent with our approach over the past couple of years, we have maintained a high-quality portfolio with a focus on higher return on capital and higher barrier-to-entry businesses with pricing power. We continue to be alert for signals that would warrant a risk-on shift, but we believe, at this point, our high-quality posture will benefit the portfolio going forward.
Comparison of the Change in Value of a $10,000 Investment in the Touchstone Common Stock Fund Class I and the S&P 500® Index
Average Annual Total Returns
Touchstone Common Stock Fund 1 Year 5 Years 10 Years
Class I 26.66% 16.22% 11.29%
Class SC* 26.35% 15.98% 10.99%
S&P 500® Index 26.29% 15.69% 12.03%
* The chart above represents performance of Class I shares only, which will vary from the performance of Class SC shares based on the differences in fees paid by shareholders in the different classes. The inception date of Class SC shares was July 10, 2019. Class SC shares performance was calculated using the historical performance of Class I shares for the periods prior to July 10, 2019. The returns have been restated for fees applicable to Class SC shares.
Performance information does not reflect fees that are paid by the separate accounts through which shares of the Fund are sold. Inclusion of those fees would reduce figures for all periods.
Note to Chart
S&P 500® Index is a group of 500 widely held stocks and is commonly regarded to be representative of the large capitalization stock universe.
11

 

Management's Discussion of Fund Performance (Unaudited)
Touchstone Small Company Fund
Sub-Advised by Fort Washington Investment Advisors, Inc.
Investment Philosophy
The Touchstone Small Company Fund (the “Fund”) seeks to provide investors with growth of capital by investing primarily in common stocks of small companies that the sub-adviser believes are high quality, have superior business models, solid management teams, sustainable growth potential and are attractively valued.
Fund Performance
The Fund (Class I Shares) underperformed its benchmark, the Russell 2000® Index, for the 12-month period ended December 31, 2023. The Fund’s total return was 16.60 percent while the return of the benchmark was 16.93 percent.
Market Environment
Economic growth in 2023 was resilient with Real gross domestic product ("GDP") accelerating from 1.7% in the first quarter to 2.9% in the third quarter and Nominal GDP growing 6%. Despite resilient economic growth, small cap earnings expectations have been under pressure for 18 months. In fact, small caps experienced an earnings recession in 2023 with earnings down 15% from inflated 2022 levels. Earnings were inflated due to excessive fiscal and monetary stimulus driving demand and spending well above long-term trend.
Portfolio Review
The Fund’s performance was driven by negative stock selection within Health Care and Materials sectors.  This was partially offset by positive stock selection within Industrials and Communications Services.
The Fund’s top five positive contributors were Onto Innovation Inc., TopBuild Corp., CarGurus, Inc., ITT Inc., and Crane Company. The portfolio’s five largest detractors were Leslie’s Inc., Premier, Inc., Veradigm Inc., Digi International Inc., and WNS Holdings Ltd.
At the end of the period, the Fund was overweight in the following sectors relative to the benchmark: Industrials, Information Technology, Consumer Discretionary, Real Estate, and Communications Services. At the end of the period, the Fund was underweight Financials and Energy, and approximately in-line with the benchmark’s weight in Health Care.  The Fund held no positions within the Consumer Staples and Utilities sectors.
Outlook and Conclusion
We expect economic growth to decelerate but remain positive over the intermediate term. We believe 2024 small cap earnings expectations for 9% growth is optimistic, but we are closer to earnings expectations normalizing than 18 months ago. Inflationary pressures and interest rates moderated, but the absolute level of prices and rates appear restrictive to growth and corporate earnings.
Small cap valuations have expanded from a trough of 11 times to 14 times, but these levels are still a discount to the 16 times average over the last 25 years. Small cap valuations relative to large cap at 0.7 times remain near 25-year lows and small caps as a total of U.S. market capitalization are near a record low of 4% compared to the 7% long-term average. We believe the low relative valuation and percentage of market capitalization creates a favorable risk/return dynamic for small caps for investors with a long-term investment horizon.
As we look forward, we believe modest economic growth, stabilizing earnings expectations, and undemanding relative valuations are constructive to support positive small cap returns in 2024.
12

 

Management's Discussion of Fund Performance (Unaudited) (Continued)
Comparison of the Change in Value of a $10,000 Investment in the Touchstone Small Company Fund Class I and the Russell 2000® Index
Average Annual Total Returns
Touchstone Small Company Fund 1 Year 5 Years 10 Years
Class I 16.60% 12.29% 9.49%
Russell 2000® Index 16.93% 9.97% 7.16%
The inception date of the Fund was November 30, 2000.
Performance information does not reflect fees that are paid by the separate accounts through which shares of the Fund are sold. Inclusion of those fees would reduce figures for all periods.
Notes to Chart
Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe.
The Frank Russell Company (FRC) is the source and owner of the Russell 2000® Index data contained or reflected in this material and all trademarks and copyrights related thereto. The material may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is a Touchstone Investments presentation of the data, and FRC is not responsible for the formatting or configuration of this material or for any inaccuracy in the presentation thereof.
13

 

Tabular Presentation of Portfolios of Investments (Unaudited)
December 31, 2023
The tables below provide each Fund’s sector allocation and/or credit quality. We hope it will be useful to shareholders as it summarizes key information about each Fund’s investments.
Touchstone Balanced Fund

Credit Quality*(% of Fixed Income Securities)
AAA/Aaa 46.7%
AA/Aa 4.9
A/A 15.4
BBB/Baa 33.0
Total 100.0%
Sector Allocation**(% of Net Assets)
Common Stocks  
Information Technology 17.5%
Health Care 9.7
Financials 9.7
Communication Services 8.9
Consumer Discretionary 5.7
Industrials 5.3
Consumer Staples 2.4
Energy 2.0
Materials 1.6
Real Estate 0.7
Corporate Bonds 18.3
U.S. Treasury Obligations 8.2
Commercial Mortgage-Backed Securities 4.1
U.S. Government Mortgage-Backed Obligations 3.9
Exchange-Traded Fund 1.0
Sovereign Government Obligations 0.2
Short-Term Investment Fund 0.9
Other Assets/Liabilities (Net) (0.1)
Total 100.0%
Touchstone Bond Fund

Credit Quality*(% of Fixed Income Securities)
AAA/Aaa 38.0%
AA/Aa 9.3
A/A 13.9
BBB/Baa 31.6
BB/Ba 0.3
B/B 0.6
CC 0.2
Not Rated 3.2
Cash Equivalents 2.9
Total 100.0%
Touchstone Common Stock Fund

Sector Allocation**(% of Net Assets)
Information Technology 27.4%
Health Care 15.5
Financials 15.3
Communication Services 13.3
Consumer Discretionary 9.0
Industrials 8.3
Consumer Staples 4.0
Energy 3.2
Materials 2.6
Real Estate 1.2
Short-Term Investment Fund 0.3
Other Assets/Liabilities (Net) (0.1)
Total 100.0%
 
* Credit quality ratings are from S&P Global Ratings ("S&P") and Moody's Investors Service (“Moody's”). If agency ratings differ, the higher rating will be used. Where no rating has been assigned, it may be for reasons unrelated to the creditworthiness of the issuer.
** Sector classifications are based upon the Global Industry Classification Standard (GICS®).
14

 

Tabular Presentation of Portfolios of Investments (Unaudited) (Continued)
Touchstone Small Company Fund

Sector Allocation*(% of Net Assets)
Industrials 22.6%
Information Technology 18.2
Health Care 15.8
Consumer Discretionary 14.0
Financials 9.7
Real Estate 8.1
Materials 3.7
Communication Services 3.2
Energy 3.0
Short-Term Investment Fund 1.9
Other Assets/Liabilities (Net) (0.2)
Total 100.0%
* Sector classifications are based upon the Global Industry Classification Standard (GICS®).
15

 

Portfolio of Investments
Touchstone Balanced Fund – December 31, 2023
Shares       Market
Value
  Common Stocks — 63.5%  
  Information Technology — 17.5%  
   13,185 Apple, Inc. $ 2,538,508
    3,115 International Business Machines Corp.    509,458
    8,512 Microsoft Corp.  3,200,853
    6,666 Oracle Corp.    702,796
    2,949 Salesforce, Inc.*    776,000
    3,574 Texas Instruments, Inc.    609,224
    1,952 Workday, Inc. - Class A*    538,869
         8,875,708
  Health Care — 9.7%  
    5,781 BioMarin Pharmaceutical, Inc.*    557,404
    8,935 Bristol-Myers Squibb Co.    458,455
    2,980 Cencora, Inc.    612,032
    2,722 HCA Healthcare, Inc.    736,791
    5,818 Johnson & Johnson    911,913
    7,902 Medtronic PLC    650,967
    1,942 UnitedHealth Group, Inc.  1,022,405
         4,949,967
  Financials — 9.7%  
   21,793 Bank of America Corp.    733,770
    4,048 Berkshire Hathaway, Inc. - Class B*  1,443,760
    4,353 Charles Schwab Corp. (The)    299,486
    2,140 Goldman Sachs Group, Inc. (The)    825,548
      384 Markel Group, Inc.*    545,242
    4,138 PayPal Holdings, Inc.*    254,114
    3,219 Visa, Inc. - Class A    838,067
         4,939,987
  Communication Services — 8.9%  
   13,038 Alphabet, Inc. - Class C*  1,837,445
   11,777 Comcast Corp. - Class A    516,422
    4,324 Meta Platforms, Inc. - Class A*  1,530,523
      767 Netflix, Inc.*    373,437
    2,667 Walt Disney Co. (The)    240,803
         4,498,630
  Consumer Discretionary — 5.7%  
    2,567 Airbnb, Inc. - Class A*    349,471
    2,136 Alibaba Group Holding Ltd. (China) ADR    165,561
   10,639 Amazon.com, Inc.*  1,616,490
    2,381 Hilton Worldwide Holdings, Inc.    433,556
    3,659 Starbucks Corp.    351,301
         2,916,379
  Industrials — 5.3%  
    2,270 Boeing Co. (The)*    591,698
      856 FedEx Corp.    216,542
    1,161 Hubbell, Inc.    381,888
    6,347 RTX Corp.    534,037
    9,216 Southwest Airlines Co.    266,158
    6,422 SS&C Technologies Holdings, Inc.    392,448
    3,335 Stanley Black & Decker, Inc.    327,164
         2,709,935
  Consumer Staples — 2.4%  
   10,705 Monster Beverage Corp.*    616,715
    6,538 Philip Morris International, Inc.    615,095
         1,231,810
  Energy — 2.0%  
    7,488 Exxon Mobil Corp.    748,650
    4,923 Schlumberger NV    256,193
         1,004,843
Shares       Market
Value
     
  Materials — 1.6%  
    6,663 DuPont de Nemours, Inc. $   512,585
    3,906 International Flavors & Fragrances, Inc.    316,269
           828,854
  Real Estate — 0.7%  
    1,833 Jones Lang LaSalle, Inc.*    346,199
  Total Common Stocks $32,302,312
Principal
Amount
       
  Corporate Bonds — 18.3%  
  Financials — 5.0%  
$  150,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust (Ireland), 2.450%, 10/29/26    138,903
   114,000 American Express Co., 5.282%, 7/27/29    116,482
   107,000 American Tower Corp. REIT, 5.900%, 11/15/33    113,507
   112,000 Ares Capital Corp., 3.250%, 7/15/25    107,162
    81,000 Bank of America Corp., 2.687%, 4/22/32     68,514
    82,000 Bank of America Corp., 3.705%, 4/24/28     78,366
    94,000 Bank of Montreal (Canada), 3.803%, 12/15/32     86,534
    80,000 Bank of New York Mellon Corp. (The), 5.834%, 10/25/33     84,942
    70,000 Berkshire Hathaway Finance Corp., 4.250%, 1/15/49     65,475
    54,000 Capital One Financial Corp., 7.149%, 10/29/27     56,084
    77,000 Citigroup, Inc., 3.200%, 10/21/26     73,480
    60,000 Citigroup, Inc., 6.174%, 5/25/34     62,198
   112,000 Corestates Capital III, 144a, (TSFR3M + 0.832%), 6.211%, 2/15/27(A)    106,682
   122,000 Goldman Sachs Group, Inc. (The), 2.615%, 4/22/32    102,585
    55,000 Goldman Sachs Group, Inc. (The), 3.691%, 6/5/28     52,587
    41,000 Huntington Bancshares, Inc., 2.550%, 2/4/30     35,129
   128,000 JPMorgan Chase & Co., 2.956%, 5/13/31    112,661
   100,000 JPMorgan Chase & Co., 3.509%, 1/23/29     94,851
   112,000 Mastercard, Inc., 2.000%, 11/18/31     94,631
   109,000 Morgan Stanley, 3.950%, 4/23/27    105,867
    66,000 Morgan Stanley, 5.297%, 4/20/37     64,345
    74,000 New York Life Global Funding, 144a, 4.550%, 1/28/33     73,085
    76,000 Northern Trust Corp., 6.125%, 11/2/32     81,756
   113,000 Northwestern Mutual Life Insurance Co. (The), 144a, 3.850%, 9/30/47     90,798
   117,000 PNC Capital Trust, (TSFR3M + 0.832%), 6.209%, 6/1/28(A)    108,837
    98,000 Royal Bank of Canada (Canada), MTN, 5.200%, 8/1/28    100,055
   185,000 Truist Bank, Ser A, (TSFR3M + 0.932%), 6.311%, 5/15/27(A)    173,820
   68,000 US Bancorp, 4.967%, 7/22/33     64,570
         2,513,906
  Consumer Discretionary — 2.0%  
   101,000 7-Eleven, Inc., 144a, 1.800%, 2/10/31     82,208
    88,000 BAT Capital Corp. (United Kingdom), 3.557%, 8/15/27     84,033
    89,000 Brunswick Corp., 4.400%, 9/15/32     81,258
    55,000 Delta Air Lines, Inc. / SkyMiles IP Ltd., 144a, 4.750%, 10/20/28     54,108
   105,000 General Motors Financial Co., Inc., 3.100%, 1/12/32     89,549
    56,000 General Motors Financial Co., Inc., 5.650%, 1/17/29     57,412
    59,000 Home Depot, Inc. (The), 5.950%, 4/1/41     66,154
   113,000 Lowe's Cos., Inc., 4.500%, 4/15/30    112,503
    52,000 Mattel, Inc., 5.450%, 11/1/41     46,586
   110,000 Toll Brothers Finance Corp., 3.800%, 11/1/29    103,176
   118,000 Toyota Motor Corp. (Japan), 5.118%, 7/13/28    122,178
  104,000 Warnermedia Holdings, Inc., 5.141%, 3/15/52     89,737
           988,902
  Industrials — 1.7%  
  100,000 Amcor Flexibles North America, Inc., 2.630%, 6/19/30      86,652
 
16

 

Touchstone Balanced Fund (Continued)
Principal
Amount
      MarketValue
  Corporate Bonds — 18.3% (Continued)  
  Industrials — 1.7% (Continued)  
$   53,000 Boeing Co. (The), 5.805%, 5/1/50 $    55,105
    83,000 Burlington Northern Santa Fe LLC, 5.750%, 5/1/40     90,570
    54,000 Carrier Global Corp., 3.577%, 4/5/50     42,278
    94,000 FedEx Corp., 5.100%, 1/15/44     91,357
    99,000 John Deere Capital Corp., MTN, 2.450%, 1/9/30     88,840
    81,000 Norfolk Southern Corp., 4.837%, 10/1/41     78,274
    71,000 Roper Technologies, Inc., 2.950%, 9/15/29     65,129
   114,000 Waste Management, Inc., 4.875%, 2/15/34    116,494
    52,000 WestRock MWV LLC, 8.200%, 1/15/30     59,957
  117,000 Xylem, Inc., 1.950%, 1/30/28    105,826
           880,482
  Health Care — 1.7%  
    84,000 AbbVie, Inc., 4.450%, 5/14/46     77,389
    90,000 Amgen, Inc., 5.150%, 3/2/28     92,076
    67,000 Becton Dickinson & Co., 4.685%, 12/15/44     62,824
    86,000 CommonSpirit Health, 4.187%, 10/1/49     72,766
    73,000 CVS Health Corp., 5.125%, 7/20/45     69,284
   104,000 DH Europe Finance II Sarl, 3.250%, 11/15/39     86,548
    72,000 Elevance Health, Inc., 4.750%, 2/15/33     72,119
    88,000 HCA, Inc., 5.375%, 9/1/26     88,451
    72,000 Thermo Fisher Scientific, Inc., 5.404%, 8/10/43     76,370
   107,000 UnitedHealth Group, Inc., 3.500%, 8/15/39     91,214
  100,000 Viatris, Inc., 2.700%, 6/22/30     84,613
           873,654
  Utilities — 1.7%  
   127,000 CMS Energy Corp., 4.750%, 6/1/50    114,672
    74,000 Duke Energy Progress LLC, 4.150%, 12/1/44     63,189
    72,000 Edison International, 4.125%, 3/15/28     69,574
    98,000 FirstEnergy Transmission LLC, 144a, 5.450%, 7/15/44     94,979
   107,000 NextEra Energy Capital Holdings, Inc., (TSFR3M + 2.329%), 7.659%, 10/1/66(A)     96,804
   104,000 Ohio Power Co., Ser R, 2.900%, 10/1/51     70,756
   126,000 Pacific Gas and Electric Co., 3.500%, 8/1/50     87,296
    89,000 PacifiCorp., 5.750%, 4/1/37     91,149
  183,000 WEC Energy Group, Inc., (TSFR3M + 2.374%), 7.754%, 5/15/67(A)    163,694
           852,113
  Information Technology — 1.6%  
   107,000 Apple, Inc., 4.650%, 2/23/46    105,879
   116,000 Broadcom, Inc., 4.150%, 11/15/30    110,961
   105,000 Marvell Technology, Inc., 2.950%, 4/15/31     91,905
   112,000 Microchip Technology, Inc., 0.983%, 9/1/24    108,512
    54,000 Micron Technology, Inc., 2.703%, 4/15/32     45,425
    20,000 Micron Technology, Inc., 6.750%, 11/1/29     21,637
   138,000 Microsoft Corp., 2.525%, 6/1/50     94,692
    46,000 Oracle Corp., 2.650%, 7/15/26     43,637
    32,000 Oracle Corp., 3.600%, 4/1/40     25,616
    24,000 Oracle Corp., 4.300%, 7/8/34     22,471
    65,000 Visa, Inc., 4.150%, 12/14/35     63,788
   71,000 VMware LLC, 1.400%, 8/15/26     64,975
           799,498
  Energy — 1.2%  
    28,000 Cenovus Energy, Inc. (Canada), 5.250%, 6/15/37     26,493
   112,000 Cheniere Energy, Inc., 4.625%, 10/15/28    109,196
    60,000 Continental Resources, Inc., 144a, 5.750%, 1/15/31     59,651
   106,000 DCP Midstream Operating LP, 144a, 6.750%, 9/15/37    116,551
    95,000 Midwest Connector Capital Co. LLC, 144a, 4.625%, 4/1/29     91,556
    67,000 MPLX LP, 4.950%, 3/14/52     59,836
   81,000 NGPL PipeCo LLC, 144a, 7.768%, 12/15/37      90,091
Principal
Amount
      MarketValue
     
  Energy — 1.2% (Continued)  
$   47,000 Occidental Petroleum Corp., 7.950%, 6/15/39 $    54,755
   20,000 Sabine Pass Liquefaction LLC, 5.000%, 3/15/27     20,094
           628,223
  Consumer Staples — 1.2%  
    63,000 Anheuser-Busch Cos. LLC / Anheuser-Busch InBev Worldwide, Inc. (Belgium), 4.900%, 2/1/46     61,790
    50,000 J M Smucker Co. (The), 6.500%, 11/15/53     57,933
    86,000 JBS USA LUX SA / JBS USA Food Co. / JBS USA Finance, Inc., 2.500%, 1/15/27     79,195
    33,000 JBS USA LUX SA / JBS USA Food Co. / JBS USA Finance, Inc., 4.375%, 2/2/52     24,574
    64,000 Kroger Co. (The), 5.000%, 4/15/42     60,181
    96,000 Mars, Inc., 144a, 3.875%, 4/1/39     84,368
    55,000 PepsiCo, Inc., 1.625%, 5/1/30     46,916
   125,000 Philip Morris International, Inc., 5.375%, 2/15/33    128,353
   65,000 Starbucks Corp., 3.350%, 3/12/50     48,719
           592,029
  Real Estate — 1.1%  
   100,000 Crown Castle International Corp. REIT, 3.650%, 9/1/27     95,124
   122,000 Host Hotels & Resorts LP REIT, Ser F, 4.500%, 2/1/26    119,671
    94,000 Invitation Homes Operating Partnership LP REIT, 4.150%, 4/15/32     86,552
    47,000 Kilroy Realty LP REIT, 3.050%, 2/15/30     39,989
    74,000 Sabra Health Care LP REIT, 5.125%, 8/15/26     72,701
    58,000 SBA Tower Trust REIT, 144a, 6.599%, 1/15/28     59,652
    46,000 STORE Capital Corp. REIT, 2.700%, 12/1/31     34,903
     8,000 STORE Capital Corp. REIT, 2.750%, 11/18/30      6,290
   63,000 STORE Capital Corp. REIT, 4.625%, 3/15/29     58,257
           573,139
  Communication Services — 0.8%  
    54,000 AT&T, Inc., 4.500%, 5/15/35     51,256
    60,000 Charter Communications Operating LLC / Charter Communications Operating Capital, 6.484%, 10/23/45     59,158
    74,000 Comcast Corp., 4.000%, 3/1/48     62,364
    28,000 Paramount Global, 4.200%, 5/19/32     25,054
   118,000 T-Mobile USA, Inc., 3.875%, 4/15/30    111,994
    42,000 T-Mobile USA, Inc., 5.750%, 1/15/54     44,632
   98,000 Verizon Communications, Inc., 2.987%, 10/30/56     65,087
           419,545
  Materials — 0.3%  
    90,000 Celanese US Holdings LLC, 6.165%, 7/15/27     92,279
   83,000 Sherwin-Williams Co. (The), 4.500%, 6/1/47     76,255
           168,534
  Total Corporate Bonds  $9,290,025
  U.S. Treasury Obligations — 8.2%
    50,000 U.S. Treasury Bond, 3.625%, 5/15/53         46,453
   505,000 U.S. Treasury Bond, 4.000%, 11/15/42        492,572
   109,000 U.S. Treasury Bond, 4.000%, 11/15/52        108,051
   272,000 U.S. Treasury Note, 3.625%, 5/31/28        269,354
1,180,000 U.S. Treasury Note, 4.000%, 2/29/28      1,184,840
1,035,000 U.S. Treasury Note, 4.375%, 11/30/28      1,060,147
1,000,000 U.S. Treasury Note, 4.875%, 11/30/25      1,010,586
  Total U.S. Treasury Obligations  $4,172,003
  Commercial Mortgage-Backed Securities — 4.1%
    60,000 BANK, Ser 2020-BN26, Class A4, 2.403%, 3/15/63         51,126
   145,000 BANK, Ser 2021-BN36, Class A5, 2.470%, 9/15/64        121,742
   280,000 BANK, Ser 2021-BN37, Class A5, 2.618%, 11/15/64(A)(B)        235,609
   75,000 BANK, Ser 2022-BNK39, Class A4, 2.928%, 2/15/55(A)(B)          64,723
 
17

 

Touchstone Balanced Fund (Continued)
Principal
Amount
      MarketValue
  Commercial Mortgage-Backed Securities — 4.1% (Continued)
$   55,000 BBCMS Mortgage Trust, Ser 2021-C11, Class A5, 2.322%, 9/15/54     $    45,760
   165,000 BBCMS Mortgage Trust, Ser 2021-C12, Class A5, 2.689%, 11/15/54        140,448
    45,000 BBCMS Mortgage Trust, Ser 2022-C14, Class A5, 2.946%, 2/15/55(A)(B)         38,827
   140,000 BBCMS Mortgage Trust, Ser 2022-C16, Class A5, 4.600%, 6/15/55(A)(B)        136,314
   160,000 Benchmark Mortgage Trust, Ser 2018-B8, Class A5, 4.232%, 1/15/52        151,091
   255,000 Citigroup Commercial Mortgage Trust, Ser 2020-GC46, Class A5, 2.717%, 2/15/53        220,140
    80,000 COMM Mortgage Trust, Ser 2015-DC1, Class A5, 3.350%, 2/10/48         77,540
    80,000 GS Mortgage Securities Trust, Ser 2020-GC47, Class A5, 2.377%, 5/12/53         67,465
   235,000 JP Morgan Chase Commercial Mortgage Securities Trust, Ser 2016-JP2, Class A4, 2.822%, 8/15/49        218,779
   170,000 JP Morgan Chase Commercial Mortgage Securities Trust, Ser 2017-JP7, Class A5, 3.454%, 9/15/50        156,500
    75,000 Morgan Stanley Capital I Trust, Ser 2018-H3, Class A5, 4.177%, 7/15/51         71,076
   170,000 Wells Fargo Commercial Mortgage Trust, Ser 2019-C51, Class A4, 3.311%, 6/15/52        152,083
  145,000 Wells Fargo Commercial Mortgage Trust, Ser 2019-C53, Class A4, 3.040%, 10/15/52        129,912
  Total Commercial Mortgage-Backed Securities  $2,079,135
  U.S. Government Mortgage-Backed Obligations — 3.9%
    95,258 FHLMC, Pool #G05624, 4.500%, 9/1/39         95,347
    62,470 FHLMC, Pool #Q29260, 4.000%, 10/1/44         60,432
   289,576 FHLMC REMIC, Pool #QE9228, 4.500%, 9/1/52        281,095
   294,916 FHLMC REMIC, Pool #SD1436, 4.500%, 8/1/52        286,278
   285,454 FHLMC REMIC, Pool #SD1515, 4.500%, 8/1/52        277,093
   281,659 FHLMC REMIC, Pool #SD1620, 5.000%, 9/1/52        279,079
   295,982 FHLMC REMIC, Pool #SD1638, 5.000%, 9/1/52        293,831
    38,248 FNMA, Pool #725423, 5.500%, 5/1/34         39,419
    34,393 FNMA, Pool #725610, 5.500%, 7/1/34         35,446
     7,788 FNMA, Pool #890310, 4.500%, 12/1/40          7,787
    26,734 FNMA, Pool #AD9193, 5.000%, 9/1/40         27,196
  283,992 FNMA, Pool #FS2906, 5.000%, 9/1/52        281,982
  Total U.S. Government Mortgage-Backed Obligations  $1,964,985
Shares        
  Exchange-Traded Fund — 1.0%  
    5,777 iShares J.P. Morgan USD Emerging Markets Bond ETF    514,500
Principal
Amount
       
  Sovereign Government Obligations — 0.2%
$  146,000 Peruvian Government International Bond, 2.780%, 12/1/60     90,885
Shares       MarketValue
  Short-Term Investment Fund — 0.9%  
  467,587 Dreyfus Government Cash Management, Institutional Shares, 5.25%∞Ω $   467,587
  Total Investment Securities—100.1%
(Cost $42,063,888)
$50,881,432
  Liabilities in Excess of Other Assets — (0.1%)    (26,996)
  Net Assets — 100.0% $50,854,436
(A) Variable rate security - Rate reflected is the rate in effect as of December 31, 2023.
(B) Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description.
* Non-income producing security.
Open-End Fund.
Ω Represents the 7-Day SEC yield as of December 31, 2023.
Portfolio Abbreviations:
ADR – American Depositary Receipt
DAC – Designated Activity Company
ETF – Exchange-Traded Fund
FHLMC – Federal Home Loan Mortgage Corporation
FNMA – Federal National Mortgage Association
LLC – Limited Liability Company
LP – Limited Partnership
MTN – Medium Term Note
PLC – Public Limited Company
REIT – Real Estate Investment Trust
REMIC – Real Estate Mortgage Investment Conduit
TSFR3M – Three Month Term Secured Overnight Financing Rate
USD – United States Dollar
144a - This is a restricted security that was sold in a transaction qualifying for the exemption under Rule 144a of the Securities Act of 1933. This security may be sold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2023, these securities were valued at $1,003,729 or 2.0% of net assets. These securities were deemed liquid pursuant to procedures approved by the Board of Trustees.
Other Information:
The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the security valuation section in the accompanying Notes to Financial Statements.
Valuation Inputs at Reporting Date:
Description Level 1 Level 2 Level 3 Total
Common Stocks $32,302,312 $$— $32,302,312
Corporate Bonds 9,290,025 9,290,025
U.S. Treasury Obligations 4,172,003 4,172,003
Commercial Mortgage-Backed Securities 2,079,135 2,079,135
U.S. Government Mortgage-Backed Obligations 1,964,985 1,964,985
Exchange-Traded Fund 514,500 514,500
Sovereign Government Obligations 90,885 90,885
Short-Term Investment Fund 467,587 467,587
Total $33,284,399 $17,597,033 $— $50,881,432
See accompanying Notes to Financial Statements.
 
18

 

Portfolio of Investments
Touchstone Bond Fund – December 31, 2023
Principal
Amount
      Market
Value
  Corporate Bonds — 43.0%  
  Financials — 11.7%  
$  269,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust (Ireland), 2.450%, 10/29/26 $   249,099
   239,000 American Express Co., 5.282%, 7/27/29    244,203
   285,000 American Tower Corp. REIT, 5.900%, 11/15/33    302,332
   191,000 Ares Capital Corp., 3.250%, 7/15/25    182,750
   135,000 Bank of America Corp., 2.687%, 4/22/32    114,191
   169,000 Bank of America Corp., 3.705%, 4/24/28    161,510
   226,000 Bank of Montreal (Canada), 3.803%, 12/15/32    208,050
   206,000 Bank of New York Mellon Corp. (The), 5.834%, 10/25/33    218,726
   333,000 Bank of Nova Scotia (The) (Canada), 3.625%, 10/27/81    255,711
   254,000 Barclays PLC (United Kingdom), 2.894%, 11/24/32    208,544
   119,000 Berkshire Hathaway Finance Corp., 4.250%, 1/15/49    111,307
   110,000 Capital One Financial Corp., 7.149%, 10/29/27    114,246
   152,000 Citigroup, Inc., 3.200%, 10/21/26    145,052
   122,000 Citigroup, Inc., 6.174%, 5/25/34    126,468
   212,000 Citizens Bank NA, 4.575%, 8/9/28    201,419
   214,000 Cooperatieve Rabobank UA (Netherlands), 144a, 1.106%, 2/24/27    196,021
   236,000 Corestates Capital III, 144a, (TSFR3M + 0.832%), 6.211%, 2/15/27(A)    224,795
   237,000 Goldman Sachs Group, Inc. (The), 2.615%, 4/22/32    199,283
   123,000 Goldman Sachs Group, Inc. (The), 3.691%, 6/5/28    117,603
    86,000 Huntington Bancshares, Inc., 2.550%, 2/4/30     73,686
   173,000 JPMorgan Chase & Co., 2.956%, 5/13/31    152,268
   226,000 JPMorgan Chase & Co., 3.509%, 1/23/29    214,363
   252,000 Mastercard, Inc., 2.000%, 11/18/31    212,921
   210,000 Morgan Stanley, 3.950%, 4/23/27    203,963
   170,000 Morgan Stanley, 5.297%, 4/20/37    165,736
   185,000 New York Life Global Funding, 144a, 4.550%, 1/28/33    182,711
   200,000 Northern Trust Corp., 6.125%, 11/2/32    215,148
   266,000 Northwestern Mutual Life Insurance Co. (The), 144a, 3.850%, 9/30/47    213,738
   293,000 PNC Capital Trust, (TSFR3M + 0.832%), 6.209%, 6/1/28(A)    272,559
   204,000 Royal Bank of Canada (Canada), MTN, 5.200%, 8/1/28    208,277
   349,000 Truist Bank, Ser A, (TSFR3M + 0.932%), 6.311%, 5/15/27(A)    327,908
  159,000 US Bancorp, 4.967%, 7/22/33    150,981
         6,175,569
  Consumer Discretionary — 4.5%  
   251,000 7-Eleven, Inc., 144a, 1.800%, 2/10/31    204,298
   185,000 BAT Capital Corp. (United Kingdom), 3.557%, 8/15/27    176,660
   186,000 Brunswick Corp., 4.400%, 9/15/32    169,821
   117,000 Delta Air Lines, Inc. / SkyMiles IP Ltd., 144a, 4.750%, 10/20/28    115,102
   340,000 General Motors Financial Co., Inc., 3.100%, 1/12/32    289,970
   114,000 General Motors Financial Co., Inc., 5.650%, 1/17/29    116,874
   153,000 Home Depot, Inc. (The), 5.950%, 4/1/41    171,551
   153,000 Imperial Brands Finance PLC (United Kingdom), 144a, 6.125%, 7/27/27    157,212
   208,000 Lowe's Cos., Inc., 4.500%, 4/15/30    207,085
   114,000 Mattel, Inc., 5.450%, 11/1/41    102,131
   241,000 Toll Brothers Finance Corp., 3.800%, 11/1/29    226,049
   247,000 Toyota Motor Corp. (Japan), 5.118%, 7/13/28    255,747
  226,000 Warnermedia Holdings, Inc., 5.141%, 3/15/52    195,006
         2,387,506
  Health Care — 3.9%  
   191,000 AbbVie, Inc., 4.450%, 5/14/46    175,967
   156,000 Alcon Finance Corp. (Switzerland), 144a, 3.800%, 9/23/49    126,346
   204,000 Amgen, Inc., 5.150%, 3/2/28    208,705
   179,000 Becton Dickinson & Co., 4.685%, 12/15/44    167,844
  177,000 CommonSpirit Health, 4.187%, 10/1/49     149,763
Principal
Amount
      Market
Value
     
  Health Care — 3.9% (Continued)  
$  162,000 CVS Health Corp., 5.125%, 7/20/45 $   153,754
   197,000 DH Europe Finance II Sarl, 3.250%, 11/15/39    163,941
   183,000 Elevance Health, Inc., 4.750%, 2/15/33    183,303
   217,000 HCA, Inc., 5.375%, 9/1/26    218,112
   152,000 Thermo Fisher Scientific, Inc., 5.404%, 8/10/43    161,225
   210,000 UnitedHealth Group, Inc., 3.500%, 8/15/39    179,019
  204,000 Viatris, Inc., 2.700%, 6/22/30    172,611
         2,060,590
  Industrials — 3.8%  
   183,000 Amcor Flexibles North America, Inc., 2.630%, 6/19/30    158,574
   103,000 Boeing Co. (The), 5.805%, 5/1/50    107,090
   190,000 Burlington Northern Santa Fe LLC, 5.750%, 5/1/40    207,329
   135,000 Carrier Global Corp., 3.577%, 4/5/50    105,694
   229,000 FedEx Corp., 5.100%, 1/15/44    222,560
   201,000 John Deere Capital Corp., MTN, 2.450%, 1/9/30    180,372
   164,000 Norfolk Southern Corp., 4.837%, 10/1/41    158,480
   133,000 Roper Technologies, Inc., 2.950%, 9/15/29    122,003
   239,000 Waste Management, Inc., 4.875%, 2/15/34    244,228
   347,000 Weir Group PLC (The) (United Kingdom), 144a, 2.200%, 5/13/26    322,721
  136,000 WestRock MWV LLC, 8.200%, 1/15/30    156,812
         1,985,863
  Energy — 3.7%  
   144,000 Aker BP ASA (Norway), 144a, 6.000%, 6/13/33    149,849
    53,000 Cenovus Energy, Inc. (Canada), 5.250%, 6/15/37     50,148
   265,000 Cheniere Energy, Inc., 4.625%, 10/15/28    258,365
   135,000 Continental Resources, Inc., 144a, 5.750%, 1/15/31    134,214
   307,000 DCP Midstream Operating LP, 144a, 6.750%, 9/15/37    337,559
   184,885 MC Brazil Downstream Trading SARL (Brazil), 144a, 7.250%, 6/30/31    144,903
   266,000 Midwest Connector Capital Co. LLC, 144a, 4.625%, 4/1/29    256,357
   169,000 MPLX LP, 4.950%, 3/14/52    150,931
   199,000 NGPL PipeCo LLC, 144a, 7.768%, 12/15/37    221,333
   101,000 Occidental Petroleum Corp., 7.950%, 6/15/39    117,665
  206,000 Petroleos Mexicanos (Mexico), 6.625%, 6/15/35    158,033
         1,979,357
  Utilities — 3.6%  
   295,000 CMS Energy Corp., 4.750%, 6/1/50    266,365
   126,000 Duke Energy Progress LLC, 4.150%, 12/1/44    107,591
   140,000 Edison International, 4.125%, 3/15/28    135,282
   227,000 Electricite de France SA (France), 144a, 4.875%, 9/21/38    210,328
   247,000 FirstEnergy Transmission LLC, 144a, 5.450%, 7/15/44    239,387
   236,000 NextEra Energy Capital Holdings, Inc., (TSFR3M + 2.329%), 7.659%, 10/1/66(A)    213,512
   228,000 Ohio Power Co., Ser R, 2.900%, 10/1/51    155,119
   251,000 Pacific Gas and Electric Co., 3.500%, 8/1/50    173,898
    86,000 PacifiCorp., 5.750%, 4/1/37     88,077
  348,000 WEC Energy Group, Inc., (TSFR3M + 2.374%), 7.754%, 5/15/67(A)    311,287
         1,900,846
  Information Technology — 3.2%  
   228,000 Apple, Inc., 4.650%, 2/23/46    225,611
   291,000 Broadcom, Inc., 4.150%, 11/15/30    278,360
   245,000 Marvell Technology, Inc., 2.950%, 4/15/31    214,446
   249,000 Microchip Technology, Inc., 0.983%, 9/1/24    241,246
   136,000 Micron Technology, Inc., 2.703%, 4/15/32    114,404
    56,000 Micron Technology, Inc., 6.750%, 11/1/29     60,583
   282,000 Microsoft Corp., 2.525%, 6/1/50    193,500
   117,000 Oracle Corp., 2.650%, 7/15/26    110,989
   81,000 Oracle Corp., 3.600%, 4/1/40      64,840
 
19

 

Touchstone Bond Fund (Continued)
Principal
Amount
      Market
Value
  Corporate Bonds — 43.0% (Continued)  
  Information Technology — 3.2% (Continued)  
$   64,000 Oracle Corp., 4.300%, 7/8/34 $    59,924
  148,000 Visa, Inc., 4.150%, 12/14/35    145,240
         1,709,143
  Consumer Staples — 2.7%  
   133,000 Anheuser-Busch Cos. LLC / Anheuser-Busch InBev Worldwide, Inc. (Belgium), 4.900%, 2/1/46    130,445
   206,000 Ashtead Capital, Inc. (United Kingdom), 144a, 4.000%, 5/1/28    194,003
   106,000 J M Smucker Co. (The), 6.500%, 11/15/53    122,817
   252,000 JBS USA LUX SA / JBS USA Food Co. / JBS USA Finance, Inc., 2.500%, 1/15/27    232,061
    81,000 JBS USA LUX SA / JBS USA Food Co. / JBS USA Finance, Inc., 4.375%, 2/2/52     60,318
   144,000 Kroger Co. (The), 5.000%, 4/15/42    135,408
   226,000 Mars, Inc., 144a, 3.875%, 4/1/39    198,616
   253,000 Philip Morris International, Inc., 5.375%, 2/15/33    259,786
  111,000 Starbucks Corp., 3.350%, 3/12/50     83,197
         1,416,651
  Real Estate — 2.6%  
   243,000 Crown Castle International Corp. REIT, 3.650%, 9/1/27    231,151
   228,000 Host Hotels & Resorts LP REIT, Ser F, 4.500%, 2/1/26    223,647
   244,000 Invitation Homes Operating Partnership LP REIT, 4.150%, 4/15/32    224,667
   102,000 Kilroy Realty LP REIT, 3.050%, 2/15/30     86,784
   195,000 Sabra Health Care LP REIT, 5.125%, 8/15/26    191,576
   205,000 SBA Tower Trust REIT, 144a, 6.599%, 1/15/28    210,839
    80,000 STORE Capital Corp. REIT, 2.700%, 12/1/31     60,702
    45,000 STORE Capital Corp. REIT, 2.750%, 11/18/30     35,381
  127,000 STORE Capital Corp. REIT, 4.625%, 3/15/29    117,440
         1,382,187
  Communication Services — 2.2%  
   161,000 AT&T, Inc., 4.500%, 5/15/35    152,818
   239,000 British Telecommunications PLC (United Kingdom), 144a, 3.250%, 11/8/29    218,488
   138,000 Charter Communications Operating LLC / Charter Communications Operating Capital, 6.484%, 10/23/45    136,063
   164,000 Comcast Corp., 4.000%, 3/1/48    138,213
    62,000 Paramount Global, 4.200%, 5/19/32     55,476
   226,000 T-Mobile USA, Inc., 3.875%, 4/15/30    214,497
    99,000 T-Mobile USA, Inc., 5.750%, 1/15/54    105,205
  228,000 Verizon Communications, Inc., 2.987%, 10/30/56    151,426
         1,172,186
  Materials — 1.1%  
   139,000 Braskem Netherlands Finance BV (Brazil), 144a, 4.500%, 1/31/30    107,906
   119,000 Braskem Netherlands Finance BV (Brazil), 144a, 5.875%, 1/31/50     82,452
   221,000 Celanese US Holdings LLC, 6.165%, 7/15/27    226,596
  203,000 Sherwin-Williams Co. (The), 4.500%, 6/1/47    186,503
           603,457
  Total Corporate Bonds $22,773,355
  U.S. Treasury Obligations — 18.8%
1,380,000 U.S. Treasury Bond, 2.375%, 2/15/42      1,063,031
    85,000 U.S. Treasury Bond, 3.625%, 5/15/53         78,970
   795,000 U.S. Treasury Bond, 4.000%, 11/15/42        775,436
   963,000 U.S. Treasury Bond, 4.000%, 11/15/52        954,612
2,051,000 U.S. Treasury Note, 3.375%, 5/15/33      1,972,485
    70,000 U.S. Treasury Note, 3.625%, 5/31/28         69,319
1,537,000 U.S. Treasury Note, 3.875%, 8/15/33      1,538,201
Principal
Amount
      Market
Value
  U.S. Treasury Obligations — 18.8% (Continued)
$2,755,000 U.S. Treasury Note, 4.375%, 11/30/28     $ 2,821,938
  695,000 U.S. Treasury Note, 4.875%, 11/30/25        702,357
  Total U.S. Treasury Obligations  $9,976,349
  Commercial Mortgage-Backed Securities — 10.0%
   675,000 BANK, Ser 2018-BN14, Class A3, 3.966%, 9/15/60        646,724
   285,000 BANK, Ser 2020-BN26, Class A4, 2.403%, 3/15/63        242,850
   365,000 BANK, Ser 2022-BNK39, Class A4, 2.928%, 2/15/55(A)(B)        314,985
   275,000 BBCMS Mortgage Trust, Ser 2021-C11, Class A5, 2.322%, 9/15/54        228,800
   500,000 BPR Trust, Ser 2021-KEN, Class B, 144a, (TSFR1M + 2.064%), 7.426%, 2/15/29(A)        498,419
   250,000 Citigroup Commercial Mortgage Trust, Ser 2020-GC46, Class A5, 2.717%, 2/15/53        215,823
   360,000 DBUBS Mortgage Trust, Ser 2017-BRBK, Class B, 144a, 3.530%, 10/10/34(A)(B)        317,205
   367,585 GS Mortgage Securities Corp. II, Ser 2017-SLP, Class B, 144a, 3.772%, 10/10/32        354,559
   250,000 GS Mortgage Securities Trust, Ser 2017-FARM, Class B, 144a, 3.541%, 1/10/43(A)(B)        209,074
   390,000 GS Mortgage Securities Trust, Ser 2020-GC47, Class A5, 2.377%, 5/12/53        328,893
   210,000 HONO Mortgage Trust, Ser 2021-LULU, Class B, 144a, (TSFR1M + 1.564%), 6.926%, 10/15/36(A)        198,962
   805,000 JP Morgan Chase Commercial Mortgage Securities Trust, Ser 2017-JP7, Class A5, 3.454%, 9/15/50        741,075
   350,000 JPMorgan Chase Commercial Mortgage Securities Trust, Ser 2018-MINN, Class A, 144a, (TSFR1M + 1.317%), 6.679%, 11/15/35(A)        332,596
   355,000 Morgan Stanley Capital I Trust, Ser 2018-H3, Class A5, 4.177%, 7/15/51        336,429
  320,000 New York City Housing Development Corp., Ser 2014-8SPR, Class B, 3.864%, 2/15/48        312,575
  Total Commercial Mortgage-Backed Securities  $5,278,969
  U.S. Government Mortgage-Backed Obligations — 6.1%
    38,806 FHLMC, Pool #A95946, 4.000%, 1/1/41         37,929
    26,169 FHLMC, Pool #A96485, 4.500%, 1/1/41         26,202
     8,821 FHLMC, Pool #G03217, 5.500%, 9/1/37          9,105
     3,933 FHLMC, Pool #G03781, 6.000%, 1/1/38          4,111
   529,085 FHLMC REMIC, Pool #QD2143, 2.000%, 12/1/51        433,236
     2,395 FNMA, Pool #561741, 7.500%, 1/1/31          2,447
   143,934 FNMA, Pool #725423, 5.500%, 5/1/34        148,340
   127,381 FNMA, Pool #725610, 5.500%, 7/1/34        131,283
     3,247 FNMA, Pool #889734, 5.500%, 6/1/37          3,347
    21,512 FNMA, Pool #AB1149, 5.000%, 6/1/40         21,884
    20,708 FNMA, Pool #AB1800, 4.000%, 11/1/40         20,220
    35,526 FNMA, Pool #AD3795, 4.500%, 4/1/40         35,519
    45,200 FNMA, Pool #AD9150, 5.000%, 8/1/40         45,950
    89,114 FNMA, Pool #AD9193, 5.000%, 9/1/40         90,652
    58,817 FNMA, Pool #AE0548, 4.500%, 11/1/40         58,807
    47,379 FNMA, Pool #AE4429, 4.000%, 10/1/40         46,263
       995 FNMA, Pool #AH2666, 4.000%, 1/1/26            976
     2,040 FNMA, Pool #AH3493, 4.000%, 2/1/26          2,001
    75,296 FNMA, Pool #AL0054, 4.500%, 2/1/41         75,283
   218,154 FNMA, Pool #AR9195, 3.000%, 3/1/43        200,818
   182,194 FNMA, Pool #AT2016, 3.000%, 4/1/43        167,714
   142,584 FNMA, Pool #BC1158, 3.500%, 2/1/46        133,236
   300,744 FNMA, Pool #FM4996, 2.000%, 12/1/50        250,332
   178,755 FNMA, Pool #FM5468, 2.500%, 1/1/36        165,688
   260,946 FNMA, Pool #FM5682, 2.500%, 1/1/51        223,580
    83,460 FNMA, Pool #MA1175, 3.000%, 9/1/42         77,001
    49,137 FNMA, Pool #MA2177, 4.000%, 2/1/35         48,057
  301,484 FNMA, Pool #MA4166, 3.000%, 10/1/40         276,685
 
20

 

Touchstone Bond Fund (Continued)
Principal
Amount
      Market
Value
  U.S. Government Mortgage-Backed Obligations — 6.1%
(Continued)
$   65,657 GNMA, Pool #4853, 4.000%, 11/20/40     $    64,395
    50,647 GNMA, Pool #4883, 4.500%, 12/20/40         50,684
   200,491 GNMA, Pool #5175, 4.500%, 9/20/41        200,639
    16,687 GNMA, Pool #736696, 4.500%, 5/15/40         16,611
   121,099 GNMA, Pool #AD1745, 3.000%, 2/20/43        110,220
   74,553 GNMA, Pool #MA1157, 3.500%, 7/20/43         70,878
  Total U.S. Government Mortgage-Backed Obligations  $3,250,093
  Non-Agency Collateralized Mortgage Obligations — 5.2%
    44,979 Agate Bay Mortgage Trust, Ser 2013-1, Class B3, 144a, 3.542%, 7/25/43(A)(B)         42,605
   220,511 Agate Bay Mortgage Trust, Ser 2015-4, Class B2, 144a, 3.499%, 6/25/45(A)(B)        210,866
   253,997 Agate Bay Mortgage Trust, Ser 2015-7, Class B1, 144a, 3.644%, 10/25/45(A)(B)        236,713
   129,992 CSMC Trust, Ser 2013-IVR3, Class B2, 144a, 3.407%, 5/25/43(A)(B)        125,614
   180,130 CSMC Trust, Ser 2015-1, Class B3, 144a, 3.900%, 1/25/45(A)(B)        170,173
   112,240 CSMC Trust, Ser 2015-WIN1, Class B3, 144a, 3.771%, 12/25/44(A)(B)        105,891
   324,547 Deephaven Residential Mortgage Trust, Ser 2022-2, Class A1, 144a, 4.300%, 3/25/67(A)(B)        308,551
       115 Deutsche ALT-A Securities, Inc. ALT, Ser 2003-2XS, Class A6, 5.470%, 9/25/33(A)(B)            112
    16,836 EverBank Mortgage Loan Trust, Ser 2013-1, Class B1, 144a, 3.506%, 3/25/43(A)(B)         16,615
   395,148 EverBank Mortgage Loan Trust, Ser 2018-1, Class B2, 144a, 3.576%, 2/25/48(A)(B)        343,315
   289,383 Mill City Mortgage Loan Trust, Ser 2018-3, Class M3, 144a, 3.250%, 8/25/58(A)(B)        245,233
    76,269 Residential Asset Securitization Trust, Ser 2006-A1, Class 1A3, 6.000%, 4/25/36         32,826
    43,137 Sequoia Mortgage Trust, Ser 2013-10, Class B2, 144a, 3.532%, 8/25/43(A)(B)         41,023
    62,980 Sequoia Mortgage Trust, Ser 2013-5, Class B1, 144a, 3.494%, 5/25/43(A)(B)         59,734
   435,332 Sequoia Mortgage Trust, Ser 2018-CH3, Class B1B, 144a, 4.763%, 8/25/48(A)(B)        410,256
   394,520 Sequoia Mortgage Trust, Ser 2018-CH3, Class B2B, 144a, 4.763%, 8/25/48(A)(B)        371,795
   20,509 Washington Mutual Mortgage Pass-Through Certificates, Ser 2005-9, Class 2A4, 5.500%, 11/25/35         17,788
  Total Non-Agency Collateralized Mortgage Obligations  $2,739,110
  Asset-Backed Securities — 4.9%
   343,000 Driven Brands Funding LLC, Ser 2021-1A, Class A2, 144a, 2.791%, 10/20/51        293,483
   192,648 Elara HGV Timeshare Issuer LLC, Ser 2019-A, Class B, 144a, 2.910%, 1/25/34        183,334
   289,500 Jack in the Box Funding LLC, Ser 2022-1A, Class A2I, 144a, 3.445%, 2/26/52        266,408
   265,990 Jersey Mike's Funding, Ser 2019-1A, Class A2, 144a, 4.433%, 2/15/50        251,929
   149,375 Jimmy Johns Funding LLC, Ser 2017-1A, Class A2II, 144a, 4.846%, 7/30/47        141,970
   295,500 Jimmy Johns Funding LLC, Ser 2022-1A, Class A2I, 144a, 4.077%, 4/30/52        275,575
  375,000 Madison Park Funding XLIX Ltd. (Cayman Islands), Ser 2021-49A, Class B1, 144a, (TSFR3M + 1.962%), 7.358%, 10/19/34(A)         373,694
Principal
Amount
      Market
Value
  Asset-Backed Securities — 4.9% (Continued)
$  350,000 New Mountain CLO 1 Ltd. (Cayman Islands), Ser CLO-1A, Class AR, 144a, (TSFR3M + 1.462%), 6.855%, 10/15/34(A)     $   349,493
   294,750 Planet Fitness Master Issuer LLC, Ser 2022-1A, Class A2I, 144a, 3.251%, 12/5/51        273,176
  217,388 TAL Advantage VII LLC, Ser 2020-1A, Class A, 144a, 2.050%, 9/20/45        197,364
  Total Asset-Backed Securities  $2,606,426
Shares        
  Exchange-Traded Fund — 3.6%  
   21,289 iShares J.P. Morgan USD Emerging Markets Bond ETF  1,895,998
Principal
Amount
       
  Agency Collateralized Mortgage Obligations — 3.3%
$  230,000 FHLMC REMIC, Ser 4991, Class HB, 2.000%, 7/25/50        161,815
   725,000 FHLMC REMIC, Ser 5178, Class CV, 2.000%, 11/25/40        537,709
     9,153 FNMA REMIC, Ser 2015-51, Class KC, 3.000%, 6/25/45          8,605
   196,633 FNMA REMIC, Ser 2017-90, Class KA, 3.000%, 11/25/47        182,530
   450,000 FNMA REMIC, Ser 2019-35, Class KB, 3.000%, 7/25/49        357,489
  675,000 FNMA REMIC, Ser 2022-16, Class KB, 2.500%, 11/25/49        510,557
  Total Agency Collateralized Mortgage Obligations  $1,758,705
  Sovereign Government Obligations — 1.3%
   210,000 Bahamas Government International Bond, 144a, 6.000%, 11/21/28        184,800
   206,000 Chile Government International Bond, 3.100%, 1/22/61        138,063
   206,000 Colombia Government International Bond, 3.250%, 4/22/32        163,498
   226,000 Ecuador Government International Bond, 144a, 6.000%, 7/31/30(A)(B)        104,482
  210,000 Ghana Government International Bond, 144a, 7.625%, 5/16/29         90,763
  Total Sovereign Government Obligations    $681,606
Shares        
  Short-Term Investment Fund — 2.7%  
1,410,379 Dreyfus Government Cash Management, Institutional Shares, 5.25%∞Ω  1,410,379
  Total Investment Securities—98.9%
(Cost $55,728,053)
$52,370,990
  Other Assets in Excess of Liabilities — 1.1%    579,071
  Net Assets — 100.0% $52,950,061
(A) Variable rate security - Rate reflected is the rate in effect as of December 31, 2023.
(B) Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description.
Open-End Fund.
Ω Represents the 7-Day SEC yield as of December 31, 2023.
 
21

 

Touchstone Bond Fund (Continued)
Portfolio Abbreviations:
CLO – Collateralized Loan Obligation
DAC – Designated Activity Company
ETF – Exchange-Traded Fund
FHLMC – Federal Home Loan Mortgage Corporation
FNMA – Federal National Mortgage Association
GNMA – Government National Mortgage Association
ICE – Intercontinental Exchange, Inc.
LLC – Limited Liability Company
LP – Limited Partnership
MTN – Medium Term Note
PLC – Public Limited Company
REIT – Real Estate Investment Trust
REMIC – Real Estate Mortgage Investment Conduit
TSFR1M – One Month Term Secured Overnight Financing Rate
TSFR3M – Three Month Term Secured Overnight Financing Rate
USD – United States Dollar
144a - This is a restricted security that was sold in a transaction qualifying for the exemption under Rule 144a of the Securities Act of 1933. This security may be sold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2023, these securities were valued at $12,034,848 or 22.7% of net assets. These securities were deemed liquid pursuant to procedures approved by the Board of Trustees.
Other Information:
The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the security valuation section in the accompanying Notes to Financial Statements.
Valuation Inputs at Reporting Date:
Description Level 1 Level 2 Level 3 Total
Assets:        
Corporate Bonds $$22,773,355 $— $22,773,355
U.S. Treasury Obligations 9,976,349 9,976,349
Commercial Mortgage-Backed Securities 5,278,969 5,278,969
U.S. Government Mortgage-Backed Obligations 3,250,093 3,250,093
Non-Agency Collateralized Mortgage Obligations 2,739,110 2,739,110
Asset-Backed Securities 2,606,426 2,606,426
Exchange-Traded Fund 1,895,998 1,895,998
Agency Collateralized Mortgage Obligations 1,758,705 1,758,705
Sovereign Government Obligations 681,606 681,606
Short-Term Investment Fund 1,410,379 1,410,379
Other Financial Instruments        
Futures        
Interest rate contracts 36,429 36,429
Total Assets $3,342,806 $49,064,613 $— $52,407,419
Liabilities:        
Other Financial Instruments        
Swap Agreements        
Credit contracts $$(138,125) $— $(138,125)
Futures        
Interest rate contracts (233,134) (233,134)
Total Liabilities $(233,134) $(138,125) $— $(371,259)
Total $3,109,672 $48,926,488 $— $52,036,160
22

 

Touchstone Bond Fund (Continued)
Futures Contracts
At December 31, 2023, $128,726 was segregated with the broker as collateral for futures contracts. The Fund had the following futures contracts, brokered by Wells Fargo, open at December 31, 2023: 
Description Expiration Date Number of
Contracts
Notional Value Unrealized
Appreciation/
Depreciation
Short Futures:        
30-Year U.S. Ultra Treasury Bond 3/19/2024 24 $3,206,250 $(233,134)
Long Futures:        
5 Year U.S. Treasury Note 3/28/2024 33 3,589,524 15,381
2-Year U.S. Treasury Note 3/28/2024 55 11,325,273 21,048
        $(196,705)
 Centrally Cleared Credit Default Swaps on Credit Indices(1)
Counterparty Termination
Date
Notional
Amount(2)
Pay Fixed
Rate
Clearinghouse Underlying
Bond
Value(3) Premiums
Paid/
(Received)
Unrealized
Depreciation
Buy Protection:                
Wells Fargo 12/20/28 $2,321,550 5.000% ICE Markit CDX North America High Yield
Series 41 5Y Index
$(135,423) $2,702 $(138,125)
(1) If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying investments comprising the referenced index or (ii) receive a net settlement amount in the form of cash or investments equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying investments comprising the referenced index.
(2) The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.
(3) The quoted market prices and resulting values for credit default swap agreements on the underlying bond serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative had the notional amount of the swap agreement been closed/sold as of the period end. Decreasing market values (sell protection) or increasing market values (buy protection) when compared to the notional amount of the swap, represent a deterioration of the referenced entity's credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.
See accompanying Notes to Financial Statements.
23

 

Portfolio of Investments
Touchstone Common Stock Fund – December 31, 2023
Shares       Market
Value
  Common Stocks — 99.8%  
  Information Technology — 27.4%  
 82,816 Apple, Inc. $ 15,944,565
 19,351 International Business Machines Corp.   3,164,856
 52,798 Microsoft Corp.  19,854,160
 42,886 Oracle Corp.   4,521,471
 22,279 Salesforce, Inc.*   5,862,496
 24,739 Texas Instruments, Inc.   4,217,010
 13,424 Workday, Inc. - Class A*   3,705,830
         57,270,388
  Health Care — 15.5%  
 36,606 BioMarin Pharmaceutical, Inc.*   3,529,551
 55,551 Bristol-Myers Squibb Co.   2,850,322
 19,454 Cencora, Inc.   3,995,462
 19,074 HCA Healthcare, Inc.   5,162,950
 40,115 Johnson & Johnson   6,287,625
 50,844 Medtronic PLC   4,188,529
 12,221 UnitedHealth Group, Inc.   6,433,990
         32,448,429
  Financials — 15.3%  
150,470 Bank of America Corp.   5,066,325
 24,442 Berkshire Hathaway, Inc. - Class B*   8,717,484
 28,140 Charles Schwab Corp. (The)   1,936,032
 14,825 Goldman Sachs Group, Inc. (The)   5,719,040
  2,590 Markel Group, Inc.*   3,677,541
 25,722 PayPal Holdings, Inc.*   1,579,588
 20,750 Visa, Inc. - Class A   5,402,262
         32,098,272
  Communication Services — 13.3%  
 81,467 Alphabet, Inc. - Class C*  11,481,144
 73,836 Comcast Corp. - Class A   3,237,709
 27,348 Meta Platforms, Inc. - Class A*   9,680,098
  4,013 Netflix, Inc.*   1,953,850
 16,977 Walt Disney Co. (The)   1,532,853
         27,885,654
  Consumer Discretionary — 9.0%  
 16,963 Airbnb, Inc. - Class A*   2,309,343
 15,202 Alibaba Group Holding Ltd. (China) ADR   1,178,307
 67,059 Amazon.com, Inc.*  10,188,944
 14,674 Hilton Worldwide Holdings, Inc.   2,671,989
 25,379 Starbucks Corp.   2,436,638
         18,785,221
  Industrials — 8.3%  
 15,193 Boeing Co. (The)*   3,960,207
  7,486 FedEx Corp.   1,893,734
  6,605 Hubbell, Inc.   2,172,583
 37,773 RTX Corp.   3,178,220
 63,607 Southwest Airlines Co.   1,836,970
 41,743 SS&C Technologies Holdings, Inc.   2,550,915
 18,592 Stanley Black & Decker, Inc.   1,823,875
         17,416,504
Shares       Market
Value
     
  Consumer Staples — 4.0%  
 67,238 Monster Beverage Corp.* $  3,873,581
 46,964 Philip Morris International, Inc.   4,418,373
          8,291,954
  Energy — 3.2%  
 50,133 Exxon Mobil Corp.   5,012,297
 32,594 Schlumberger NV   1,696,192
          6,708,489
  Materials — 2.6%  
 43,334 DuPont de Nemours, Inc.   3,333,685
 25,448 International Flavors & Fragrances, Inc.   2,060,524
          5,394,209
  Real Estate — 1.2%  
 13,114 Jones Lang LaSalle, Inc.*   2,476,841
  Total Common Stocks $208,775,961
  Short-Term Investment Fund — 0.3%  
584,143 Dreyfus Government Cash Management, Institutional Shares, 5.25%∞Ω     584,143
  Total Investment Securities—100.1%
(Cost $104,392,571)
$209,360,104
  Liabilities in Excess of Other Assets — (0.1%)    (171,423)
  Net Assets — 100.0% $209,188,681
* Non-income producing security.
Open-End Fund.
Ω Represents the 7-Day SEC yield as of December 31, 2023.
Portfolio Abbreviations:
ADR – American Depositary Receipt
PLC – Public Limited Company
Other Information:
The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the security valuation section in the accompanying Notes to Financial Statements.
Valuation Inputs at Reporting Date:
Description Level 1 Level 2 Level 3 Total
Common Stocks $208,775,961 $— $— $208,775,961
Short-Term Investment Fund 584,143 584,143
Total $209,360,104 $— $— $209,360,104
See accompanying Notes to Financial Statements.
 
24

 

Portfolio of Investments
Touchstone Small Company Fund – December 31, 2023
Shares       Market
Value
  Common Stocks — 98.3%  
  Industrials — 22.6%  
    6,770 Albany International Corp. - Class A $   664,949
    7,157 ASGN, Inc.*    688,289
    2,810 CACI International, Inc. - Class A*    910,047
    5,579 Clean Harbors, Inc. *    973,591
    8,418 Crane Co.    994,503
    4,060 Curtiss-Wright Corp.    904,527
    4,010 EMCOR Group, Inc.    863,874
    8,249 ESCO Technologies, Inc.    965,381
   31,185 ExlService Holdings, Inc.*    962,057
   12,710 Federal Signal Corp.    975,365
   11,458 ITT, Inc.  1,367,169
   17,598 KBR, Inc.    975,105
   16,022 MAXIMUS, Inc.  1,343,605
   19,480 WNS Holdings Ltd. (India) ADR*  1,231,136
   22,280 Zurn Elkay Water Solutions Corp.    655,255
        14,474,853
  Information Technology — 18.2%  
    6,132 Advanced Energy Industries, Inc.    667,897
   36,690 Box, Inc. - Class A*    939,631
  116,299 CCC Intelligent Solutions Holdings, Inc.*  1,324,646
   21,280 Ciena Corp.*    957,813
   12,283 CommVault Systems, Inc.*    980,797
   12,328 Crane NXT Co.    701,093
   23,795 Digi International, Inc.*    618,670
    8,352 Onto Innovation, Inc.*  1,277,021
   40,450 PowerSchool Holdings, Inc. - Class A*    953,002
    4,920 Qualys, Inc.*    965,698
    3,274 SPS Commerce, Inc.*    634,632
   21,210 Tower Semiconductor Ltd. (Israel)*    647,329
   35,225 Verint Systems, Inc.*    952,132
        11,620,361