default title

In the third quarter of 2025, the investment landscape was characterized by a favorable environment for risk assets, leading to positive returns, largely attributed to the supportive stance of the U.S. Federal Reserve and strong underlying macroeconomic conditions, coupled with robust corporate performance. However, the Touchstone Ares Credit Opportunities Fund, specifically its Class A Shares with load waived, experienced a period of underperformance compared to its benchmark, the ICE BofA U.S. High Yield Constrained Index. This divergence in performance was predominantly influenced by the fund's strategic allocations to collateralized loan obligations (CLO) equity and direct equity holdings, both of which lagged the benchmark's returns during this period. Despite the short-term underperformance, the fund maintains a neutral risk posture, reflecting its balanced assessment of the prevailing spread environment, the conducive macroeconomic backdrop, and the health of corporate fundamentals.

The Touchstone Ares Credit Opportunities Fund distinguishes itself through a flexible investment strategy, adeptly adjusting its asset allocations between core and opportunistic investments in response to evolving market dynamics. This adaptability is central to its approach, allowing the fund to navigate varying economic cycles and capitalize on emerging opportunities. A key pillar of its strategy involves meticulously identifying companies and securities that present compelling relative values when evaluated against their fundamental attributes. This rigorous selection process is designed to uncover investments with strong potential for growth and stability, aligning with the fund's objective of generating long-term value for its investors.

The fund's commitment to a neutral risk posture reflects a calculated approach to current market conditions. While acknowledging the positive momentum from external factors like the Federal Reserve's policies and a healthy economy, the fund remains vigilant. It carefully balances the pursuit of returns with an awareness of potential risks, ensuring that its investment decisions are well-grounded in a comprehensive analysis of market spreads, economic indicators, and the financial health of corporations. This cautious yet dynamic strategy aims to optimize performance while prudently managing exposure to market fluctuations.

In essence, the third quarter of 2025 highlighted both the opportunities and challenges within the credit market. While broad market sentiment was buoyed by positive macroeconomic trends, the Touchstone Ares Credit Opportunities Fund's specific investment choices, particularly in CLO and direct equity, led to a temporary dip in relative performance. Moving forward, the fund remains dedicated to its flexible allocation strategy and diligent security selection, underpinned by a balanced risk assessment that seeks to leverage supportive market conditions while mitigating potential downsides.