Touchstone Climate Transition ETF

Touchstone Climate Transition ETF (HEAT) is an actively managed global stock fund holding 40 to 60 companies that sub-adviser Lombard Odier expects to gain from the shift to a lower-carbon economy. Beyond clean energy, it owns carbon-intensive industrial firms cutting emissions and companies profiting from climate adaptation. It is tiny, with $13.1 million in net assets as of September 30, 2025, and its 0.69% annual fee is more than double the 0.31% peer average.

• Over the year to Oct 27, 2026, HEAT returned -3.6%, 6th of 7 among similar funds.
• Its worst full calendar year was 2024 (+2.0%); its best was 2025 (+20.6%).
• The deepest fall in its price history was 20.7% (Jul 18, 2023 to Oct 27, 2023), recovered by Sep 26, 2024.

As of Sep 30, 2025, the fund held 59 securities; the ten largest made up 22.63% of assets. It also reported 4.24% in a money-market fund, most likely cash collateral from lending out shares rather than uninvested money.

• Over the three months to Sep 30, 2025, investors withdrew a net $755K (creations minus redemptions, per the N-PORT report).
• Monthly total returns reported for that quarter: +0.97%, +2.87%, +5.92%.

HEAT does not track an index. Sub-adviser Lombard Odier Investment Managers picks stocks it expects to benefit from the climate transition. At least 80% of net assets go into three groups: “solution providers,” such as renewable-energy and energy-efficiency firms; “transition leaders,” carbon-heavy industrial companies moving to cleaner production; and “adaptation” companies, such as infrastructure firms and insurers, that may gain from the cost of adapting to climate change.

Lombard Odier combines number-based screens, its own ESG (environmental, social and governance) rating method and judgment. It excludes makers of controversial weapons and restricts companies earning more than 10% of revenue from tobacco, thermal coal, or tar sands, shale and Arctic oil and gas. It favors firms with strong cash generation and little need for outside capital, typically holding 40 to 60 stocks of any size worldwide, including emerging markets and mainland Chinese shares. Up to 20% of assets may fall outside these rules, including cash.

As of September 30, 2025, the fund held 59 stocks in fairly even sizes. The largest were NVIDIA (3.2%), Samsung Electronics, ASML and Steel Dynamics (about 2.3% each); the top 10 made up 22.6%. About half was in US companies. There is no set rebalancing date; the manager trades as its views change, with 65% annual turnover (the share of the portfolio replaced in a year).

• HEAT charges 0.69% a year, versus an average of 0.31% for the similar funds below (6th of 7, cheapest first).
• Of that, 0.65% is the management fee; the rest covers other fund expenses.
• The fee includes a 1.44% waiver from the adviser, which may end.
• Using the prospectus's standard example, $10,000 invested would cost about $70 in the first year and $2,348 over 10 years (assuming a 5% annual return).

HEAT is a small, actively managed climate-theme fund with a short record, an above-average fee and no income, so it fits as a minor add-on beside broad core holdings.

HEAT launched May 2, 2023, so it has no record from the 2008 crisis, the 2020 COVID crash or the 2022 bear market. Its deepest drop was 20.7%, from July 18 to October 27, 2023, and it took 11 months to recover. Its weaker full calendar year, 2024, gained 2.0%, but a retiree forced to cash out during a slide like 2023's would have locked in losses. It paid no distributions in the year through October 27, 2026, so it offers no income.

Cost matters too. The 0.69% expense ratio (annual cost) reflects a 1.44% fee waiver and is more than double the 0.31% average of funds with overlapping holdings. In the SEC's standard example, $10,000 earning 5% a year would cost $70 in year one but $2,348 over 10 years. Past results don't predict the future, and a plan should look at the whole portfolio, not one fund.

Matched by closest holdings overlap from the latest N-PORT reports (no similar fund shares 20% or more of its holdings).