"California Limited Term Fund is distinguished from many other California single-state funds in that it has a relatively short duration in the range of 3.5 years, which protects against the risk of rising interest rates. From a credit perspective, given the volatile history of California real estate, the fund is focused on regions of California where real estate is developed and mature. The fund is a 10-year, actively managed ladder and seeks to generate attractive income without excessive shifts in principal valuations."
— Josh Gonze
We build a portfolio of staggered maturities so that a portion will mature each year. Money from maturing bonds provides an organic source of cash flow, and is typically reinvested in longer-maturity bonds at the top range of the ladder.
Laddering tends to perform well against other strategies because it captures price appreciation as bonds age and their remaining life shortens, and it reinvests principal from shorter, lower-yielding bonds into longer, higher-yielding bonds.
The fund’s laddered portfolio structure is one of many important contributors (credit research also among them) to the total return an investor receives over an appropriate holding period.
In bond investing, nothing is more important than determining whether the party to whom you propose to lend money has the ability and willingness to pay you back in full and on schedule.
We conduct thorough, bottom-up credit research on every bond we purchase, both to understand the ability of the issuer to repay obligations, and to ensure that investors are adequately compensated for the risk assumed.
The portfolio is composed of roughly 300 separate positions, in part to ensure that a potential default or price decline of any one issuer has a minimal impact upon the net asset value of the portfolio.
In adjusting position sizes within the portfolio, we take into account the credit quality of the issuer (with higher-quality credits typically being afforded larger position sizes), the extent to which each issue contributes to the duration of the portfolio, and of course, prospectus limitations.
Keep in mind that the California Limited Term Fund is not as diversified as our national funds, and macroeconomic trends within the state may impact all securities within the fund.
It’s important for investors to match their investment horizon to the duration of the strategy in which they’re invested, and to diversify tax-exempt assets across the yield curve.This is why Thornburg offers a range of strategies — from the Low Duration Municipal Fund on the short end to the Strategic Municipal Income Fund on the long end — to provide a home to match every time horizon.
AAA Non-callable S&P Composite Yield Curve, as of 9/30/14
2012 – The firm ranked #1 out of 41 eligible firms in Lipper Inc.'s fixed income large firm universe for the three-year period ended 11/30/11.
2008 – The firm ranked #1 out of 41 eligible firms in Lipper Inc.'s fixed income large firm universe for the three-year period ended 12/31/07.