Actively allocating the fund’s portfolio between long and short positions is designed to pursue long-term capital appreciation and lower volatility relative to broad equity indexes. Because the fund does not seek to time the market, the fund generally will be weighted more toward long investments. As an active, focused strategy, the fund typically will hold only about 30-40 names long, 30-40 names short.
Thornburg Long/Short Equity Fund combines tenets of both growth and value investing to pursue long-term capital appreciation. The fund invests in long and short positions of a wide range of equity securities. These represent companies of all sizes primarily in the U.S. which, based on our fundamental active research process, we believe will either rise or fall in price to the benefit of the fund’s absolute return.
“By investing both long and short, we not only give ourselves the opportunity to add value with active management, but we can also provide for significantly less volatility than the overall market. Over a full market cycle, our goal is to achieve broad equity index-like returns with less risk. So, adding this fund to a portfolio helps investors achieve greater diversification while offering the potential for attractive returns.”
— Bimal Shah
The fund offers:
- A liquid alternative option to complement a diversified portfolio.
- A risk management discipline, which may help lower volatility over time.
- Low correlation to equity markets to enhance an overall portfolio’s diversification.
- Thornburg’s active, focused investment selection process we have applied to all of our products since 1984.
Thornburg Long/Short Equity Fund is a natural extension of our bottom-up security selection process, which is flexible, collaborative, and far from the herd.
Applying the same firm-wide discipline in how we think and invest differently to a focused long/short strategy, we strive to simultaneously mitigate risk while increasing the potential for greater total return. Through active security selection, we hope to generate full market cycle returns similar to the S&P 500 Index, but with less volatility, while delivering positive outcomes within both the long and short sides of the portfolio.
The fund ideally takes long positions in investments that we believe will grow over time, and which are trading below their long-term value. To construct this side of the portfolio, we categorize long equity positions in three categories:
- Growth Industry Leaders: Firms with top positions in growing markets.
- Consistent Growers: Companies that exhibit steady earnings or revenue growth, or both.
- Emerging Growth Companies: Names that are addressing a new market or carving out a niche in an existing one.
The fund generally takes short positions in investments that we believe are overvalued (or to hedge against the fund’s long exposures). Here too, we apply a three-basket portfolio construct to categorize the fundamentals that we think make such companies short-sale candidates:
- Cycle Victims: Cyclical companies that could be facing deteriorating industry dynamics or risks specific to the company or industry.
- Stumbling Stalwarts: Firms that once exhibited steady earnings or revenue growth, but that we expect to decline due to technological changes, weakening business economics, or other factors.
- Falling Stars: Fast growing businesses with premium valuations that we expect to decline because of approaching market saturation, increasing competition, or other factors.