The fourth quarter of 2019 saw the S&P 500 Index accelerate into the close, continuing its year-long uptrend by posting a positive return of 9.07% for the year’s final three-month period. Broadly, the market benefited from increased optimism over a potential U.S.-China phase-one trade deal, providing a measure of relief for equity investors. Markets got additional support after the U.S. Federal Reserve lowered the Fed funds rate during the quarter, maintaining its accommodative, if not dovish, stance.
Fourth-Quarter 2019 Performance Highlights
- For the fourth quarter, the Thornburg Long/Short Equity Fund was up 1.78% (I shares), which translates to just under 20% of the benchmark S&P 500 Index return of 9.07%, with an average net exposure of 32%. For the full year, the Thornburg Long/Short Equity Fund was up 8.50%, which translates to 27% of the S&P 500 Index return of 31.49%. The average net exposure for the year was 32%.
- For the fourth quarter, our long book was up 8.82% on a total return basis, with an average weight of 109.63%, while our short book was up 9.91%, with an average weight of negative 77.34%. For the year, our long book was up 28.49%, with an average weight of 106.51%, while our short book was up 28.25%, with an average weight of negative 74.23%.
- During the fourth quarter and for the full year, our more growth-oriented long investments and relatively balanced exposure between the long and short books contributed to portfolio returns, while the continued outperformance of high-quality and low-volatility stocks detracted from overall results.
Current Positioning and Outlook
We remain very excited about the valuation and prospects of the holdings within our long book, and equally unexcited about the prospects for the businesses that we’re short. Since the fourth quarter of 2018, we’ve worked to position the portfolio to perform better during the next downturn. While this is what our investors expect from the Thornburg Long/Short Equity Fund, 2019 was not the sort of year that flattered that effort. While 27% of the S&P return for the year was disappointing and somewhat below our average net exposure of 32%, it’s not outside the realm of expected outcomes for the portfolio. We are confident that a different sort of environment for U.S. stocks at some point in the future will better highlight the diversification advantages of the Thornburg Long/Short Equity Fund.
Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than quoted. For performance current to the most recent month end, see the mutual funds performance page or call 877-215-1330. The maximum sales charge for the Fund’s A shares is 4.50%.