Global Opportunities Fund - Commentary

3rd Quarter 2020

Brian McMahon
Brian McMahon
Vice Chairman and Chief Investment Strategist
Miguel Oleaga
Miguel Oleaga
Portfolio Manager and Managing Director
Portfolio managers are supported by the entire Thornburg investment team.
October 1, 2020

This Thornburg Global Opportunities Fund commentary is published amidst the ongoing developments associated with the global spread of COVID-19. Government bodies around the world have taken unusual steps to control the spread of the disease and mitigate the consequences of related economic disruption in order to keep the basic structure of the global economy in place to resume normal economic activity when the pandemic passes.

Most equities in the Thornburg Global Opportunities Fund recovered strongly in the June and September quarters from their March 2020 price troughs, as the list on the following page will describe. Listed in descending order are the 20 largest holdings in the fund as of September 30, 2020, along with year-to-date returns as of September 30, 2020 and March 31, 2020 [the latter in parentheses]. We also show the trailing five-year average annual revenue growth rates for these businesses through year end 2019, or the latest reported fiscal year end. Together, these firms comprise approximately 77% of the fund’s total assets, near-cash debt comprises 7% of fund assets and 10 other equities comprise a total of approximately 16% of fund assets. Even with share price recoveries in the June and September quarters, seven of these 20 largest equity investments have delivered negative returns in 2020 through September 30. We believe observed operating results from these businesses could justify better future returns.

The fund’s health care and digital communications centric businesses have fared best in the first half of 2020, while financial firms have fared worst. Individual position sizes of the top 20 positions range from 5% or more (Reliance Industries, Alibaba, Vestas Wind Systems and Qorvo) to just over 2.4% for those shown near the bottom of this list.

The reader will notice a high incidence of investments in firms tied to the digital economy, and to tools to facilitate digital communications.

These are not trivial businesses. They tend to be well capitalized. We believe most of these will emerge from the present economic valley with their competitive positions intact or improved. Most have been growing faster than the global economy in recent years as the trailing annual revenue growth rates indicate. Some of the slower growers over recent years appear to be advantaged in their industries at this time.

Table 1: Global Opportunities Fund – Top 20 Equity Holdings (as of 9/30/20)

(Together, these 20 investments account for approximately 77% of fund assets as of September 30, 2020; near cash interest bearing debt account for 7% of assets, approximately 10 other equity investments account for around 16% of fund assets)

Name of Company 2020 YTD Performance at Sept. 30, 2020 and [at March 31, 2020] ($US) Trailing 5-Yr Annual Revenue Growth Rate 2014–2019*
Reliance Industries, Ltd. +44.8%; [-30.5%] +9.7%
India-based conglomerate: chemicals, refining, #1 mobile telco and #1 retailer in India
Alibaba Group Holding, Ltd. +38.6%; [-8.3%] +48.3%
China-based provider of internet infrastructure, e-commerce, and content services
Vestas Wind Systems A/S +62.7%; [-19.6%] +11.9%
Manufactures, markets and services wind turbines for electricity generation, based in Denmark
Qorvo, Inc. +11.0%; [-30.6%] +21.9%
U.S.-based manufacturer of integrated circuits for wireless communications devices
Samsung Electronics Co., Ltd. +4.7%; [-18.1%] +2.2%
Manufactures consumer & industrial electronic products; leading semiconductor producer
Facebook, Inc. +27.6%; [-18.7%] +41.6%
Global social networking, communications, internet-based content, and advertising
Capital One Financial Corp. -29.3%; [-50.8%] (per share) +9.1%
U.S. consumer oriented commercial bank
Alphabet, Inc. “A” (Google) +9.4%; [-13.2%] +19.6%
Internet-based search & advertising, content, software applications, and data centers
GDS Holdings Ltd. +58.6%; [+12.4%] +54.5%
Leading developer and operator of data centers in China
NN Group N.V. +5.8%; [-28.9%] +7.7%
Netherlands-based life and casualty insurer
AbbVie, Inc. +2.9%; [-12.8%] +10.8%
Develops and sells pharmaceutical products
China Telecom -23.6%; [-26.4%] +3.0%
China’s 2nd largest mobile & fixed line telecom and largest data center operator
Citigroup -44.5%; [-46.9%] (per share) +8.9%
Multi-national banking & financial services firm
T-Mobile U.S. +46.1%; [+7.0%] +8.8%
U.S. mobile communications services provider
TJX Companies -8.5%; [-21.4%] +7.5%
Leading off-price apparel & home fashion retailer with > 4,000 stores worldwide, TJ Maxx
Roche Holding +8.5%; [+3.2%] +5.3%
Global health care company selling medicines and diagnostic tools
Tesco plc -16.6%; [-16.2%] (divestments) flat
Leading UK-based food retailer, currently divesting low performing foreign operations
Barratt Development plc -38.0%; [-44.8%] +8.6%
UK-based homebuilder with large land bank and no net debt
Taiwan Semiconductor +38.0%; [-17.3%] +7.0%
Largest global semiconductor manufacturer
Charles Schwab Corporation -22.7%; [-29.0%] -1.9%
U.S.-centric wealth management platform, securities brokerage, and bank

The Thornburg Global Opportunities Fund’s I share return of 21.8% for the June 2020 quarter exceeded its benchmark (MSCI All Country World Index), which returned 19.2% for the quarter.

Thornburg Global Opportunities Fund’s I share return of 11.4% for the September 2020 quarter exceeded its benchmark (MSCI All Country World Equity Index), which returned 8.1% for the quarter.

Performance comparisons of Thornburg Global Opportunities Fund to its benchmark over various periods are shown on the previous page. In July of 2020, we marked the 14th anniversary of the fund’s inception. From its inception on July 28, 2006, through September 30, 2020, Thornburg Global Opportunities Fund has outpaced the ACWI by an average margin of over 3.0% per year, resulting in a total cumulative return since inception of 244.7% (I shares) versus 131.4% for the ACWI index.

Top contributors to portfolio performance during the September quarter included Danish wind turbine manufacturer Vestas Wind Systems, India’s digital economy and downstream energy conglomerate Reliance Industries, Alibaba, Facebook, semiconductor components manufacturer Qorvo, Taiwan Semiconductor, Samsung Electronics, Australian mining services firm Mineral Resources and Dutch insurer NN Group. Fifteen equities contributed at least 0.25% to portfolio performance for the quarter, while only two equities (AbbVie and Citigroup) subtracted more than 0.25% from portfolio performance. We sold the remaining portfolio positions in Atlantia and easyJet to fund other opportunities. We added China Telecom to the portfolio in the September quarter. China Telecom is China’s second-largest mobile and fixed-line communications network operator and its largest data center operator. We made other position size adjustments for portfolio diversification purposes and to better balance the downside risk versus upside capital appreciation potential of individual positions.

The table below summarizes major sector weightings within the Global Opportunities portfolio as of September 30, as well as general directional changes over the course of the September quarter. We believe the extreme dislocation caused by COVID-19 will be temporary. As we write these words, many countries, including parts of the United States, remain under restrictive orders that reduce normal economic activity. When the pandemic passes, we believe people around the world will continue to buy goods and services and trade with each other, though there will be certain differences from prior norms. The global economy will gradually repair. In the meantime, most governments will make reasonable attempts to bridge the material dislocations we currently witness.

Table 2: Global Opportunities Fund—Major Sector Weightings and Directional Changes

Sector Weighting as of Sept. 30, 2020 Quarterly Movement
Communication Services 17% stable weighting
Information Technology 17% higher weighting
Financials 15% stable weighting
Consumer Discretionary 13% higher weighting
Industrials 9% lower weighting
Health Care 8% lower weighting
Materials 6% lower weighting
Our Investment Framework

Thornburg Global Opportunities Fund seeks capital appreciation from a focused portfolio of global equity investments. We believe the structure of the fund— built on our core investment principles of flexibility, focus, and value—provides a durable framework for value-added investing.

We urge shareholders of the fund to maintain a long-term investment perspective rather than placing too much emphasis on return figures that are available daily, weekly, monthly and quarterly. Clear examples of the need to keep a longer-term investment perspective are illustrated by comparing the 2020 year-to-date returns of your fund’s top 20 holdings as of March 31, 2020, with the returns as of September 30. Share prices of 14 of these top 20 holdings appreciated at least +10% during the last six months, only one saw a negative total return in $US terms over this period. We continue to follow our core investment principles of flexibility, focus and value, as we have since the fund’s inception back in 2006.

Remember that you can monitor the holdings of Thornburg Global Opportunities Fund and other fund information on our website.

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%.

Important Information

Unless otherwise noted, the source of all data, charts, tables and graphs is Thornburg Investment Management, Inc., as of 9/30/20.

Investments carry risks, including possible loss of principal. Additional risks may be associated with investments outside the United States, especially in emerging markets, including currency fluctuations, illiquidity, volatility, and political and economic risks. Investments in small- and mid-capitalization companies may increase the risk of greater price fluctuations. Investments in the Fund are not FDIC insured, nor are they bank deposits or guaranteed by a bank or any other entity.

The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.

Any securities, sectors, or countries mentioned are for illustration purposes only. Holdings are subject to change. Under no circumstances does the information contained within represent a recommendation to buy or sell any security.

Funds invested in a limited number of holdings may expose an investor to greater volatility.

The performance of any index is not indicative of the performance of any particular investment. Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index.

There is no guarantee that the Fund will meet its investment objectives.

Please see our glossaryglossary (www.thornburg.com/glossary) for a definition of terms.

Thornburg mutual funds are distributed by Thornburg Securities Corporation.

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