International Growth Fund - Commentary

3rd Quarter 2020

Greg Dunn
Greg Dunn
Portfolio Manager and Managing Director
Sean Koung Sun, CFA
Sean Koung Sun, CFA
Portfolio Manager and Managing Director
Portfolio managers are supported by the entire Thornburg investment team.
October 1, 2020
Market Review

Equity markets extended their rally from the prior quarter, continuing the recovery process after
a sharp pandemic-induced sell off in the first quarter. Many equity indices, most notably ones
with a growth tilt, such as the MSCI ACWI ex-USA Growth Index, reached all-time highs in the
third quarter. This feat was achieved despite broad economic conditions remaining relatively
weaker than prior to the onset of the global pandemic. The level and pace of fiscal and monetary
stimulus deployed has been unprecedented but is clearly contributing to early signs of economic
revival and growth. Encouragingly, countries like China that started coping with the virus earlier
are further along on the path towards economic normalization. Notably, because of this rapid
recovery, China is the only large-sized economy forecasted to post real economic growth
this year.

Third-Quarter Performance Highlights
  • The Thornburg International Growth Fund returned 12.02% (I shares), outperforming its
    benchmark, the MSCI All Country World ex-US Growth Index, which returned 10.16%.
  • Top contributors to performance by sector were consumer discretionary and communication
    services, where stock selection drove much of the outperformance. While information
    technology was a positive contributor, overall it had the largest negative relative impact on
    performance due to stock selection from a single outsized detractor.
  • Top country performers were Japan and the Netherlands, with the former being underweight
    and the latter overweight versus the benchmark. Stock selection drove most of the collective
    outperformance. The countries that detracted the most from relative performance were the U.K.
    and Korea.

Current Positioning and Outlook

The portfolio outperformed in the third quarter as the rally in “growth” stocks continued,
although at a moderated pace from the second quarter. The relative outperformance stems from
our stock selection and focus on owning great companies with long duration growth prospects.
Many of the companies we owned benefited as the current environment accelerated the pace
of adoption of various secular trends and themes. Some of these themes include the increasing
digitalization of the world through e-commerce, streaming video, online education and video
games, as well as enabling technologies like digital payments and cloud computing.
While the global economy is clearly recovering, the path to a full recovery could be long and
uneven. However, an increasingly likely outcome is that people will work, interact, spend and
entertain themselves in different ways than before the crisis, even with a vaccine available. We
see this as a fertile environment for bottom-up investors that employ an intensive fundamental
research process to evaluate and discern the long-term beneficiaries of these trends.
The lasting economic damage from the pandemic remains opaque, but we believe our portfolio
is well positioned given its exposure to high-quality businesses with durable growth prospects
and is well balanced through our three-basket structure, which also supports our ability to
nimbly reposition in response to an everchanging world.
Thank for your continued support and for investing alongside us.

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 7/1/20.

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.

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.

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