"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."
— Connor Browne
Thornburg Long/Short Equity Fund offers investors the potential for competitive total returns, while helping to preserve capital during periods of higher volatility or market declines.
The fund offers:
- Competitive return potential that can complement a diversified portfolio.
- A risk management discipline, which helps 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.
Adding Thornburg Long/Short Equity Fund to a portfolio helps investors achieve greater diversification while offering the potential for attractive returns.
For most investors, equity market exposure is the main driver of total return over the long run. Extended bull markets, however, do not always end well, and can heighten overall volatility and unpredictability.
That’s why investors should consider actively managed alternative strategies like Thornburg Long/Short Equity Fund, which can help mitigate volatile markets over time as part of a diversified portfolio.
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.
- 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.
- Typically, the fund will invest more in long positions than shorts.
- Because it’s an active focused strategy, the fund will usually hold about 30-40 names in both long and short books.
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 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.