Thornburg Limited Term Income Strategy is a flexible, actively managed, core portfolio of high-quality U.S. dollar-denominated bonds. This centerpiece investment-grade portfolio seeks a reasonable level of income and lower volatility than some peers, without overextending in the pursuit of yield.
The Limited Term Income Strategy is designed to range across the investment-grade bond market to look for the best opportunities available in the context of a high quality, laddered portfolio. As the vast majority (around 85%) of the U.S.-dollar investment-grade bond market matures within 10 years, we believe that we can provide a large portion of the reward of U.S. bonds without much of the heavy interest rate risk in the longer end of the yield curve. We will continue to strive to bring as much income as is consistent with lower volatility and a focus on balancing risk with reward.”
— Jason Brady
In bond investing, nothing is more important than determining whether the party to whom you propose to lend money has the ability and willingness to pay you back. Rigorous research into the fundamental creditworthiness of an issuer is critical.
In the Limited Term Income portfolio, issuer credit quality is high, with 58% of the portfolio rated A or better.
As with other Thornburg portfolios, flexibility is key. While Limited Term Income is structured as a 10-year ladder, we enjoy the flexibility to invest wherever we see the most value. Analysts and portfolio managers are expected to be conversant across a wide range of asset classes and geographies.
Limited Term Income Strategy is a 10-year laddered portfolio, managed with an eye toward mitigated volatility. Of course, markets are inherently volatile at times, so some price movement is to be expected. But through careful credit research and portfolio construction, we seek to mute price change.
Many “core” investment-grade bond strategies seek to enhance yield by extending duration, lowering credit quality, and even through the use of leverage. While the Limited Term Income Strategy is flexible in pursuit of its goals, we keep things reasonable. We want a reasonable level of income commensurate with a moderate level of risk assumption; we won’t assume undue risk in pursuit of a few extra basis points.
Laddering involves building a portfolio of staggered maturities so that a portion will mature each year. Money from maturing bonds provides an organic source of cash flow and is typically reinvested in longer-maturity bonds within the range of the ladder. In the case of Limited Term Income, the ladder ranges from zero to 10 years.