2nd Quarter 2018

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For the second quarter of 2018, Thornburg All Cap Growth Strategy returned 6.65% (net of fees), outpacing its benchmark, the Russell 3000 Growth Index, which returned 5.87%. This brings the year-to-date return to 13.13% for the strategy, versus the index’s 7.44%.

Volatility returned to equity markets in early 2018 and continued through the second quarter. Global equities delivered a mixed performance in the April-though-June period, with U.S. indices in positive territory but international indices, particularly emerging market equities, posting negative returns on a dollar-denominated basis. The major theme of the quarter was escalating trade tensions, which dominated the headlines, and the risks they pose to the global economic upswing. We have yet to see recent trade actions play out negatively in corporate earnings in a broad-based manner. However, investors have already become less constructive on economically sensitive risk assets based abroad and market anxiety has appreciably increased.

Performance Discussion

During the quarter, the index delivered positive returns within all sectors except industrials. Energy was the top-performing sector as stocks there rallied on the back of rising oil prices. We saw slightly negative performance in the space as our overweight was offset by stock selection. Consumer discretionary was the second-best performing sector, and our overweight was additive, though stock selection detracted slightly. The sectors that most underperformed the benchmark were industrials and financials. We benefited from having zero holdings in industrials, however, an overweight to financials detracted. Stock selection was most additive within materials and information technology.

Top contributors to performance for the quarter included SVB Financial Group, DexCom, Inc. Facebook, Inc., Amazon. com, Inc., and Inogen, Inc.

SVB Financial Group operates a commercial bank serving emerging growth and middle-market growth companies focused on technology and life sciences. The stock rose following a strong quarterly earnings report, which beat street estimates based on an increase in overall funds, loan growth, and expanding margins, while expenses remained flat.

DexCom makes a glucose-monitoring system for diabetes patients that we believe is the best on the market and will remain so for the foreseeable future. Performance was challenged in 2017 due to concerns around competition. However, the stock bounced back earlier in the year and has continued gaining ground as it became clear that it is the market leader from a technological standpoint.

Internet companies were notable contributors during the period, rebounding strongly after a difficult first quarter. Facebook management’s performance in front of legislators and regulators, along with strong earnings, provided comfort that it can sustain its dominance as the leading social media platform.

Amazon continued to deliver very strong fundamental results as its well-publicized businesses grow at a high rate.

Inogen, a medical technology company, primarily develops, manufactures, and markets portable oxygen concentrators for patients, physicians, and other clinicians, and third-party payors in the U.S. and internationally. The company’s oxygen concentrators are used to deliver supplemental long-term oxygen therapy to patients suffering from chronic respiratory conditions, which they market directly to consumers. It reported strong quarterly results during the period.

Primary detractors from performance this quarter were Affiliated Managers Group, Inc., Alkermes plc, Zillow Group, Inc., Nevro Corp., and Walmart, Inc.

Affiliated Managers Group is an investment management company with holdings in an array of alternative, hedge fund, private equity, and traditional asset managers. During the period, the firm faced headwinds after announcing the loss of two large institutional clients and concerns that others may follow.

Alkermes saw its shares fall sharply as the FDA sent a Refusal to File (RTF) letter to the company regarding the firm’s pipeline depression drug ALKS 5461.Although the FDA rescinded the RTF letter just two weeks later and accepted the drug for review, the stock has yet to fully recover, and we exited the position on heightened pipeline risk and generally weaker trends in its marketed products.

Zillow Group announced significant product and business model changes during the quarter. The changes increased uncertainty around Zillow’s outlook.

Nevro is a medical device corporation that focuses on a spinal stimulation system for the treatment of chronic pain. Nevro posted earnings results below street expectations, however, guidance for the remainder of the year remained on track.

Walmart’s stock declined after disappointing results for its e-commerce segment.


The overriding wild card is trade and, given recent events, it is too early to expect a re-acceleration in global growth. The global economy can be vulnerable to even relatively small shocks, such as increased input prices due to tariffs. Trade actions have consequences and, over time, those can spill over into Main Street and the real economy. We hope that more rational heads prevail and trade tensions abate, but, given the risks from rising protectionism, we see volatility remaining heightened.

Our process and approach to investing remains consistent with a focus on high-quality companies with wide economic moats and low dependence on macroeconomic themes. The stocks we own have the potential to grow rapidly because of secular or stock-specific factors that we think can help them sustainably compound business value over long time horizons. This results in a collective portfolio of stocks that we believe can navigate even choppier seas and may provide our investors with a return profile that is attractive on a risk-adjusted basis over a full market cycle.

We thank you for investing in Thornburg All Cap Growth Strategy.

Contributors to Performance1
(Representative Account)
NameContrib %Avg Wgt %
SVB Financial Group 0.71 2.81
DexCom, Inc. 0.64 2.53
Facebook, Inc 0.62 3.09
Amazon.com, Inc. 0.59 3.54
Inogen, Inc. 0.52 1.10
Detractors from Performance1
(Representative Account)
NameContrib %Avg Wgt %
Affiliated Managers Group, Inc. -0.51 2.07
Alkermes plc -0.42 1.09
Zillow Group, Inc. -0.21 0.28
Nevro Corp -0.16 2.25
Walmart, Inc. -0.14 1.19

1. Past performance does not guarantee future results. To obtain the calculation methodology and a list showing the contribution of each holding in the representative account to the overall account's performance during the reporting period, please email a request to bdg@thornburg.com. The holdings identified do not represent all of the securities purchased, sold or recommended for advisory clients.

Important Information

Performance data for the All Cap Growth Strategy is from the All Cap Growth Composite, inception date of January 1, 2001. The composite includes non-wrap discretionary accounts invested in the All Cap Growth Strategy. Returns are calculated using a time-weighted and asset-weighted calculation including reinvestment of dividends and income. Returns are annualized for periods greater than one year. Individual account performance will vary. The performance data quoted represents past performance; it does not guarantee future results. Gross of fee returns are net of transaction costs. Net of fee returns are net of transaction costs and investment advisory fees. For periods prior to 2011, net returns for some accounts in the composite also reflect the deduction of administrative expenses. Thornburg Investment Management Inc.’s fee schedule is detailed in Part 2A of its ADV brochure. Performance results of the firm's clients will be reduced by the firm's management fees. For example, an account with a compounded annual total return of 10% would have increased by 159% over ten years. Assuming an annual management fee of .75%, this increase would be 142%.


 As of 6/30/18

1 Yr

3 Yr

5 Yr

10 Yr

Inception 1/1/2001

All-Cap Growth Composite (Net)
All-Cap Growth Composite (Gross)
Russell 3000 Growth Index

Unless otherwise noted, the source of all data is Thornburg Investment Management, Inc., as of 6/30/18.

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.

Holdings may change daily and may vary among accounts.

The information provided in this report should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an account's portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account's entire portfolio and in the aggregate may represent only a small percentage of an account's portfolio holdings. It should not be assumed that any of the securities transactions or holdings discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein.

Portfolio holdings and characteristics shown herein are from a representative account managed within the investment composite. The representative account is selected based on account characteristics that Thornburg believes accurately represent the investment strategy as a whole. Should these characteristics change materially, Thornburg may select a different representative account. Holdings may change daily and may vary among accounts, which may contribute to different investment results. The representative account information is supplemental to the strategy’s composite and GIPS compliant presentation.

Portfolio construction will have significant differences from that of a benchmark index in terms of security holdings, industry weightings, asset allocations and number of positions held, all of which may contribute to performance, characteristics and volatility differences. Investors may not make direct investments into any index.

Please see our glossary for a definition of terms.