Thornburg Emerging Markets ADR Strategy

2nd Quarter 2021

Ben Kirby, CFA
Ben Kirby, CFA
Co-Head of Investments and Managing Director
Charles Wilson, PhD
Charles Wilson, PhD
Portfolio Manager and Managing Director
Josh Rubin
Josh Rubin
Portfolio Manager and Managing Director
Portfolio managers are supported by the entire Thornburg investment team.
July 1, 2021
Market Review

After sliding in February and March, emerging market equities regained traction during the second quarter. Despite strong positive returns, the quarter wasn’t without its challenges for the asset class. Higher than forecasted U.S. inflation, coupled with ongoing COVID outbreaks across some EM economies, contributed to downward pressure over the first half of May. In response to the inflationinduced volatility, global central banks worked to quell concerns over shorter-term interest rate tightening and accelerating vaccine distribution in India and Brazil helped further abate investor fears. As a result of improving investor sentiment, emerging markets outpaced developed markets over the back half of the quarter, with markets like Brazil and Russia taking the lead.

Second-Quarter 2021 Performance Highlights
  • The Thornburg Emerging Markets ADR Strategy-Wrap returned positive 2.54% (net of fees), modestly underperforming its benchmark, the MSCI EM Index, which was up 5.05%.
  • The utilities and financials sectors detracted from the strategy’s relative performance. Allocation effect was modest for both, but stock selection was a headwind. Information technology and real estate sectors both contributed positively to relative performance. Within information technology, strong stock selection drove outperformance, while in real estate, an underweight position was the primary driver of relative performance.
  • On a geographic basis, stock selection within China and Taiwan detracted from relative results. Brazil and Uruguay contributed strongly to relative performance, with stock selection being the primary driver in both cases.

Current Positioning and Outlook

While economic indicators continue to remain supportive of a broad-based reopening, global uncertainty still remains high. Implications of inflation, as well as the potential timing of central bank tightening are points of much consternation, and value and growth dynamics continue to battle for market leadership. We are maintaining heightened awareness of the sources of inflation across markets and considering where it seems like a healthy outcome of demand recovering faster than idled supply restarts versus certain segments truly getting overheated. Broadly, we view recent inflation spikes as transitory, primarily an outcome of shorter-term supply and demand imbalances, as economies find their post-COVID footing. Despite the global uncertainty, we believe current market forces remain supportive of emerging markets.

As always, our goal remains to participate in a variety market in environments and we’re focused on maintaining portfolio style balance, mitigating index relative volatility, and relying on our high conviction portfolio of strong businesses to drive future performance.

Important Information

Unless otherwise noted, the source of all data, charts, tables and graphs is Thornburg Investment Management, Inc., as of 6/30/21.

Performance data for the Emerging Markets ADR Strategy Wrap is from the Emerging Markets ADR Wrap Composite, inception date of November 1, 2018. The Emerging Markets ADR Wrap Composite includes broker-sponsored discretionary accounts invested in the Emerging Markets ADR strategy. The composite includes broker-sponsored accounts including those that may pay transactions costs that are not included in a bundled fee. 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. "Pure" Gross returns do not reflect the deduction of any expenses, including trading costs and are supplemental to net returns. Net returns reflect the deduction of the maximum total wrap fee which is currently 3% per annum. Net returns are derived from subtracting 1/12th of 3% from each account's monthly gross return. The total wrap fee includes all charges for the trading costs, portfolio management, custody and other administrative fees. The standard fee schedule currently in effect is: 1% to 3% on all assets. Fees may be negotiated in lieu of the standard fee schedule. Actual fees may vary depending on, among other things, the applicable fee schedule and portfolio size. The firm's fees are available upon request and also may be found in Part II of its Form ADV.

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 herein 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.

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