Thornburg International Growth ADR Strategy

Around the World in Search of Growth

Thornburg International Growth ADR Strategy is a bottom-up, focused, flexible, fundamentally driven portfolio of international growth American Depositary Receipts (ADRs) with the ability to invest in equities up and down the capitalization spectrum.

“We search for good businesses with promising growth prospects that trade at reasonable valuations. Good businesses typically have durable competitive advantages that lead to strong market share and high margins. We look for secular tailwinds and a large addressable market — to provide a long runway for growth. We also consider valuation a key component of investing and are only willing to pay a reasonable price for growth. Our goal is to build a diversified, all-weather portfolio that will perform well in both up and down markets.”— Greg Dunn

OVERALL APPROACH

Managed in a bottom-up, fundamentally driven, hard-research intensive fashion.

Managers enjoy true multi-cap flexibility: they’re able to buy many small- and mid-cap companies that other international growth strategies cannot. International markets tend to be less efficient and news-driven, which favors this flexibility.

While value managers often start from a place of valuation and decide whether a company is a good business, International Growth ADR Strategy managers start from a place of growth and ask:

Is there a long-term growth opportunity?
Is it a good business?
Is the valuation reasonable?

THE OPPORTUNITY SET

We look for:
Attractive growth characteristics: A large addressable market, long term structural tailwinds, secular growth drivers, and a high rate of growth with operational leverage.

Good businesses: High barriers to entry, quality management, durable competitive advantages, strong market share, high and sustainable margins.

Reasonable valuation: We consider growth prospects, business models, historical valuation ranges, conduct peer valuation comparisons, and look at investor sentiment.

DISTINGUISHING CHARACTERISTICS

Focus:Thornburg International Growth is more focused than many peers.

Risk management: We use a three basket approach (roughly equally weighted) to give us exposure to different types of growth stocks and provide an extra layer of diversification. We also diversify by country, sector and industry.

INVESTMENT PROCESS & PORTFOLIO CONSTRUCTION

International Growth uses Thornburg’s basket construct; we attempt to keep the exposure to each basket roughly equal to provide optimal diversification balance.

Consistent growth companies exhibit steady earnings and revenue growth; these companies often have subscription or other recurring revenue profiles.

Growth industry leaders often have leadership positions in growing markets, sometimes with dominant market share, and tend to be larger and more established.

Emerging growth companies are typically growing rapidly, often carving out a niche in an existing market. They tend to be smaller, earlier-stage companies. We expect these companies to generate high returns over time, but with higher volatility.