A Laddered Portfolio of Limited-Term Municipal Bonds from Across the Country

Thornburg Limited Term Municipal Strategy is a laddered portfolio of investment-grade municipal bonds from throughout the country, with maturities of one to 10 years, and with an average duration around 3.5 years. An active management strategy, laddering portfolios helps mitigate the risks of bond investing and can generate attractive returns over time.

Working Photo"The Strategy has a classic 10-year laddered structure, but don’t mistake it for a passively managed portfolio. We manage the strategy actively, frequently freshening our targets for portfolio credit quality, duration, and exposure along the yield curve. We invest our time and effort in fundamental research, both before acquiring new names and to monitor existing holdings. The goal is to maximize income subject to maintaining a relatively stable principal value."

– Chris Ryon

An Actively Managed, Short/Intermediate Ladder

We build 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 at the top range of the ladder.

Laddering tends to perform well against other strategies because it captures price appreciation as bonds age and their remaining life shortens, and it reinvests principal from shorter, lower-yielding bonds into longer, higher-yielding bonds.

The strategy’s laddered portfolio structure is one of many important contributors (credit research also among them) to the total return an investor receives over an appropriate holding period.

Fundamental, Bottom-Up Credit Research

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 in full and on schedule.

We conduct thorough, bottom-up credit research on every bond we purchase, both to understand the ability of the issuer to repay obligations, and to ensure that investors are adequately compensated for the risk assumed.

Broad Diversification

The portfolio is composed of almost 2,000 separate positions, in part to ensure that a potential default or price decline of any one issuer has a minimal impact upon the net asset value of the portfolio.

In adjusting position sizes within the portfolio, we may take into account the credit quality of the issuer (with higher-quality credits typically being afforded larger position sizes), the extent to which each issue contributes to the duration of the portfolio, and prospectus limitations.

Important Information

Investments in the strategy carry risks, including possible loss of principal. Portfolios investing in bonds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. The principal value of bonds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. Unlike bonds, bond portfolios have ongoing fees and expenses. Carefully consider the strategy’s investment objectives, risks, fees and expenses before investing. There is no guarantee that the strategy will meet its investment objectives.

Weight percentages are of the total portfolio unless otherwise noted.

Portfolio characteristics are derived using currently available data from independent research resources that are believed to be accurate. Portfolio attributes can and do vary.

Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses.

The laddering strategy does not assure or guarantee better performance than a non-laddered portfolio and cannot eliminate the risk of investment losses.

Portfolios invested in a limited number of holdings may expose an investor to greater volatility.

Dividends are not guaranteed.

Income earned from municipal bonds is exempt from regular federal and in some cases, state and local income tax. Income may be subject to the alternative minimum tax (AMT).

Credit quality ratings for Thornburg’s municipal portfolios used the highest rating available from either Standard & Poor’s or Moody’s Investors Service.

A bond credit rating assesses the financial ability of a debt issuer to make timely payments of principal and interest. Ratings of AAA (the highest), AA, A, and BBB are investment-grade quality. Ratings of BB, B, CCC, CC, C and D (the lowest) are considered below investment grade, speculative grade, or junk bonds.

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. Investors may not make direct investments into any index.

Valuations are computed and reported in U.S. dollars.

Source: Advent/APX, FactSet and Thornburg.

View the Limited Term Municipal Composite GIPS compliant presentation.

To receive a complete list and description of Thornburg Investment Management's composites, please contact the Business Development Group at bdg@thornburg.com

Please see our glossary for a definition of terms.