Thornburg International Equity Fund - Thornburg Investment Management

AROUND THE WORLD IN SEARCH OF VALUE

Thornburg International Equity Fund is a focused, diversified portfolio of leading, mostly large-cap international companies, selected via a fundamentally driven, bottom-up, valuation-sensitive process. The fund is centered on providing attractive risk-adjusted returns with mitigated volatility versus its benchmarks.

“Our core stock selection philosophy centers on building a focused but diversified portfolio of international companies. We like to find industry leaders when they are out of favor, offering value in the context of long-term prospects. The portfolio will be invested primarily in the developed markets of Europe and the Asia Pacific region but does include some emerging-market holdings. We believe diversification among three types of stocks (basic value, consistent earners, and emerging franchises) provides the opportunity for our portfolio to produce positive total returns over time. Stock selection is a key element in achieving our investment objectives.”

— Lei Wang, and Di Zhou

A FOCUS ON RISK-ADJUSTED RETURNS

We focus on constructing a core portfolio with potential to outperform benchmarks over time — with lower volatility. One way we mitigate volatility is via Thornburg’s three-basket diversification construct:

Basic Value: Companies generally operating in mature industries and which generally exhibit more economic sensitivity and/or higher volatility in earnings and cash flow.

Consistent Earners: Companies which generally exhibit predictable growth, profitability, cash flow and/or dividends.

Emerging Franchises: Companies with the potential to grow at an above average rate because of a product or service that is establishing a new market and/or taking share from existing participants.

A BROAD, NUANCED VIEW OF VALUATION

Some value managers who don’t diversify across a basket structure may have a narrow view of valuation, with a single set of metrics or constraints by which they evaluate stocks. Our view of valuation is flexible and varies across basket structures. It is a broader, more nuanced, less formulaic take.

A CONSISTENT, REPEATABLE PROCESS

We have selected stocks via the same bottom-up, collaborative, fundamentally driven, repeatable process since the U.S. mutual fund’s inception more than 15 years ago.

SEEKING PROMISING, QUALITY COMPANIES AT A DISCOUNT

We look for promising, quality companies — industry leaders with modest financial risk and demonstrated management competence — trading at a discount to their intrinsic value.

A FOCUS ON ECONOMIC EXPOSURE, NOT COUNTRY OF DOMICILE

We generally focus on a company’s economic exposure (the countries or markets from which it derives most revenues) not its country of domicile. Of the ten largest holdings, most operate in a number of countries worldwide, with a significant share of sales and earnings from outside the country of domicile.

EMERGING MARKETS EXPOSURE

The portfolio has historically had exposure to emerging markets — either through firms domiciled in emerging markets or through firms that derive a large portion of revenues from them. The inclusion of emerging-markets holdings, while they are often more volatile, has benefitted the fund over the years.

BENCHMARK AWARE, NOT BENCHMARK DRIVEN

While we respect the necessary role a benchmark plays in assessing management skill, we don’t use benchmarks as starting points in constructing the portfolio. We focus on individual security selection and managing risk.