Thornburg International Equity Fund

4th Quarter 2019

Lei Wang, CFA
Lei Wang, CFA
Portfolio Manager and Managing Director
Di Zhou, CFA, FRM
Di Zhou, CFA, FRM
Portfolio Manager and Managing Director
Portfolio managers are supported by the entire Thornburg investment team.
31 December 2019
Market Review

International equities performed well in 2019 as a number of macro headwinds, which affected markets in 2018 (trade, monetary policy, Brexit), abated. After a fourth quarter selloff in 2018 left many stocks arguably undervalued, markets got off to a strong start in 2019, were choppy through the middle of the year and finished strong in the fourth quarter. For the year, the MSCI EAFE Index, which focuses on developed markets, returned 22.0% and outperformed the MSCI ACWI ex-USA Index, which returned 21.5%. The ACWI ex-USA Index includes emerging markets, which underperformed the broader index.

Fourth-Quarter 2019 Performance Highlights
  • In the fourth quarter, the Thornburg International Equity Fund (I shares) returned 9.22%, ahead of both the MSCI EAFE’s 8.17% return and the 8.92% return of the MSCI ACWI ex-USA Index.
  • Positive stock selection helped the fund’s relative performance versus the ACWI ex-USA during the fourth quarter, offsetting the negative impact of our underweight to emerging markets in an up quarter. Relative to the EAFE Index, our allocation to Emerging Asia drove outperformance. Versus both indices, our cash allocation was a modest drag to performance.
  • In 2019 the fund (I shares) outperformed the EAFE by 7.6% and the ACWI ex-USA Index by 8.1% in the best relative performance year since the fund’s inception in 2012. The substantial outperformance versus both indices was driven almost entirely by bottom-up stock selection, which is central to our investment process.
Current Positioning and Outlook

After a 29.6% return in 2019 (I shares), the fund enters 2020 with international markets less undervalued than in 2018 but with many positives intact: monetary policy remains supportive, trade momentum is positive, euro area Purchasing Managers’ Indices have bottomed and downside risk on Brexit has lessened. On the cautious side, geopolitical jitters have resurfaced, trade policy can change with a tweet, and the upcoming U.S. presidential election could bring negative surprises. In the fourth quarter, the fund added to the Basic Value basket and reduced Emerging Franchise, although Consistent Earner remains our largest allocation. The fund remains overweight the eurozone and underweight Japan and the U.K., although less so in all cases than earlier in the year. We are underweight Emerging Markets, mostly due to trimming of China and India into strength during the year. Communication services is our largest sector overweight and financials our largest underweight.

Important Information

Source of data: Factset, BBH, Confluence, Bloomberg—unless otherwise stated

Date of data: 31 December 2019—unless otherwise stated

This does not constitute or contain an offer, solicitation, recommendation or investment advice with respect to the purchase of the Funds described herein or any security. The Fund’s shares may not be sold to citizens or residents of the United States or in any other state, country or jurisdiction where it would be unlawful to offer, solicit an offer for, or sell the shares. For information regarding the jurisdictions in which the Fund is registered or passported, please contact Thornburg at contactglobal@thornburg.com or +1.855.732.9301. Fund shares may be sold on a private placement basis depending on the jurisdiction. This should not be used or distributed in any jurisdiction, other than in those in which the Fund is authorized, where authorization for distribution is required. Thornburg is authorized by the Fund to facilitate the distribution of shares of the Fund in certain jurisdictions through dealers, referral agents, sub-distributors and other financial intermediaries. Any entity forwarding this, which is produced by Thornburg in the United States, to other parties takes full responsibility for ensuring compliance with applicable securities laws in connection with its distribution.

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