Global Opportunities Fund (UCITS) - Commentary

3rd Quarter 2021

Brian McMahon
Brian McMahon
Vice Chairman and Chief Investment Strategist
Miguel Oleaga
Miguel Oleaga
Portfolio Manager and Managing Director
Portfolio managers are supported by the entire Thornburg investment team.
1 October 2021

This portfolio manager commentary on Thornburg Global Opportunities Fund is published amidst the ongoing developments associated with the global spread of the novel coronavirus, COVID-19. Government bodies around the world have taken unusual steps to control the spread of the disease and mitigate the consequences of related economic disruption in order to keep the basic structure of the global economy in place as we resume normal economic activity now that the pandemic appears to be better controlled.

Thornburg Global Opportunities Fund’s (I share, accumulating) return of -2.31% for the September 2021 quarter trailed its benchmark (MSCI All Country World Index), which returned -1.05% for the quarter. For the trailing 12-month period ending September 30, 2021, your Fund’s (I share, accumulating) return of +34.15% exceeded the +27.44% return of the MSCI All Country World Index by +6.71%.

Most equities in Thornburg Global Opportunities Fund recovered strongly in the last 12 months from their March 2020 price troughs. Listed in Table 1 in descending order are the 20 largest equity holdings in the fund as of September 30, 2021, along with full year 2020 returns and 2021 returns through September 30 shown in $US. We also show the trailing 5-year average annual revenue growth rates for these businesses through year end 2020, or the latest reported fiscal year end. Together, these firms comprise approximately 77% of the fund’s total assets, nearcash debt comprises 2% of fund assets, and 15 other equities comprise a total of approximately 21% of fund assets. Individual position sizes of the fund’s top 20 positions range from 5% or more (Reliance Industries and Capital One) to approximately 2.7% for those shown near the bottom of this list.

Global Opportunities Fund’s businesses whose share price performances lagged the overall market in 2020 performed better in the first half of 2021. All 8 of the 20 largest investments listed in the table that delivered negative returns in calendar 2020 turned around to deliver positive returns in 2021 through September 30. The reader will notice a high incidence of investments in firms tied to the digital economy, and in providers of tools to facilitate digital communications.

Table 1 | Global Opportunities Fund—Top 20 Equity Holdings (as at 30 Sep 2021)

(Together, these 20 investments account for approximately 77% of fund assets as at 30 September 2021, near-cash debt comprises 2% of fund assets, 15 other equities comprise a total of approximately 21% of fund assets).

Name of Company 2020 Year Returns ($US) YTD Returns to 30 Sep 21($US) Trailing 5-Yr Annual Revenue Growth Rate 2015–2020*
Capital One Financial -3.0% 52.5% (per share) 7.6%
U.S. consumer oriented commercial bank
Reliance Industries 29.5% 24.8% 9.5%
India-based conglomerate: chemicals, refining, #1 mobile telco and #1 retailer in India
Alphabet, Inc. “A” (Google) 30.9% 39.3% 19.6%
Internet-based search & advertising, content, software applications, and data centers
Samsung Electronics 59.7% -15.2 (per share) 5.0%
Manufactures consumer & industrial electronic products; leading semiconductor producer
OCI NV -8.7% 53.7% 9.7%
Producer & distributor of natural gas-based fertilizers and industrial chemicals
Facebook 33.1% 24.2% 36.3%
Global social networking, communications, internet-based content, and advertising
Charles Schwab Corporation 13.6% 38.4% (per share) 11.1%
U.S. centric wealth management platform, securities brokerage, and bank
NN Group 22.4% 27.4% 8.0%
Netherlands-based life and casualty insurer
Citigroup -19.6% 18.0% (per share) +7.0%
Multi-national banking & financial services firm
Barratt Developments -7.6% 0.2% 2.2%
UK-based homebuilder with large land bank and no net debt
AbbVie Inc. 27.6% 4.2% 14.3%
Develops and sells pharmaceutical products
Vestas Wind Systems 138.5% -15.2% 14.7%
Manufactures, markets and services wind turbines for electricity generation, based in Denmark
Total Energies SE -16.4% 17.2% -3.6%
Global oil & gas producer and distributor and low carbon electricity supplier
TJX Companies 12.2% -2.3% (per share) 3.1%
Leading off-price apparel & home fashion retailer with > 4,000 stores worldwide, TJ Maxx
Qorvo 43.1% 0.6% (per share) 7.9%
U.S.-based manufacturer of integrated circuits for wireless communications devices
CF Industries -15.8% +59.3% -0.9%
U.S. based nitrogen & phosphate fertilizer manufacturer & distributor  
L3Harris Technologies -2.7% 18.2% +29.1%
U.S. defense, technology and aeronautics company
Taiwan Semiconductor 75.4% 11.9% 9.7%
Largest global semiconductor manufacturer
Alibaba Group Holding 9.7% -36.4% 48.0%
China-based provider of internet infrastructure, e-commerce, and content services
Tesco -2.6% 10.5% 1.4%
UK-based food & general merchandise retailer with > 4,000 stores & online presence

* 2020, or latest fiscal year, if completed and reported during calendar 2021

These are not trivial businesses. They tend to be well capitalized. Most of these have emerged from the 2020 economic valley with their competitive positions intact or improved. As the trailing annual revenue growth rates indicate, most have been growing faster than the global economy in recent years. Some of the slower growers over recent years appear to be advantaged in their industries at this time.

Performance comparisons of Thornburg Global Opportunities Fund to its benchmark over various periods are shown on the previous page. From its inception on March 30, 2012 through September 30, 2021, Thornburg Global Opportunities Fund (I shares, accumulating) has outpaced the MSCI All Country World Index by an average margin of over 1.2% per year, resulting in a total cumulative return since inception of 184% (I shares, accumulating) versus 157% for the MSCI All Country World Index.

Top contributors to portfolio performance during the September quarter included Reliance Industries, agricultural fertilizer manufacturers OCI NV and CF Industries, Netherlands-based insurer NN Group, Philippines broadband internet service provider Converge ICT Solutions, Alphabet (aka Google), France-based diversified energy provider Total Energies, Tesco, and Capital One Financial. Nine equities contributed at least +0.25% to portfolio performance for the quarter. Ten equities subtracted more than -0.25% from portfolio performance, with the most significant detractors being Alibaba Group, Samsung Electronics, Mineral Resources, Qorvo, and Galaxy Entertainment. We made various position size adjustments during the September quarter for portfolio diversification purposes and to better balance the downside risk vs upside capital appreciation potential of individual positions.

Table 2 summarizes major sector weightings within the Global Opportunities Fund portfolio as of September 30, as well as general directional changes over the course of the September quarter: We believe the extreme dislocation caused by the Covid-19 pandemic will be temporary. Restrictions on movement and business operations remain in place in certain countries, but these are loosening. The global economy is rapidly repairing and aggregate demand is strong. Economic news flow today is dominated by stories of shortages of labor, energy, semiconductors, other materials, and tight conditions in global shipping and logistics. People around the world continue to trade with each other, and we expect global trade and consumption to trend higher in the coming quarters.

Table 2 | Global Opportunities Fund—Major Sector Weightings and Directional Changes

Sector Weighting (%) as at 30/09/21 Quarterly Movement
Financials 18 higher weighting
Communication Services 16 lower weighting
Information Technology 14 lower weighting
Materials 12 higher weighting
Consumer Discretionary 11 lower weighting
Energy 9 higher weighting
Health Care 9 higher weighting
Industrials 7 higher weighting
Consumer Staples 3 higher weighting
Our Investment Framework

Thornburg Global Opportunities Fund seeks capital appreciation from a focused portfolio of global equity investments. We believe the structure of the fund—built on our core investment principles of flexibility, focus, and value—provides a durable framework for value-added investing. We urge shareholders of the fund to maintain a long-term investment perspective rather than placing too much emphasis on return figures that are available daily, weekly, monthly and quarterly. Clear examples of the need to keep a longer-term investment perspective are illustrated by comparing the trailing 12-month return of your fund as of March 31, 2021 [+76.4%] with the returns from the single quarter ending March 31, 2020 [-25.1%]. In general, the businesses in your portfolio have managed well through the Covid-19 impacted quarters despite the initial impact of the pandemic on their share prices. We continue to follow our core investment principles of flexibility, focus, and value, as we have since the fund’s inception back in 2012.

Important Information

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

Date of data: 30 October 2021—unless otherwise stated

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