Thornburg Investment Income Builder Fund – 1st Quarter Update 2026

Thornburg Investment Income Builder Fund – 1st Quarter Update 2026

Adam Sparkman: Good afternoon, and welcome to the Thornburg Investment Income Builder quarterly update call. My name is Adam Sparkman, and I am a client portfolio manager with Thornburg Investment Management. A few housekeeping items before we get started. At this time, all participants are in a listen-only mode. However, you can ask questions at any time by submitting them through WebEx or emailing us at Questions at Thornburg.

This webcast is being recorded and a replay will be available shortly. You can ask for access today’s presentation slides by clicking on the three dots in the bottom of your WebEx screen and clicking on Download Presentation. If you are unable to download the presentation, please email us at Questions at Thornburg or let us know in the webcast question box and we will send you a copy of the deck.

Just to remind you, today’s presentation may contain forward-looking statements based on management teams’ current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these statements due to various factors, including those described in our SEC filings. For those in the call today who may be less familiar with Thornburg, we are an investment manager based in Santa Fe, New Mexico, overseeing approximately $60 billion of assets across a suite of actively managed equities, fixed income and multi-asset solutions.

I’d like to quickly introduce our speakers today. Brian McMahon, portfolio manager, vice chairman and chief investment strategist for Thornburg, along with our head of equities, Matt Burdett, and our head of fixed income, Christian Hoffmann. So with that, let me turn it over to you, Brian, to kick us off.

Brian McMahon: Okay. Thank you. Adam. And thanks to everyone listening to this call. I’ll start out with the slide deck. Slide number two and refer to that key macroeconomic issues at the moment. And of course, the big news is the Iran war every single day. And how that’s moving markets based on some news or statement or tweet. But importantly the war has cut the supply of oil to world markets by about -10%.

So the WTI spot price is up 42% since late February. And similar moves by spot all prices in other markets. The one-year forward contract West Texas oil price is up about 18% to $74 a barrel as of yesterday. Most forecasts of future global GDP and US GDP have been cut a bit in recent weeks, and we’ll see how the war plays out.

But if it continues with the present stalemate on the Straits of Hormuz, I would expect some further cuts. Consensus published forecasts of equity market earnings are expected to grow by at least 10% this year and next in the US. So far, we have not seen material cuts to earnings forecasts, but I do expect to see some guidance cuts when companies report earnings, not across the board, but from a variety of businesses.

I’ll note that the Bloomberg Commodity Spot Price Index is up 35% year-over-year as of early April. So we do expect to see some inflationary pressures build in the US. And that does put some pressure on central bankers, puts them in a bit of a difficult position. There’s obviously a wide range of opinions among Fed governors on what to do next.

And last but not least, I’ll just point out the growth of the US labor market has slowed up only 260,000 payrolls per year as of March, the latest. So that’s well below the million plus that we were getting in prior years. And with that, I’ll go to slide three and on to the income builder. It’s been a very good quarter and a very good year for Thornburg Investment Income Builder.

Just remind you our objective is to pay an attractive yield today. Grow the dividend over time. And we believe if we do that we’ll get long term capital appreciation. And we kind of saw all of the above in the last quarter in the last year. We have an NAV today, last night of $37.78 per share. And I’ll just remind you, we started out at $11.90 per share.

Back at the end of 2002. The Navy is up more than 39% in the trailing one year. And as far as the income goes, trailing four quarters, we paid dividend of $1.29. That’s up from $0.53 in our first full year. And if you include capital gains dividend 195, which is a yield of 5.16% on last night’s NAV. Last year’s dividend was 84% treated as qualified dividend income, which I think is good.

And last year’s dividend trailing year dividend is up 3.9% year over year. The slide 4 the next slide has an overview of our allocation shifts by sector in the equity portfolio. And just to highlight, if you look back over the trailing year, we’ve increased our allocation to communications services businesses and infotech businesses, the latter mostly on appreciation. Also some increase to industrials businesses and basically have paid for that with reductions in our allocations to healthcare and utilities businesses.

Also, a modest reduction in financials out to financials over the trailing year. If we go to slide five, you’ll see an overview of summary portfolio characteristics. We continue to have a majority of our equity exposure to foreign equities. And that was amped a little bit last year by the currency appreciation of the foreign investments. If you look at our PE trailing PE weighted average 16.2 times the forward estimate is 13 times, which implies strong double-digit expected growth. I don’t think we’ll probably see that. I’d be thrilled if we did. But anyway, that’s where the estimates come out at the moment. And weighted average dividend yield 3.5%, which is roughly two x that of the equity benchmark. Go to the next slide number six. I’ll just consider six and seven as one slide. This is our top 20 equity holdings. And combine these accounts for 60% of the fund assets as of March 31st. I’ll just point out in Q1 we had 15 of these top 20 that had a positive price change in US dollars and five that had negative price changes in Q1. And that compares to last year. In the second column, we show the price changes of each of those stocks last year and last year, all 20 of them had positive price changes in US dollars. And the far right. We have the all important five year local currency dividend growth rate. And if you mush all those together and put them into dollars, it comes out pretty close to the plus 4% year over year that we delivered for the four quarters ending March 31st.

And in the income builder with that, I’ll go to slide number eight and eight through 17. Just give you more detailed information on each of our top ten holdings in Thornburg Investment Income Builder. And I won’t talk about each one of these, but I would like to highlight something that we referenced in most of these slides. And that is periodically these businesses will experience some price declines.

And if I look at Orange on slide number eight, which is our largest holding as of March 31st, I just remind you, if you look at that chart or on stock, price declined by 34% between mid-February and September 30th of 2020. Now, it didn’t decline because they lost customers. In fact, they gained paying customers and have gained paying customers each quarter going back over this period. It was the Covid period. And if you think back to how much you depended on your digital connection to a Covid, it’s a bit ironic that the price went down that much and it has it has recovered nicely, but it took a long time for it to recover nicely.

And all I can say is we did add to the position because we were watching the fundamentals of the business over this period, and we had a number of opportunities to add to the position in Orange. And there’s similar things with respect to most of these other slides. I’ll just point out, because they just reported earnings overnight, Taiwan Semiconductor, which is a bit the bell of the ball at the moment, but its stock price was down 34% in 2022. That’s on slide nine. On slide 13 NN Group stock price was down 29% over a period of quarters through mid 2023. And again, the business was growing the whole time. If you look at Broadcom, it’s hard to even see it on slide 15.

But the stock price was down 48% in the first quarter of 2020. And last but certainly not least, another current darling, Samsung, was down 29% in the four quarters through June 30th of last year. And they just announced their Q1 revenue up 68% year over year. And you can see what’s going on with that stock chart. They never lost their position as the largest supplier of memory to the market and also largest global manufacturer of handsets.

So, this is all just to point out that we don’t get hung up on short-term fluctuations. We’re really focused on the underlying characteristics of the business. And is there growth in paying customers. And do we have the cash flow that supports the ability to pay and the willingness to pay that we’re looking for in Thornburg Investment Income Builder.

And I’ll close out with slide number 18, which just shows the dividend growth of the current portfolio last year. And what you see is 77% of our holdings grew their dividend in calendar 2025. We had 7% with a flat dividend and 16% that had a down dividend over the year, and a good chunk of that 16%. We’re lacking a special dividend that they paid in calendar 2024.

So we are hoping for and expecting broadly similar dividend growth from our equity portfolio this year. And with that, I’ll turn it over to Matt Burdett.

Matt Burdett: Thanks, Brian. And thanks everyone for joining. I will begin on slide 19. Given this is an income solution. We thought it’s good to kind of show how the Thornburg Investment Income Builder Fund has behaved in different rate environments. And on this slide what you can see is we’ve segmented the performance of the fund versus differing levels of fed funds rate.

So we’ve kind of banded into three buckets 3% or higher 1 to 3% and less than 1%. And you can see over the 93 quarters here the performance of the Thornburg Investment Income Builder Fund versus our blended index. It’s a pretty reasonable and easy picture to see someone rates when the fed funds rate is 3% or higher.

We tend to we have outperformed the blended index by 756 basis points per annum, as indicated on the slide. And then versus the MSCI world, if it’s 4.5% per annum, and then you can see the other numbers on the slide. And really I think over all periods we’ve managed to outperform the blended index by about 265 basis points annualized, and then the MSCI world by 78 basis points annualized.

And this is over the 23 plus year history of the fund. As you all know, the fed funds rate today is 3.63. The 40-year average is actually kind of close to that about 3.33%, although it’s heavily weighed down by the post-GFC quantitative easing period where interest rates were near zero. So I think it’s important to kind of put that into perspective.

Advancing to the next slide. This is just a slide highlighting selected global market portfolios here. Q1 was not the greatest quarter for financial asset returns. You can see here that the 3000 Growth Index kind of was at the bottom of the pack, down about 9.5% in the quarter. And others, the S&P 500 down about 4.4%, the euro stocks down 5%. I will say that the Japan index was up 3% in yen at about 1.3% in US dollars. You can see the numbers for other calendar years there. It’s not on the slide, but I would just kind of highlight everybody is well aware that since the end of Q1, the market has recovered quite, quite dramatically. This is just from a Bloomberg screen from three 3126 to almost through the end of today.

Did this earlier in the day. So the S&P is up about 8%. You know, basically in the last couple of weeks. The ACWI ex-US, that is up 10.3%. Emerging markets index is up almost 15%. And then the IFA is up about 8.5%. So it’s a pretty strong recovery. We’ll have to see how durable that is. Advancing to slide 21.

This is just highlighting the performance of the Thornburg Investment Income Builder over differing periods as well as calendar years. You know, as Brian mentioned earlier, the quarter was one of or if not the strongest relative performance that we’ve delivered in our history. So that was a good outcome for shareholders here. And I guess I would just highlight on here the inception column for the iShares is 10.7% per annum since inception.

And then the five-year annualized is about 15.5%, per annum over that time frame. Advancing to slide 22. This is showing the quarterly returns of the fund over time. These are the iShares. We’ve just completed the 93rd quarter. 69 of those quarters were positive or, you know, a win rate of 74%, I guess I would call it. 18 of the 23 calendar years have also been positive.

Slide 23 is just another reminder that this is an income solution. It’s a dynamic, approach to asset allocation. We think we’re relatively unique in that regard. And what this slide is highlighting is over time, the dark blue line is the Investment Income Builder cash and fixed income allocation. The dashed lines are the yield to worst for us, high yield, and blue, and then European high yield, and orange. It’s a pretty it’s a pretty simple picture when we believe credit and fixed income is offering us equity-like returns. And you can see that on the y axis, on the right side, the yield to worst, you can see that the allocation to bonds went up pretty dramatically, up to 45% when the yield to worst was around 20% or so.

So definitely equity life returns there. You should expect us to continue with this, this kind of a risk-adjusted mindset, you know, as we look to produce income and the income builder fund. Moving on to slide 24. This is just a table of quarterly distributions. Brian highlighted some of this. The Q1 26 dividend was up 7.9% year on year.

The trailing dividend of $1.29 per I share was up 3.9% year on year, advancing to slide 25, this is showing calendar year yield comparisons of the Thornburg Investment Income Builder yield, which is the silver bars vertical bars compared against our blended index which is the light blue. The Bloomberg US corporate bond index is in orange and then CPI is in is in the black or dark blue.

And what you can see here is we’ve had a consistently higher yield over most of the history, all of the history versus the blended benchmark. And I guess the one thing I would just point out here is, you know, if you think about CPI and where it is today. So from when we launched this product in December of 2002, up to December of 2020, CPI averaged 2.1% in core PCE what the fed looks at average 1.69% from 12 from extending that period from 1231 2020 to current, the average CPI is 4.4% and core PCE is 3.7%. So it’s a very different inflation backdrop over time. What we’ve managed to do is grow the dividend. As is Brian mentioned earlier, the CAGR 2003 to 2025 is 4.1%, and then the net asset value grew 4.5% over that time frame. Advancing to slide 26. Getting on to the report card. How have we done? We update this this slide and the following one every quarter. So this is a hypothetical $100,000 investment in the A shares. Basically since inception of the fund. And what you can see is the dark blue line is the market value of the investment over time. And then the vertical orange bars are the quarterly dividends paid.

And in this example, this individual perhaps is a client. You may have that once the income they want to, they want to use the income for whatever purposes they needed for. And so those dividends are not are not all reinvested. And what you can see is the trailing 12-month yield is 3.4%. The trailing 12-month dividend is $11,045. And so that’s if you think about a yield on original cost of $100,000. That’s an 11% yield on cost. And looking at the cumulative dividends received over this time, you have $198,388 received. If you were to do that on an average annual basis, it would be $8,532 per year received over this little more than 23-year period, or an 8.5% yield on original cost.

And the capital base grew from $100,000 to $330,804 over time. Again, this is dividends not reinvested. If you advance to slide 27. This is the same hypothetical example, though. This this individual is perhaps earlier, younger and still working and doesn’t need the income right away. So these are all of the dividends paid have been reinvested into the Thornburg Investment Income Builder over time.

Again a 3.3. 4% yield. But the cumulative dividends over time are now $376,459. And with all of those dividends, more shares have been repurchased. You started off with 8,375 shares, now at 27,645 shares. So it’s a 3X increase over time. And then the capital, of course, has also appreciated the original $100,000 growing to $616,273, the total account value now sitting at $992,733. That, of course, includes the original $100,000 investment. Just to think through, you know, the transition of a client who then decides, hey, you know what? Now, I would like the income. Well, in this, in this example and the A shares paid a $1.20 on the trailing 12-month basis. So, if you take that and multiply it by the 27,645 shares now owned, if they wanted to turn this on and collect cash dividends, that would be about 33,450. So basically over 33% yield on original cost. If this individual decided to turn that on. So this is what we’re trying to do in this strategy is just utilize, you know, dividend paying stocks and fixed income when compensated for it, to produce an income stream that that grows over time. And the last slide I have is on slide 28, just as a reminder for everyone who asks themselves, where’s the total return going to come from?

This slide is fairly instructive and at least giving you a sense for the breakdown of price return versus income return and the S&P 500 index. What we’ve done here is we have a table that segments by decade. And it looks at the average annual price component, the average annual income component. The sum of the two is the total return.

And then income as a percentage of total return in the far right column is basically telling you how much of the total return received on average in that decade was due to dividends, and the take home is simple. It’s roughly half. Half of your total return comes from dividends over time, however, it’s highly variable as the percentages and the far right column highlight.

I just will note a couple of them. So the 91 to 2000 decade that’s the dot com boom price return on average was 14.9%. Over that decade, dividends were roughly 14.9% of your total return. So not so important. However, the following decade, 2001 to 2010, the average price return was -50 basis points and therefore dividends were more than 100%. In this case, 135.7% of your total return. You can see the next two decades, and interestingly enough, the current decade we’re in is halfway complete and it’s the lowest income percentage over the entire series at 12.7%. So we’ll have to see where things go from here. But, you know, I think Brian highlighted an important detail going through some of the select names in our top holdings, where it takes time often for the market to appreciate some of these income producing dividend payers.

And so, with this with this slide here kind of gives you a little bit of a flavor for where total returns have come from and where they might come from in the future. So with that, I’ll pass it back to you, Adam.

Adam Sparkman: All right. Thanks Matt and Brian for the color. We’ll switch over now to Q&A. Christian, I’ll kick it off with a question for you about fixed income markets. There’s a call out that some of the geopolitical volatility that we’ve seen here lately feels a bit like last year. And wanted to get your thoughts if you agree with that sentiment or kind of what the differences are?

Christian Hoffmann: Certainly, the charts and the timing. I wouldn’t say they’re exact, but there’s certainly a lot of overlap. I guess also the reasonably quick resolution as it relates to markets and certainly not, I guess, the underlying drivers, certainly there’s tremendous uncertainty around there, particularly for this year, you know, relative to last year. Just, you know, sitting on the desk looking at fixed income markets, it has not been the same. They were both widening events, but the magnitude was actually pretty different. You know, we started with high yield spreads in the mid two hundreds in early 2026. Same is true for 2025. But at the wides, the high print this year was actually only 338. That compares to 450 a year ago. And not only were they higher, you know, at the highs, but for a more prolonged period. If you look at underlying interest rates, you see a pretty notable difference in magnitude as well. From, you know, a range of 399 to 479 relative to 393 to 430. That’s on the ten-year, you know, in a pretty similar magnitude on the two-year, you know, sitting on the desk, you know, every market selloff is different.

But the the stages feel very similar. You know in the first innings of a market sell off, you know, actually nothing happens like no one is freaked out. Everyone’s waiting to see, you know, if it’s real and if it’s going to stick. So really the first thing that you see is a lack of issuance. And really people, people sitting on their hands for, for a short period of time, I would say the second and the third inning are dominated by a lot of front end paper coming out. And really that’s across structured product, high-quality and low-quality credit is folks who are dealing with flows, whippiness, trying to create some dry powder in their portfolios. They generally want to sell the thing that’s down the least on a price basis. And that tends to be front end paper really weighted by the duration impact. So we’ve done a pretty good job of picking up that paper, you know, during the early stages of a sell off. And that was certainly true. You know, over the past 6 to 8 weeks. That said, we didn’t really get into, you know, the innings beyond that, we actually start to see much more severe market volatility. We did see more of that last year. Again, not a tremendous amount, but we did not see that this year, to date.

I should all you know important caveat here is is to date. And what we’ve seen US stocks actually make new highs. You know we have not seen will revert to you know pre-war levels. Nor have you seen yields revert to to pre-war levels. Even those spreads have done pretty significant retracement. Now just one step deeper on all and yields because they seem related. But actually you know if you dig a bit deeper there’s something of an interesting disconnect there. People apologizing for oil or the potential disruption effect of oil are really looking at the future price of oil, which has remained pretty contained and subdued, you know, despite the short-term and near-term volatility. And that’s a reasonable explanation.

But there is no analog in, you know, in the rates market that the rates market prices in, you know, all future known and unknown news and expectations. So it is interesting that we’ve had, you know, a full retracement and then some in many equity markets. And frankly really an intellectual divergence both you know in oil and you know an underlying core rates.

Adam Sparkman: All right. Thanks for that Christian Brian I’ll come to you next. But quickly before I’ll just reiterate what we mentioned at the beginning of the call, because I see a few questions here. If you’re unable to download the slide deck and you’ve tried hitting the three buttons in the bottom and it still hasn’t worked, certainly email us at, questions@thornburg.com, or respond in the box here with your email address, and we’ll get those over to you as soon as we can.

Brian, to dive into some of your equity positions. One of the questions notes that nine of the top 20 holdings were up double digits on a price basis over 2025, as well as in Q1 of 2026, and wanted to get some color from you about the earnings. And if they’ve been coming through in a way that justifies the price movements that you’ve seen.

Brian McMahon: Yeah. Great question. Broadly, the answer to that is yes. The earnings have been coming through. I think the most important thing is the expectation of future earnings. And I mentioned a little bit when I was referring to slide five, that if you jump from the trailing PE of 16.2 times to the forward p estimate weighted average for the portfolio of 13 times, that implies expected earnings growth of more than 20% this year, weighted average for the portfolio, which is unusual for an equity income portfolio.

But if you look down these names and look at Taiwan Semiconductor, Q1 earnings up 58% year over year, the energy companies obviously knocking it out of the park. Samsung not too dissimilar from Taiwan Semi, Broadcom the same. So and then you look at the financials. And as long as we don’t have credit problems, I think what we’ve seen from the big US banks so far is that the financials look pretty good on a year-over-year basis.

And I believe that should also mostly apply to our insurance companies. So yes, we’ll I’m knock on wood here but we’ll see what happens. But the backdrop looks pretty good for earnings as, as it was last year. And the stock price action is kind of recognizing that. And as I think most listeners to this call will know, what we started to see late last year was a little bit of a rotation out of the Mag seven, and they were kind of getting all the oxygen in the room and, and into some of these other businesses that have learnings today and, and cash flows today. So we’ll see whether that continues. But my base case is that it probably will.

Adam Sparkman: All right. Thanks, Brian. We have a question on the impact of currency on portfolio returns in 2025 and Q1 of 2026. I’ve actually done some work on this previously, so I can come on it, comment on it here really quickly. Currency certainly was a tailwind for the portfolio in 2025. Within our fixed income sleeve, those bonds are almost exclusively US dollar-denominated. So no real currency impact there. But within the equity book, our equities returned roughly 33% in local terms and roughly 40% in US dollar terms. So, we certainly benefited by some of that translating into US dollars for our USD-based investors. If you think about it on a relative basis versus the MSCI world, that overweight to non-U.S. companies versus the MCI world obviously helped from a relative standpoint as well.

We did have currency forwards on, which is a natural part of our process to offset some of the risk of currency impact. You know, last year those currency forwards were a bit of a headwind, but they’ve been a tailwind in other recent years. Currency forwards ate away roughly 300 basis points of the positives of currency for the portfolio.

But overall, if you look at our portfolio relative to the index, we were about plus 470 basis points of positive performance versus the index from a currency perspective. During Q1, we saw a bit of a reversal from that with the flight to safety. Post the Iran-induced volatility, it was roughly a 100-basis-point headwind, but we did have the currency forwards, which protected roughly 50 basis points of that.

Matt, I’ll come over to you. You highlighted some of the market movements that we’ve seen quarter to date, a pretty strong bounce back for global equity markets. What are your thoughts on this rally we’ve seen over the past couple of weeks, despite what still feels like a high degree of market uncertainty?

Matt Burdett: Yeah, I know it’s a good, good question. I think I mean, one, it’s very hard to really decipher all of the detail on it. You know, we tend to focus more on the very long term and focus our time analyzing companies’ earnings, really analyzing what’s analyzable, this rally based on kind of things that I watch different indicators.

It seems to be very much driven by more algorithmic types of strategies. So, so less fundamental. A lot of the information that I get on a daily basis, volumes are actually are actually below average. So I’m not so sure that this is a durable rally. You know, again, these types of things will happen and we navigate them. But what we’ll do is, you know, spend our time assessing the individual companies we own in the bonds. And that’s how we run the portfolio. So we’ll have to see how long and sustainable this is.

Adam Sparkman: All right Christian, maybe coming back to the fixed income side, any expectations that the ten year Treasury will have to go up as the fed prints money to pay off the huge US debt issue?

Christian Hoffmann: I mean, it’s as simple but incredibly complex question. Right. And we could probably devote an hour call to that topic alone. You know, I think we have to acknowledge that the rate environment is pretty wildly different, you know, over the past five years relative to the ten years before that, really across the curve, you’re looking at, you know, levels we really haven’t seen you know, pre-global financial crisis. You know spending is certainly a very very very important part of that. Spending has frankly been reckless since the global financial crisis. And like many things you know it doesn’t matter until it does. But still it’s still not the only driver. Right. And look, a lot of the selloff you saw was in conjunction of the conflict with Iran, you know, and the spike in prices and considerations around short-term inflation.

Although I would argue that tariffs and high prices are both short term inflationary but long-term deflationary, you know, is there more likely to be really a speed bump on global economic growth and potential? Look, I think another factor that’s important to look at is, you know, the demand side. And you know, I think we’ve been somewhat aggressive relative to what has historically been, you know, friendly buyers of US debt.

And I don’t think it’s any coincidence that you’ve seen global central banks become better buyers of gold and levels that we really haven’t seen for decades, you know, impairing back some of the enthusiasm, you know, around our debt product. And look, so you can see that in price action. Right. You’re seeing, you know, incredibly strong price action for gold, you know, and weaker price action for bonds. I’d also say it’s you know, US debt does not live alone in a vacuum. Right. This is also a global phenomenon. And you know how attractive it is on a real yield basis and currency adjusted basis, you know, also matters to the worldwide market. You know, I think eventually we will do the right thing when we’re out of options. I also think we might do the wrong thing in the interim, which could look like some form of yield curve control or yield curve control-light. So like I said, this is something we could discuss for an hour. But look, real yields are more compelling than they’ve been in decades now. You know, have they fully priced in this risk? We can argue that. And frankly it changes day by day. But look, you know, it’s certainly a very important part of the fundamental equation. And, you know, something that we look at, you know, frankly, every day as we look at, you know, economic releases and, you know, spending patterns.

Adam Sparkman: All right. Thanks, Christian. Brian, we’ll come to you with a question around buybacks. They’ve become more prominent, especially here in the US given the tax landscape relative to other markets. How if at all, has this impacted your assessment as to prospective purchases around if the stock is attractive, despite having a maybe lower dividend?

Brian McMahon: Yeah. Well, to answer that question, I’ll just go back to our mission statement for Thornburg Investment Income Builder. And that is to pay an attractive yield today and to hopefully grow it over time. And so in the extreme case of a company that’s distributing three, four, 5% to shareholders, but it’s all buybacks and no dividend, that’s not a company that’s going to be of interest to us in this portfolio. Maybe in some other portfolios. There are plenty of those other portfolios. And we have some here at Thornburg Investment Management. But not for the income builder. We’re looking for investments where we get some cash from our investment each year. And if the price of the investment goes up enough, then maybe the windshield yield goes down to a pretty low level. But if we’re in at a lower price, and maybe our yield is quite a bit higher, and that would be the case with several of our top ten holdings, maybe most notably Broadcom where we’re in at mid 20s split adjusted price. And today the dividend is $2.30. You can do the math in your head. So even though the apparent dividend yield is below one, what we’ve been able to do there is have growing cash flow from the investment that we made some years ago and gradually sell down that position and reinvest in some higher dividend-paying stocks. So here it’s maybe some of our favorite companies, our companies that both do buybacks and have attractive dividends, because we sure like fewer straws in the drink going forward. That means we get a bigger drink in the future. But now we’re not, we’re not really, we don’t have a spot for companies that are only focused on buybacks in this income builder fund.

Adam Sparkman: Thanks, Brian. Matt. European equities have broadly seem to be more sensitive to Iran-induced volatility than the US. I think both on the upside and the downside. How were you thinking about your positioning and Europe kind of given the current dynamic right now?

Matt Burdett: Yeah. I mean, it’s again, it’s going to really be about the individual companies that we own. You know, we own just in general terms, a fair amount of telco businesses there. Brian touched on a couple of them. You know, higher energy costs will moderately impact them in 2022. We saw that in a much more, you know, harsh sense for Europeans because the energy price there went up a lot more than it did in this period. But, you know, this is something that we think they’ll manage through. Right. And the other element is if you think about a fair amount of exposure in European financials, right? And that’s because those yields are attractive. Overall valuations are relatively much more attractive. And as Brian highlighted some of these companies are buying their shares to right which we like.

And what you’re seeing actually is steepening of the euro swaps curve. So that helps a lot of these financial businesses. And the real risk we want to watch for there is just what happens to the overall economy that would impact credit behavior. But overall you know again we look at this on a company by company basis and don’t necessarily think of it as, as you know, Europe versus us. It’s more the individual company prospects that we’re assessing.

Adam Sparkman: All right. Maybe I’ll open up this last question to anyone who has thoughts. But do you have any general commentary from holdings in the portfolio regarding how they’re using AI, kind of in terms of adoption rates, expectations for cost reductions via labor, how did use revenue, etc.?

Matt Burdett: Yeah, I’ll throw one in. So when, you know, when I first came out, one of the things we did here at Thornburg is really try and assess how this impacts won the overall economy, but also earnings and revenue pools like, you know, you ideally you would like it revenue pools to grow faster than they otherwise would and cost to be to be better managed.

So Brian mentioned NN group. This is a Dutch insurer. It turns out that they’ve, they’ve been doing AI like machine learning mostly really since 2015. And so they’re probably one of the most advanced companies with respect to actually implementing it. Trying to remember the numbers off the top of my head, I want to say they’re going to spend roughly €400 million to get a sustainable 250 to 300 million cost savings per annum. So that’s a specific example. This is highly evolving. And we’ll have to see. Obviously, there are going to be some business models that could be challenged by AI as has played out in a lot of software stocks that we don’t own in this portfolio. But overall, I think there’s, there’s some evidence  of efficiencies. But really where we have had most portfolio exposure is in the, you know, the picks and shovels of Broadcom, Taiwan Semiconductor and Samsung.

Adam Sparkman: All right. Appreciate the example Matt and appreciate everyone for joining us today for the quarterly webcast call. We always appreciate all the questions and your interest in making it as conversational. It is as it is. If you have any questions, please feel free to reach out to us directly. Thank you.

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