Thornburg Investment Income Builder Fund – 2nd Quarter Update 2025

Thornburg Investment Income Builder Fund – 2nd Quarter Update 2025

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 by emailing us at questions@thornburg.com.

This webcast is being recorded, and a replay will be available in a few days. You can access today’s presentation slides by going to thornburg.com/TIBIXD/quarterly. Just to remind you, today’s presentation may contain forward looking statements based on management’s 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 on the call today who may be less familiar with Thornburg, we are an investment manager based in Santa Fe, New Mexico, overseeing approximately $50 billion of assets across a suite of actively managed equity, 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.

With that, let me turn it over to you, Brian, to kick us off.

Brian McMahon: Okay. Thank you, Adam, and thanks to everyone, participating on this call. Whether it’s live or whether you’re listening to a replay. Let’s start with, our slide deck and slide number two, where we outlined some key macroeconomic issues. These are getting even more attention than usual, so I’ll, I’ll spend a bit more time.

Markets are really challenged to price in the impacts of, tariff framework and evolution of, regulatory frameworks here and elsewhere. But so far after we saw a big, repricing in early, April, the market seems to be assuming that there’ll be very little impact from all of these measures. Consensus published forecasts for equity market analysts for the S&P 500 index earnings this year and next year are scheduled to grow by at least 10% per year.

And that’s with, significant margin improvement, almost 300 basis points this year is what, analysts are modeling. And we’ll see whether that happens or not. But, the first quarter was on track with that. So, that leads us to, the fed and inflation and inflationary pressures, have moderated and, continue to be below 3%. Right now.

The core PCE in May was, 2.8%. So, we hear that news every day about, the white House arguing for lower fed funds rate. I’ll just remind you that, for 26 years, between 1982 and 2008, the average fed funds rate was 5.55%. And that was with average core inflation of 2.85%. So the real fed funds rate was 2.7% on average for 26 years. At the moment, the real fed funds rate is 1.53%, on a 4.33% fed funds rate. So, so we’ve seen positive real fed funds rate before, or it’s just that from 2009 to, the first half of 2025, the average real fed funds rate has been negative.

So, inflation 2.1%, average fed funds rate 1.2%. So, a lot of people are used to a negative real fed funds rate. But, in my career I’ve seen it be a positive. I think maybe it’s noteworthy to point out that, banking system deposits have stabilized a lot in the last 24 months.

So they were reported 18.3 trillion in the, in the end of June. And that’s up from a mid 2023 trough of 17.2 trillion, so up 1.1 trillion. Just for comparison, deposits peaked at 18.4 trillion in April. So, we’re going to we’re going to re achieve that peak. But that’s up from 13.3 trillion in March of 2020.

So just over five years ago, US banking system deposits were much, much, much lower. And, and those, that liquidity in the banking system is, is helping the US economy, I think quite a bit as our budget deficits, the fiscal stimulus, from U.S. government budget deficits, which will round to 2 trillion this year and budget deficits in many other developed countries, well above average relative to GDP. And, at least in the case of the United States, those budget deficits are, are holding up, longer maturity Treasury yields. And with that, I’ll, go to the third slide. So, what can we say about Thornburg Investment Income Builder? Our, objective hasn’t changed at all. That’s the pay an attractive yield today. And, if I look back over the last year, ordinary dividends been $1.24.

The NAV today is $30.50, so that’s 4% dividend. If you throw in the, the capital gains, dividends that we paid at the end of last year, that would go up to a $1.46 dividend and a 4.75% yield. So I’ll check that box on the attractive dividend. We also expect to grow the dividend over time, subject to periodic fluctuations.

So we started in, 2003 with a dividend of $0.50. And as I mentioned, $1.24 last year for the ordinary dividend. That’s a keg or 4%, a little over 4%. And, we also expect to get long term capital appreciation along with our growing dividend and, the Nav is grown from 11.90 at inception to, $30.50 per share last night.

So we do that with an investable universe of global dividend paying stocks. At the moment, 57 of these in the portfolio that comprise about 83% of our portfolio assets and also a global bonds and hybrid securities, we have more than 250 CUSIPS in our bond portfolio today. And, we continue to focus on the ability and the willingness of the firms that we invest in to, to pay attractive dividends if slide 4, just outlines an overview of the portfolio allocation shifts by sector for Thornburg Investment Income builder and, if you look across, this page, we go back quarter by quarter for two years.

But I’ll just focus on the last four quarters. We have increased our weighting in, financials, in communications services and in industrials, and we have reduced our weightings in healthcare and materials. Some of that is, relative appreciation or depreciation of the investments we hold in those sectors. And some of it is some, portfolio adjustments. But, you can see that this tends to evolve slowly, over time, but it does evolve, based on, where the, the best tools are for us to achieve our goals of attractive income today, wealth of income over time. Slide number five. Just gives a snapshot of portfolio characteristics. These again move, very gradually for Thornburg Investment Income Builder.

But maybe what I’ll point out is relative to, say many, many market indices that you see quoted day by day in the United States are, P/E, both trailing and forward. Weighted average P/E is low. And that gap is, is significant. As it has been for the last several years, kind of reflecting that the kinds of equities that we own, for the most part, are not the ones that are, gathering most of the attention day to day, but, if you look at the difference between the trailing one year P/E and the forward estimate, what you see is that earnings from our portfolio companies are expected to grow, even by double digit percent this year. So, we’ll see how that develops with, second quarter earnings starting to roll in just a few days. So, with that, I’ll move to, slide number six, which shows our top ten equity holdings as of June 30th. And, I think what you see here is all ten of these were up by at least double-digit percent in US dollar terms. These are just the share prices in US dollar terms in, the first half of this year. I think it’s maybe noteworthy to, to point out that, five of these ten, actually had negative price changes in US dollar terms in calendar 2024. So, that I think is, is worth noting, we’ve turned around, the momentum.

It’s not that the businesses were bad last year. In fact, pretty much all of these companies that showed negative earnings or negative share price developments last year had positive earnings. The only exception to that was Total. But, that gave us an opportunity to, to buy more of these, which we did, on average and I’ll get a little more specific on that later. The column on the far right, this slide six and, the similar slide seven, which shows detail on our next ten equity holdings, is the local currency dividend growth rate. And, this is super important for income builder to have dividend growth. And dividend growth varies over time. So don’t hold us to we only buy dividend growers, because sometimes companies retrench and do some investment to grow the dividends more down the line. But we do see good, dividend growth from, of most of our holdings in the top 20 and indeed of, the next, 37 of these stocks. So, with that, move to, the slides that give some specifics on each of our top ten holdings. The slides eight through 17, and I won’t, I won’t dwell on each of these. But maybe what I’ll point out is, say with respect to, to Orange, which is our largest holding, right now, we added to our, number of shares, about 30% in calendar 2024. We haven’t bought a single share this year of Orange.

But, if I go back to, slide number six, what you see is the reward is, those shares, the value of the shares was up 52.5% in US dollar terms. This this year, in the first half of this year. And, as far as we’re concerned, it’s still, a value stock. The business is, is perking along, nicely. And, I’ll also spend a moment on Broadcom, which has been a terrific, performer up 108% in 2024. It’s our second largest holding. When we when we did our March quarter webcast three months ago was our seventh largest holding. And the thing I’ll point out about Broadcom is, we once owned more than 8 million shares of Broadcom. Got it pretty cheaply. We now on about 2.5 million shares of Broadcom. So, you could see that the dividend yield now because of the the incredible capital appreciation is down to 90 basis points in the, in the portfolio. But the dividend yield, at, at the price we bought it is, $2.36.

And we, we recently bought this stock in the mid 20s before a share split. So, it helps to have some of these in the portfolio. And, the income builder portfolio is, it’s really a mix of, of faster growing, dividend payers and some higher yielding, dividend payers. And that’s, consistent with the way it’s always been. So I won’t dwell on all ten of these, of these stocks, but, I think what I’ll do now is turn it over to, Matt Burdett. Who will talk, you know, more broadly about the potential to grow our distributions.

Matt Burdett: Thank you. Brian, if we could just advance to slide 18. You know, Brian had highlighted you know, what some of the goals of the investment income builder are, one is to grow that distribution over time. Right. And if you think about it, at the fund level, that’s going to be the sum of all dividends and fixed income interest, that we collect divided by the shares outstanding. Right. And one of the best ways to grow that dividend is to have our underlying companies grow the dividend. Right. So, Brian had mentioned the ability and willingness to pay dividends. And we also look for the willingness and ability to grow that dividend. And what you see on the table here, this is looking at, calendar year, 2024. And what you can see is, is the percentage of the equity portfolio is 82%. Are either flat dividends or growing. And then we break out and the different growth rates, the percentage of the portfolio. So what you can see is, you know, 34%, 0 to 5% growth, 19%, 5 to 10%, and 29% to ten plus percent growth.

And what’s really interesting in the market now is, you know, we can find high yielding stocks. And Brian, kind of touched on this on the top ten and the next ten stocks in the in the slides before. But you can get a stock like an NN Group which yields 6%. But it’s growing the dividend at a fast rate. Right. And so those are the kinds of things we really look for. But it is a balance. And you could see about 9% of the portfolio paying lower dividends. That’s really a function of some restructurings. Or special dividends not repeating. So that comprises that aspect, of the growth segmentation, advancing to slide 19. You know, Brian commented earlier about, you know, where the fed funds is today, 433 and gave you some historical context. So, what we did with slide 19, is we just wanted to just segment, how the Thornburg Investment Income Builder performed versus our blended index and versus the global portfolio, the MSCI World Index and a variety of bands of fed funds rate.

Right. And so what you can see here is, you know, when fed funds is above 3%, the average annual return for the Thornburg investment Income Builder, there has been 531 basis points above the blended index. Right. So you can see since, the 90 quarters of existence of investment income bill, there are 22 of those quarters were 3% or higher. And then you see 24 quarters where it’s between 1% and 3%. You could see a slightly less outperformance, versus the blended and the world index, but still outperforming, and then when interest rates or when the fed funds is less than 1%, is where we tend to lag the global market but still outperform the blended index.

And I think we all know that, you know, that’s, that’s roughly half of the existence of the strategy is where, the fed funds was less than 1%. So just think it’s interesting, you know, depending on what you think the fed funds rate is going to do this, the at least historically, you know, how the fund has performed in different fed funds rate regimes, advancing to the next slide, slide 20.

This is just giving you a snapshot of various, market, returns. Most of these are equity returns other than the U.S. Universal Bond Index. Third from the bottom. The big take home here is overall a pretty strong first half of 2025 after having two strong calendar years in 23 and 24. I guess the only thing I would note here is that these are returns in U.S. dollars.

So if you were to look at the foreign international indices, those numbers and would be, would be slightly, slightly lower, right. Because the US dollar has, has depreciated. If you look at the Fed’s real trade weighted dollar index, that’s down about 6%, year-to-date. Advancing on to the next slide. This is just highlighting, investment performance for the Thornburg investment income below. You could look at this at various, you know, at your leisure. I guess the one thing that I would just highlight is the inception return, which is the IT column on the, on the table there. And that’s at 9.96%, per annum return, so close to 10%, you know, for more than more than 22 years of existence advancing to the next slide, this is just showing you quarterly returns, going all the way back to inception. As I mentioned earlier, we’ve completed a 90th quarter, with the conclusion of, June 30th, 2025 and in the 66 of the quarters we have, delivered a positive return. So that’s, you know, kind of a win rate of 73%. Advancing to slide 23. I think this is an important slide to always remind everyone, of the uniqueness of the Thornburg Investment Income Builder.

What you see here is the dynamic asset allocation that we’ve tended to, you know, employ when conditions were right to buy bonds and so on the chart, you can see the dark, the thick, dark blue line that’s, cash and fixed income securities. That’s the weight within the portfolio. And you can see the weight is the, left hand side y axis. And then on the right hand side y axis, you see, yield-to-worst. And that’s what the dashed blue and orange lines are, U.S. and European high yield tours, respectively. Very simple picture. When yields are high, we buy more bonds. When yields are not high, we don’t buy them. And it’s simply because we’re trying to make the best relative value, assessment of income producing assets that we can. Oftentimes people say, well, you’re messing up my asset allocation by doing that. So to what box do I put you in? And I would say, try not to think about a box. Think about an income solution. Because when you buy bonds, when spreads are blowing out, you’re getting equity like returns in those bonds. And usually when bond yields are that high, equities are under some pressure too. So just a reminder, you know, we peaked at 45% fixed income in the financial crisis. But now it’s, a much a much lower number, just simply because of the relative value assessment that we do.

Advancing to slide 24. This is just showing you the quarterly dividends, that we’ve paid over the history. The only thing I would highlight is so for the second quarter; we were basically flat year on year versus the second quarter of 2024. Brian had mentioned $1.24 and the trailing 12 months. That’s about 3.4% higher year on year. Advancing to the next slide, slide 25, is just showing you the history, the Thornburg Investment Income building yield, which are the gray blue bars, in each calendar year compared against our blended index, which is the light blue line and the Bloomberg U.S Corporate Bond Index, which is the orange line.

And then in the dark blue or black line is CPI. Brian mentioned this before but over history it’s a 4% CAGR on the dividend and the net asset value has also been about 4% growth over time. So we’ve comfortably been above our blended index throughout the history in terms of yield. So very competitive. And, you know, touching on that first point, the first goal of having attractive yield, this slide here is highlighting, that point and where we focus one of the elements we focus on managing is portfolio. Advancing to slide 26. This is the first of two what we refer to is report card slides. And it really highlights, you know, what, a hypothetical $100,000 investment in total boring investment income bill there. Basically, at that inception in the a-shares, would have experience. What would that investment experience have been? So with this slide 26 what you see, this is an individual who, you know, put that $100,000 to work, you know, over 20 years ago and wanted to collect the dividends, you know, every quarter, right. And use it for living expenses. And what you can see on the slide here is so the dark blue line is the market value of the investment and how it’s progressed over time. And then the bars are the quarterly dividend that the individual received. And so, I guess I would just highlight number one, the cumulative dividends received is $189,644. Right. So almost 2x the original $100,000 investment, has been collected in cash, you know, cash dividends over time. And then if you if you kind of put that into perspective on a calendar year basis, if you look at the orange boxes at the bottom, what you can see is, you know, the annual, dividend that this individual received back in 2003 was $4,200. Right. And then you kind of walk across the table and you can see that in calendar year 2024, that amount was $10,500, right? So, this is, you know, the original $100,000, getting a growing income stream over time. And not only that, but there’s some capital appreciation too. So, the final value is, you know, $270,000, 980, which means you’ve grown the capital by $170,980. And if you think about that $10,500 figure for calendar 24, you think about the trailing 12-month figure, which is about the same. And you think of it from a yield on cost perspective, which is how we tend to think of a lot of our companies. You know, Brian had mentioned Broadcom yielding less than 1%. But our yield on cash is closer to 9 or 10 right now.

So, this is kind of a similar concept with this. The other 10.5% yield on cost for an individual who collected the dividends and spent it, you know, on whatever, whatever expenses they choose to, to deploy that money. On slide 27, what you can see here is the same hypothetical $100,000 investment, except this is an individual perhaps earlier in their life, was working, did not need to collect the cash payments every quarter. So instead, they, reinvest the dividends over time. So, you can see all of the variable share here, but they’ve changed a bit with that reinvestment and gets the first one to start with is, you know, you started out with 8,375 shares from your initial $100,000 investment. That is, that has now, you know, basically tripled to 26,303 shares. Right? So a lot more shares. And then if you go down to the table at the bottom, just like we did in the last example, you know, that that income theoretical income, right, that you’re receiving and reinvesting started at 4300. And in calendar 2024 was 29,300. Right. And so, it’s, it’s just a, a pretty powerful tool to reinvest those dividends, over time. So that total amount of growth and income over this time, it’s $350,732, right? To put a to put a fine number on it. And the capital, you know, increased from $100,000 to $439,399. So basically a $339,399 increase in the capital, for a total account value of $790,131 and again, if you were if you were to take that dollar 24 and trailing 12 month, dividend and then multiply it by the 26,303 shares, you end up with about a 32.6%, yield on original cost. Right. So if this person then decides, hey, you know what, I want to start getting cash now. The cash is going to be coming off of that 26,303 shares. So, so two, two report cards. We can we like to highlight every quarter, all if we can advance to, to slide 28, this would be the last slide. Again, just as a reminder to everyone on the call, you know, the question everyone should be asking themselves is where are my total returns going to come from? Not where did they come from? Because that’s already happened. And what we really care about is what’s going to happen. And this slide here is highlighting, the S&P 500 Index where it segments out the average annual price return, and income component sums them up to the total return. And then in the far right column you see income as a percentage of that total return. Right. And this is the average, component in a given decade. Right. So we just take what it was over time, what was the price appreciation and averaged out over the ten years. And the big the big conclusion here is well over time, it’s given for roughly 50% of your total return. Right. And however, as you can see in the far-right column, that percentage varies wildly in any given decade on average. So, what you can see, for example, 1991 to 2000, this is the, you know, this is the decade where the price return has been the highest over this period, on average, at 14.9%. Dividends were 2.6%. So going over to the far right, 14.9% of your total return on average in any year in that decade. That was the that was the dividend component. So, 85% of the return was price driven dividends worth that important? Well, fast forward to the next decade. And, you know, 2001 to 2010, you know, you had you had a telecom bubble burst, you had the financial crisis in there. There was a lot of a lot of moving pieces. But the average annual price return over that decade was -50 basis points. Right. And so therefore you go all the way to the far right. Dividends were roughly 136% of your total return. Meaning if you didn’t have dividends, you would have you would have lost money, over time, on average, in any given year. So, you know, you think about the current decade that we’re in, which we’re almost halfway through an 11.8% price appreciation is still pretty strong. It’s pretty strong. And so dividends are actually, only 12.4% of your total return. So actually, they actually matter less, right. Which I think is an interesting point to make and one that people should think about. Well, will that continue into the future? Right.

Brian highlighted the valuation from PE multiples of the Thornburg Investment Income Builder. You know, 11 times forward is very discounted relative to the market, especially relative to the income production of the securities. But with that, I just, wanted to highlight this chart to remind everyone and I will conclude my prepared remarks and pass it back to Adam.

Adam Sparkman: All right. Well, thanks so much, Matt, for the color and Brian as well, where we are going to shift to the Q&A section here, I think, today, some of these questions may actually be kind of feeding through to everybody. So, you may have a little bit of a preview on, the questions, coming your way today. But, Brian, maybe you will we’ll start off I think we had a question on the cash allocation of the portfolio being a little bit higher than it has been, you know, over the last quarter. Any thoughts? Just generally what you’re thinking from a cash perspective in today’s environment?

Brian McMahon: Yeah. A couple of reasons for that. One is that we have, de-risked a bit, some of our, higher volatility stocks that have kind of had price appreciation. I mentioned, I mentioned Broadcom as one, but we’ve also done that with some non-U.S. stocks. We’ve also had positive cash flow into the portfolio into the income builder portfolio. Not as strong as what we had many years ago, but, better than we’ve had, certainly in the latter years of the prior decade, and in the early years of this decade. And we’ve so far, been okay with putting some of that into cash. But, just to get specific on numbers, you see on slide number five that, cash and cash equivalents was 8.2% of the portfolio, and that’s up about 390 basis points, quarter over quarter. So, the allocation to domestic equities at 26% is pretty similar quarter over quarter. And the allocation to foreign equities is down a touch. And that’s just, that’s just the cash coming in. So, we have had appreciation of the foreign currencies on average, touch over 10%, some higher than that, said the euro, a bit higher than that. I think the, the Taiwan dollar’s up about 11%. The pound up, 6 or 7% versus the dollar, but widespread, depreciation of the of the dollar. So far in 2025.

Adam Sparkman: All right. Thanks, Brian. Christian, maybe to hit on a couple of fixed income questions that we’ve gotten. There’s been a lot of speculation around, the fed governor and Jerome Powell, over the course of the quarter, from your purview. Any thoughts on who the next that governor might be?

Christian Hoffmann: It’s a super interesting question, particularly given the heavy hand the executive branch seems to be wanting to push, you know, on to that, seemingly independent, you know, group of folks. The other important question that we need to answer is when will we know the next fed chair? You know, historically, that’s been something like a 2-to-5-month window before the transition. But there’s talk that we could have it, you know, ten months or so early. Which raises the possibility and specter of a shadow fed or something that would, front run future policy in short term rates. You know, looking at the field for a while, the market seemed to think this was a battle between the Kevins, the Kevin seeing Kevin Hassett and Kevin Warsh. Warsh actually the consensus pick for a bit, which was kind of wild to me because he was someone that was historically known as being pretty hawkish, which seems like the opposite of what this administration is, is playing for, past.

It seems to be a little bit more like, a lighter hand, dovish. And you know, potentially friendly to the administration’s aims. I think that’s in play. Bessent also seems to be in play, which I don’t think is a bad pick. But you have to view that as a trade. Right. So who do we get in the Treasury you know, in his place? I think that it’s been, you know, a reasonable person you know, sitting in that seat. So maybe that would be an okay add to the fed. But, you know, maybe we would give it, you know, on the back end with, maybe somebody less, less strong, you know, at, at the Treasury, there’s a decent amount of chance that this is all talk as well. And we actually don’t get this shadow fed and this very early appointee. I think the other thing to remember, two other things to remember, really, is that, you know, this is not a monarchy. You know, there are no kings at the fed. There’s 12 voting members. I think you also have to think that this changeover is, you know, almost a year in the future. So, it’s not clear that even if you had Powell, you know, continue on the feet does not seem to be on the table. You know, a lot can change between then and now. And it’s not clear that Powell or the Senate or has it you know would not be doing the same thing, you know, at that period of time. So it’s kind of inside baseball and, bond nerdy. But they are it is a little unprecedented and certainly something that, you know, we’re watching and thinking about.

Adam Sparkman: All right. Thanks for that question. Matt, we have a question on the US versus international allocation within the equity sleeve of the portfolio. Can you talk a little bit about, versus history, is our weight international non-US, you know, how does that compare? Are we on the higher side and historically kind of what has been, the historical allocation between us and international?

Matt Burdett: Yeah, sure. Thanks for the question. I mean, just as a, you know, kind of, a structural for structural reasons, given that dividend yields are much better outside of the US. They tend to be a lot of international stocks in this portfolio. You know, mainly, you know, for that reason. Right. You get you can get a diversity of sectors, with attractive yields, and culturally, you know, dividends are just, you know, as part of shareholder total return dividends just that much higher on the, on the decision tree for, for international boards then they do in the U.S where, where stock buybacks are very, very prominent. Mainly on, on tax, you know, advantage reasons. But also, you know, I think you have to think about the fact that management teams, you know, are paid a lot of stock options in the US relative to international markets. So, you know, it’s always it’s always skewed international stocks.

You know, I, I defer to Brian on years, you know, before 2010, but you know, again, we’re, we’re picking we’re picking companies, and we are aware of the fact that where we are is overweight and we are in international stocks. And what we tend to do is hedge a bit of the currency risk, and some of the major currencies to, to balance that out, which, which is really more to just dampen, you know, the volatility that may come from foreign currencies, and net asset value, you can’t do anything about the income you get. But net asset value you can you can hedge a little bit. Hopefully that helps.

Adam Sparkman: Yeah. Appreciate that Matt.

Brian McMahon: I would just add that the relative cheapness of many similar businesses outside the US to a business inside the US that does, similar the same things. And so, a higher income is part of it, but relative cheapness is also, part of why we’ve been shopping a bit more outside the US. But honestly, we don’t care, where a dollar of income comes from, as long as we’re getting income, we just kind of go to the most efficient place, that we can find to, to get that low income to satisfy our objectives.

Adam Sparkman: Brian, maybe to piggyback on that, with the question about, the appreciation of the top ten that that you showed on the slide. You know, a lot of those are non-U.S. companies. Any idea approximately what percentage of the price appreciation from, from some of those names is really driven by that weaker dollar? During the first half of the year?

Brian McMahon: Well, think roughly 10%. Coming on on the non-U.S. stocks. Depreciation of the dollar. Now this is showing stock by stock. And as Matt mentioned, we do some hedging. Not 100% hedging, but oh, rounded off to, about 50% of the, the currency risks that we have with respect to the, to the principal investments that we make in non-U.S. assets. So we did have a headwind, from that in some quarters and in some years, like last year was a tailwind for us to have some, currency hedges in place. So, our philosophy there is just to smooth out the rough edges and de-risk, because we know that, most of our shareholder base is living their lives in dollars. So, so we do to do that hedging. But it was definitely overall a tailwind, with an offsetting headwind from our currency hedges in the first half of calendar 2025.

Adam Sparkman: All right, Christian, another, another question on fixed income markets. Are you seeing much volatility, within the bond market from the trade and geopolitical events that we’ve been experiencing here lately?

Christian Hoffmann: You know, you would think so if you’re reading a newspaper, not looking at markets, but the answer is, surprisingly, no. The really only exception to that is looking at, you know, oil or oil and energy markets, which have been exceptionally responsive to any news, you know, in that part of the world. You know, which makes sense.

It’s a little surprising the lack of follow through to any other risk assets, whether in equity markets, credit markets. The other surprising thing is the unresponsiveness of, of treasuries, where you would normally see that flight to quality, you know, in that safe haven bid, it was pretty weak. You know, throughout these headlines, which isn’t particularly encouraging, you know, as it relates to treasury markets and the yield curve, look to the ten-year, year to date has oscillated between 4 and 4.8%, over the last month, we’ve only lived in a 25-basis point band. So the volatility has been fairly subdued. And if you think about near-term potential catalysts, they’re all fairly positive actually. If you think about increased buybacks, weighted average maturity reductions, SLR reform, potential rate cuts, you know, all those things at the margin, you know, should be both positive and volatility dampeners. That’s on the core rate side. You know, on the on the spread side was looking back at different historic events in after 9/11 one day change in spreads for high yield was about 150 basis points. Russia-Ukraine war one day change was about 13 basis points. And there’s been a number of, I would say, alarming or certainly things that you would pay attention to. You know, on the geopolitical front, you know, since the Russia and Ukraine war. But the market, you know, is really, recalibrating, you know, reaction function machine. And, you know, the lesson that it has been learning is that, you know, nothing matters, which is somewhat glib, but the idea is, you know, risk is learning the wrong lesson. Because it hasn’t mattered, right? Like you weren’t paid for dumping risk assets for, you know, jumping into quality.

The danger there is that you extrapolate that lesson too far, and at some point you have a tipping point and then risk recalibrates, you know, in a step function, which will happen. It’s just a matter of time. You know, when that happens. And look, we’ve seen spreads really retrace to, you know, pre-Liberation Day levels for the most part. And broadly I would say, you know you’re looking in the market on a day like today. You know it feels kind of like a sleepy summer. But you know any event is always in danger of disrupting that at a moment’s notice.

Adam Sparkman: All right. Thanks, Christian. Matt, we have a question on our exposure to health care names similar to the top ten. Most of the holdings, 11 through 20, were also, up, notably over the first half of the year, with the exception being, Merck and Pfizer. Obviously, health care is generally viewed as a pretty defensive sector. But can you talk a little bit about, your confidence in these names and their ability to, to grow given some of the headwinds that that we’re seeing in the healthcare sector right now?

Matt Burdett: Yeah, sure. It’s a good question. Look, I think there so I think we’re referring to Merck and Pfizer in the question, but I think it can be expanded to much of, of the biopharmaceutical space. You know, look, I think, the sector over time, there are different periods of time when the sector is in the crosshairs of politicians. I would say, you know, this has been the case throughout, throughout the history that I have followed this sector. And it just comes in different waves instead of intensity. Right. And right now, you know, you have a situation where the Trump administration, is doing a section 232 assessment, you know, of, of pharmaceuticals. And I think, I think the president, had mentioned a couple of days ago. Well, we’re going to we’re going to we’re going to wait a year and then we’ll put 200% tariffs on pharmaceutical products that that are not made in, in the U.S. Not sure if that’s really going to happen. But that is for sure compressing the multiple. And one of the metrics that’s been, you know, that we look at is the relative P/E multiple, you know, a single stock like a drug, drug stock. But if you look, you’re going to have the whole sector. What you see is relative to a global benchmark or certainly relative to the S&P 500, that relative p/e multiple is at very, very low levels. Historically that, you know, there’s kind of a floor where it goes. Now, I would say, you know, the past is not always going to be repeated in the future. But that’s a good starting point from a, you know, a downside protection. I think, you know, in the case of these two companies, Merck and Pfizer, they both have, you know, patent lists ahead of them. But they also have other things, in their pipeline and through business development that are happening. Merck just announced an acquisition yesterday, of a company called Verona, which has PAH drug. So, pulmonary arterial hypertension. All right, so they’re bolting things on, you know, to the pipeline. And I think for us, you know, is, is the question I always ask myself is whether or not this is a secularly damaged sector. It’s just to think about progress in medicine generally. Right. And a lot of that is coming through these types of companies. And I just don’t think the world is, you know, has come and reached a point where they say, you know what? We’ve come far enough. Let’s stop. I don’t I don’t think that’s it.

Historically, these types of valuation opportunities have been good times to own the stocks. But, you know, obviously we’ll be mindful of tariffs and all the other things that is compressing the sector. You know, when I speak with, with, you know, analysts sell side analysts who cover names in this chapter, they’re just not a lot of interest. So I think sentiment is really, really low. And, you know, generally that’s a good indication for a good stock in the future. Obviously we do our fundamental work and believe that the earnings, you know, are going to be there. Right. And the dividends will be there, which is important for Thornburg Investment Income Builder. So, it’s a bit of, it’s a bit of a sector thing. It’s somewhat stock specific, but we feel like the risk reward is in our favor overall.

Adam Sparkman: All right. Thanks, Matt. Brian, this has obviously been a busy week from, a tariff standpoint. The US has announced, you know, broad range of tariffs on, you know, roughly a dozen countries. And we’ve also pushed back, the implementation from what was supposed to be July 9th now to, potentially August 1st. How are you thinking about the policy unpredictability of the tariff situation? And is it having any impact on how you’re constructing the portfolio?

Brian McMahon: Yeah. That’s, timely question. We’ve been thinking about, tariffs and impacts of tariffs on the income builder portfolio since, since last summer. At this time, we could see how the presidential race polling was lining up and, we knew, what, Trump’s, espoused policies were and, and tariffs were pretty much at the top of the list. So, we’ve tried to, get out of the way of owning obvious victims of, the tariff. And,if I would just look at slide number six, our top ten holdings, and look at the, the non-U.S. players, Orange, Telecom, in Europe and Africa. No, no impact from tariffs, BNP very little impact from, tariffs. By bank but mostly, mostly European, Taiwan Semiconductor. We need the chips that they manufacture. And by the way, they have been spending, tens of billions of dollars to build out, state of the art, semiconductor fabs in Arizona. And, NN Group, no impact. It’s, Netherlands, insurance company. Enel, Europe and Latin America, utility electric utility. No impact. Total some impact. But, oil and gas is a global business and, not really affected by tariffs and Tesco UK grocer no impact. So I think you could see in the construct of the portfolio that we’ve, tried pretty, pretty consciously to steer around, the impact of tariffs in the, in the US and they’ll continue to be a bunch of confusion about tariffs. I do expect some, some opportunities to, to come up from tariffs. And I’ll just allow one stock. It’s not in our top 20. But we do on a few hundred million dollars’ worth of DHL, the freight company, headquartered in, in Germany, Global freight company. And they’ve actually seen some opportunities, with rerouting of trade routes. They were never that big in, in China to the U.S anyway. But there has been some rerouting. And so, whether stock specific or business wise, I think there will be some hazards, but also some opportunities from, the tectonic plates moving, with respect to U.S tariff policies, I hope that answers the question.

Adam Sparkman: All right. Well, we’re getting close to the top of the hour here. So, we’ll end with one final question. And Matt, maybe I’ll throw this one to you. There’s been obviously growing unpredictability in US foreign policy this year. And we’ve seen Europe accelerating defense spending, some infrastructure spending and really moving, more towards a coordinated fiscal policy. As the US decouples a little bit, from some of our NATO partners?

How are you thinking about the potential downstream effects of, of the investment landscape in Europe as some of these structural changes are happening?

Matt Burdett: Yeah. Look, it’s, you know, I think, I think what’s going on, you know, just with the, the very the big change in the US administration, is a huge wake up call to, you know, companies in Europe, but also companies everywhere, right? And governments everywhere. I can tell you; I spent some time in Europe recently meeting with companies. Brian was there, for me, even longer period than me. So, between the two of us, we met with, you know, many, many companies over a period of several weeks or so and, you know, look, this is this is the wake up call that, you know, a lot of these countries didn’t, didn’t expect to get, but they got it. And they know that there’s just a new self-reliance, you know, movement that needs, needs to happen. You know, I guess Germany is probably the best example of doing something, you know, very quickly with an infrastructure fund and a defense fund. You know, I mean, they moved it through pretty quickly. And it’s sizable, relative to their economy. You know, look, I wouldn’t expect a lot of this to just happen overnight. It’s going to take some time. But for sure, when you meet with companies and you just you the tone, it’s pretty clear that there’s a hey, maybe the US is, you know, we can’t rely on them as much as we did in the past. It doesn’t mean, you know, it won’t be allies, but it means there’s just, a new self reliance that needs to happen. And then, you know, that that can create opportunities in investing in these markets. Right. And some of the stocks in these markets have they have done very well as a result. And they’ll probably be more opportunities in the future. So, yeah, let’s the big shift, it will create opportunities. And it will also create, you know stocks to avoid. And so that’s where we spend, we spend a lot of our time, you know, sifting through those.

Adam Sparkman: All right. Well why don’t we leave it there for today. If we didn’t get a chance to answer your question, I will reach out, to you personally and, make sure that we get it answered.

Thanks to everybody for joining to today. And, for your participation with the Q&A portion, as always. Please feel free to reach out with us, to us with any follow ups that you may have. Thanks again. And, have a great afternoon.