PORTFOLIO SPOTLIGHT
of almost 29 %, which is nearly double the return of its benchmark index and the average funds in its assigned category.( While the fund’ s benchmark is the Morningstar Moderately Aggressive Target Risk Total Return USD index, Thornburg uses its own internal benchmark, 75 % of which is the MSCI World Net Total Return USD index and 25 % of which is the Bloomberg U. S. Aggregate Total Return Value USD.)
Over the longer term, McMahon and the various co-managers he has worked with have had a successful track record of top-quartile performance in the fund’ s Morningstar category for all measurable time periods going back 15 years. That performance has attracted investor attention: The fund’ s recent assets under management have approached $ 18 billion, making it Thornburg’ s largest. When asked why he believes it’ s the biggest, McMahon’ s cogent reply is,“ I think it’ s because it delivers.”
As of this year’ s third quarter, the fund’ s average annual return since inception was 10.18 %.“ When we filed our prospectus for this fund we figured we could do 9 % over time,” he says.“ It has been about four-ish from dividends and the rest from capital appreciation that’ s compounded.”
Base Of The Pyramid
When it comes to equities, McMahon and his team want companies that’ ve shown the ability and willingness to generate cash flow and distribute cash as dividends. To find these businesses, they are willing to look far beyond America’ s borders.
Portfolio Statistics
Number Of Stocks 66 Median Mkt. Cap
$ 58.1 billion P / E Ratio 14.7x Std. Dev Fund / Benchmark 9.37 / 11.06 Number Of Bonds 262 Turnover Ratio 25 % Net Expense Ratio 0.89 %
Performance and AUM as of 11 / 5 / 25. Portfolio stats as of 9 / 30 / 25. Performance and expense numbers are for the institutional share class. Sources: Thornburg Investment Management and Morningstar
Manager: Brian McMahon Age: 69
Professional Background: He is chief investment strategist for Thornburg Investment Management. He co-manages Thornburg’ s global equity portfolios and serves as vice chairman of Thornburg. He joined the firm in 1984 as chief investment officer, a role he held until 2019. He served as president of the firm from 1997 to 2015 and as CEO from 2008 to 2015. He was promoted to vice chairman in 2016. He remains actively involved in securities analysis for various Thornburg portfolios. He has worked in the financial services industry since 1979.
Outside Interests: Hiking, and downhill and cross-country skiing. He also enjoys traveling.
“ The sectors that tend to pay the best dividends are the sectors we have the heaviest weightings. Where are you going to fish? You fish where the fish are,” he says.
The fund’ s recent biggest equity sector allocations were to financials( 24.7 %), communication services( 22.3 %) and information technology( 14.9 %). The first two allocations are significantly greater than those in the fund’ s blended index, while information tech is significantly less. The fund’ s top two holdings were France-based multinational telecom provider Orange, which pays a substantial dividend north of 5 %, and do-it-all chipmaker Taiwan Semiconductor.
The latter company’ s recent yield was an unimpressive 1 % plus change, but its annual dividend rate was a chunky $ 3.11 a share. McMahon says his fund has held a large stake in Taiwan Semiconductor for many years, so all of those shares it bought at a cheaper price now equate to healthy dividend income for the fund’ s shareholders. He says the company exemplifies the type of tech names he likes with its reasonable valuation and products that help underpin the ongoing tech revolution.
“ The technology we own is foundational technology at the base of the pyramid,” he says, noting how Taiwan Semiconductor makes the chips designed and sold by Nvidia that are fueling the artificial intelligence revolution. Meanwhile, the Taiwan company’ s shares recently traded at nearly half the price-to-earnings multiple and two-thirds the price-to-sales ratio of Nvidia.
“ We buy the base of the pyramid and tie into whatever Nvidia is getting but with a better dividend and, quite frankly, with more certainty because whichever horse is winning we’ ve got a bet on the racetrack where they’ re running,” McMahon says.
Shoe Leather
Foreign stocks recently represented nearly 57 % of the Income Builder Fund’ s equity portfolio.“ It’ a little more than usual, and a big part of that is valuation,” Mc- Mahon explains.
He and his team employ a bottomup, valuation-sensitive process that relies mainly on their own research to generate investment ideas.“ We do some screening, but the screens usually don’ t turn up much beyond what we already know from going out and meeting with companies,” he says.
“ We have a pretty good idea in the sectors where we’ re fishing who the players are and what their capabilities are to generate cash to pay dividends,” he adds.“ We spend a lot of time trying to stay fresh. We meet with a lot of companies.”
The week after we spoke he was off to Europe to meet with companies. One of his colleagues went to Australia on a similar mission, and other Thornburg people were slated to meet with companies at conferences in Asia.
“ We meet with companies to try to get to know them and what their culture is, what kind of decisions are being made in the boardroom about dividends and sustaining
38 | FINANCIAL ADVISOR MAGAZINE | DECEMBER 2025 WWW. FA-MAG. COM