the cash flows of the business,” McMahon says.“ It’ s shoe leather work, if you will.”
He adds that they continually monitor the competitive landscape for the businesses they own.“ You never know everything. We try to keep digging and know as much as we possibly can. That’ s our process.”
For the most part, he jokes, the names in the fund’ s equity portfolio are“ pretty nerdy.”“ Most of the stocks we own get little attention in the market. They’ re not the ones that people are talking about on CNBC and in the financial press.”
Relative Value On the bond side, the Income Builder Fund gravitates toward“ BBB”( the bottom rung of investment-grade credit ratings) to“ B”-rated bonds( at the top rung of non-investment grade) with shorter maturities. In a recent report, Morningstar analyst Reyna said that high-yield corporates made up more than a third of the bond stake.“ That design reflects the fund’ s philosophy: Every holding must pull its weight on current cash flow,” he wrote. He added that the fund’ s duration
The fund’ s recent biggest equity sector allocations were to financials( 24.7 %), communication services( 22.3 %) and information technology( 14.9 %). of about 4.0 years was somewhat shorter than the typical peer’ s 5.3 years.
Thornburg’ s investment process for bonds differs somewhat from the one for equities because the two markets operate differently.“ In the equity market, we may study a business for months before we buy it,” McMahon says.“ We don’ t have that luxury in the bond market. The bonds are either there or they’ re not that day. We go where the value is in the bond market, and it happens more quickly there.”
He says the firm’ s equity and fixed-income research teams are complementary.“ The equity research we do can be helpful to our bond guys, and vice versa.”
The Income Builder Fund holds more than 260 bonds— meaning there’ s a large number of relatively small positions in the portfolio.
“ I think we buy more in the secondary market than in the primary market,” Mc- Mahon says.“ On any given day, the bid size on the secondary market can be better or worse. We do the work and look for relative value; sometimes it’ s new issues, sometimes it’ s the secondary market.”
Long-Term Savings
McMahon says financial advisors tend to use the Income Builder Fund as part of what he calls a long-term savings sleeve that they build around with different things.“ The fund’ s story and what it has done is pretty straightforward,” he says.
Morningstar’ s Reyna noted in his report that since the fund’ s December 2002 inception through August 2025, the I-share class’ s annualized 10.1 % return comfortably topped Morningstar’ s global moderately aggressive allocation category average of 7.8 %. He added that the fund’ s proclivity toward the telecom, financial and utilities sectors has contributed to its solid longterm track record. But its underweights in tech have caused it to lag during growth-led rallies such as the one in 2020.
Nonetheless, the fund has done well in recent years as growth has outpaced value, at least with U. S. stocks. McMahon maintains that his fund’ s track record during the past 23 years makes it attractive for investors seeking investment income and compounded growth over the long haul.
The fund’ s recent 30-day SEC yield of 2.48 % topped the recent 1.16 % yield of the S & P 500. By far most of the quarterly dividends paid by the fund in 2024( roughly 90 %) qualified as long-term capital gains( which are taxed at lower federal rates). That reflects the fund’ s low turnover and preponderance of long-term holdings.
Thornburg Investment Management began in 1982 when founder Garrett Thornburg rolled out municipal and taxable fixed-income strategies. The firm subsequently broadened its strategies, which are now available mainly through mutual funds, along with several exchange-traded funds, a closed-end fund and UCITS.
McMahon offers that Thornburg has something of a cult following among appreciative financial advisors for its investment approach.
“ We always aim to have capable execution of sensible investment strategies,” he says.“ Maybe our lineup isn’ t always high fashion, but we hope we’ re executing well on strategies that will make sense over decades.”
DECEMBER 2025 | FINANCIAL ADVISOR MAGAZINE | 39