Review of Thornburg Investment Management 2020

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Updated on Thursday, January 9, 2020

Thornburg Investment Management is an investment firm based in Santa Fe, N.M. The firm offers a lineup of both domestic and international equity funds and fixed income mutual funds for individuals, which are available exclusively through financial advisors. In addition, Thornburg provides portfolio management services for individual and institutional investors. Thornburg currently has $40.5 billion in assets under management (AUM), overseen by its 39 investment advisors on staff.

All information included in this profile is accurate as of December 30th, 2019. For more information, please consult Thornburg Investment Management’s website.

Assets under management: $40,523,499,464
Minimum investment: Starts at $100,000 for individual investors
Fee structure: Percentage of AUM, performance-based fees
Headquarters:2300 North Ridgetop Road
Santa Fe, New Mexico 87506
https://www.thornburg.com/
505-467-7200

financial advisor

Overview of Thornburg Investment Management

Thornburg Investment Management was founded in 1982 by Garrett Thornburg, who is currently the firm’s chairman and owns 100% of the firm’s voting shares. Prior to founding the firm, Thornburg served as a limited partner at global investment bank Bear Stearns & Co., where he was a founding member of the firm’s public finance department. He was also chief financial officer of New York State’s Urban Development Corporation and a financial advisor to the State of New Mexico’s Board of Finance.

With the founder’s strong background in the public finance market, the firm’s first foray was in municipal bond funds. Thornburg only launched its first stock fund in 1995; it waited another three years to open its second. Today, Thornburg Investment Trust, a client of Thornburg Investment Management, has a lineup of 20 publicly available mutual funds covering domestic, global and international equity, as well as taxable and tax-exempt bond funds. The firm also  offers separately managed accounts and institutional strategies.

What types of clients does Thornburg Investment Management serve?

According to Thornburg’s Form ADV, the bulk of its clients are individual investors, in addition to high net worth individuals, investment companies, pension and profit-sharing plans, corporations and charitable organizations.

Individual clients can access Thornburg’s investments through mutual funds, separately managed accounts and wrap programs. Minimum investment requirements vary by offering:

  • Mutual funds: For individual clients who want to invest in mutual funds offered by the firm, minimums of $5,000 for regular accounts and $2,000 for individual retirement accounts apply.
  • Separately managed accounts: Private client separate accounts have minimums of between $100,000 and $500,000 for a Private Client Equity Separate Account and $1 million to $25 million for Private Client Fixed Income Separate Account. However, the firm notes that it can waive minimums at its discretion.
  • Wrap programs: Each wrap program sponsor has its own minimum account size, which typically ranges from $100,000 to $500,000 for equity accounts and from $1 million to $25 million for fixed income accounts. Thornburg has the discretion to waive account minimums.

For institutional separate accounts, minimums range from $10 million to $50 million, depending on the investment strategy.

Services offered by Thornburg Investment Management

Thornburg Investment Management provides investment services covering a broad range of strategies, including municipal bond, taxable bond, domestic stock and international stock categories. The firm provides these investment strategies for its mutual funds, separately managed accounts and investment services for institutions and government entities.

Additionally, Thornburg participates in third-party wrap programs in which investors of some brokerage firms can choose to invest in a mutual fund from a select list for a reduced sales charge. Investors in third-party wrap programs do not pay fees directly to Thornburg. The sponsor pays Thornburg’s fee from the wrap fee paid by investors.

Here is a complete list of the services offered by the firm:

  • Mutual funds
  • Separately managed accounts
  • Portfolio management for institutional clients, including corporations, pensions and government entities
  • Wrap programs

How Thornburg Investment Management invests your money

Thornburg uses an active approach to manage more than 60 equity and fixed-income mutual funds and strategies. These funds and strategies cover both domestic and international markets. In addition, Thornburg has a sizable lineup of tax-exempt funds.

For the equity funds, Thornburg employes a bottom-up style with analysts and portfolio managers constructing the portfolio on a stock-by-stock basis rather than relying on macro calls on sectors, economies or interest rates. Thornburg considers itself a long-term, value-driven investor and likes to keep turnover low. Managers seek out securities that are well-priced relative to the stock’s long-term prospects.

A hallmark of Thornburg’s fixed-income strategy is the bond ladder, which calls for buying bonds at staggered maturities along a “ladder,” so a portion of the portfolio’s assets matures each year. This strategy helps to reduce interest rate and investment risk.

Here is a full list of the strategies and funds that the firm offers to both individuals and institutions:

Portfolio/Fund NameInvestment Strategy
 Thornburg Investment Income BuilderGlobal Equity
Thornburg Global OpportunitiesGlobal Equity
Thornburg International ValueInternational Equity
Thornburg Better World InternationalInternational Equity
Thornburg ValueDomestic Equity
Thornburg Core GrowthDomestic Equity
Thornburg Low Duration IncomeGlobal Fixed Income
Thornburg Limited Term U.S. GovernmentGlobal Fixed Income
Thornburg Limited Term IncomeGlobal Fixed Income
Thornburg Strategic IncomeGlobal Fixed Income
Thornburg Low Duration MunicipalTax Exempt Bond
Thornburg Limited Term MunicipalTax Exempt Bond
Thornburg Intermediate MunicipalTax Exempt Bond
Thornburg California Limited Term MunicipalTax Exempt Bond
Thornburg New Mexico Intermediate MunicipalTax Exempt Bond
Thornburg New York Intermediate MunicipalTax Exempt Bond
Thornburg Strategic Municipal IncomeTax Exempt Bond
Thornburg Long/Short EquityAlternatives

Fees Thornburg Investment Management charges for its services

Private client and institutional client separate account fees

Thornburg generally charges a fee based on a percentage of assets under management for its institutional and private clients separate accounts. The fees charged to separate accounts are negotiable and will vary depending on the type of client, the amount of assets under management and whether the client chooses to place restrictions on Thornburg’s discretionary investing authority.

The firm may charge a limited amount of performance-based fees as well, though this fee only applies only to institutional separate account clients and to certain private funds managed by the firm. Performance-based fees are charged when the portfolio manager produces positive returns.

Note that investors participating in institutional or private client programs pay less due to higher initial minimum investment requirements. These are the fee schedules for institutional separate accounts and private client separate accounts. Rates do not include additional charges that clients may pay, such as custodial fees, third-party money manager fees, brokerage and exchange fees and fees for certain trades.

 

International ADR Strategy ($25 million minimum)
Up to $25 million0.70%
$25 million to $75 million0.65%
Over $75 millionnegotiable
International Equity Investment Strategy ($10 million minimum)
Up to $25 million0.70%
$25 million to $75 million0.65%
Over $75 millionnegotiable
All Cap Growth, International Equity ESG, International Growth ADR and Ultra Focused International Equity Investment Strategies
($10 million, $25 million, $10 million and $10 million minimums, respectively)
Up to $25 million0.75%
$25 million to $75 million0.65%
Over $75 millionnegotiable
Developing World and Emerging Markets ADR Strategies ($25 million minimum)
All assets0.80%
Ultra Focused Equity and U.S. Equity Investment Strategies ($10 million minimum)
Up to $25 million0.60%
Over $25 millionnegotiable
Global Quality Dividend ($25 million minimum)
Up to $25 million0.75%
Over $25 millionnegotiable
Global Opportunities ($25 million minimum)
Up to $25 million0.75%
Over $25 millionnegotiable
Investment Income Builder Investment Strategies ($100 million minimum)
Up to $25 million0.75%
Over $25 millionnegotiable
Long/Short Equity Investment Strategy ($50 million minimum) 
Up to $50 million1.25%
Over $50 millionnegotiable
Multisector Opportunistic and Strategic Municipal Income Investment Strategies ($50 million minimum)
$50 million to $100 million0.50%
Over $100 millionnegotiable
All Other Municipal Fixed Income Investment Strategies ($1 million minimum)
Up to $25 million0.30%
$25 million to $75 million0.25%
Over $75 million0.20% or negotiable
All Other Taxable Fixed Income Investment Strategies ($25 million minimum)
Up to $25 million0.35%
Over $25 million0.30%

Wrap program fees

Clients in Thornburg’s wrap programs pay the program’s sponsor an annual fee, typically from 1% to 3% of assets under management. Thornburg receives an annual fee ranging from 0.30% to 0.75% of the assets it manages, depending on the size of the wrap program and the investment strategy.  The exact rate will depend on factors including the size of the wrap program and the investment strategies offered.

Wrap program fees generally covers all brokerage commissions on executed trades, though clients will pay additional fees when trades are made with broker-dealers other than the sponsor.

Mutual fund fees

Shareholders in Thornburg Investment Management’s mutual funds pay a percentage of their assets under management. Fees vary depending on the strategy.

Fees for domestic equity funds range from 1.27% to 1.48%, while fixed-income funds charge between 0.77% and 1.05%. In addition, shareholders are charged upfront commissions of up to 4.50% for A shares of the mutual funds.

Thornburg Investment Management’s highlights

  • Municipal bond expertise: Thornburg sets itself apart with its emphasis on municipal bond investing. The firm has an extensive lineup of municipal bond funds and strategies including for residents of New York, California and New Mexico. Investors residing in these states can benefit from tax-free yields on bonds issued by their home state.
  • Unique laddering strategies: Thornburg’s bond laddering strategy helps boost returns in its bond funds without taking on additional credit risk. This can be especially beneficial in a low interest rate environment. By investing at different maturities, the average yield of the fund can be higher for the same average maturity (due to higher yields on longer dated maturities) than it would be if the fund had only invested at the average maturity.
  • Aligned interests: Portfolio managers invest in the funds they manage, which aligns their interests with that of shareholders.
  • Awards and recognition: Thornburg was named “Global Core Equity Manager” of the year in Institutional Investor Magazine’s 2015 U.S. Investment Management Awards.

Thornburg Investment Management’s downsides

  • Above-average fees for mutual funds: Individual investors in Thornburg’s mutual funds pay above-average fees. For example, the expense ratio for the Thornburg Value fund is 1.33%, while the average expense ratio for actively managed domestic equity funds is 1.12%, according to Morningstar Inc., a mutual fund research firm.
  • Performance-based fees: Thornburg charges performance-based fees to certain clients, which could lead portfolio managers to take greater risks to bolster returns. When Thornburg charges a performance-based fee, it has an incentive to maximize gains in that account (and, therefore, maximize its performance-based fee), and it could make investments for that account that are riskier or more speculative in an attempt to do so. Thornburg also has an incentive to favor accounts for which it charges a performance-based fee over other types of client accounts, by allocating more profitable investments to performance-based fee accounts or by devoting more resources toward the management of those accounts.
  • Investment management only: Thornburg does not offer traditional financial planning services. Those who want to receive financial planning alongside portfolio management will not be able to find those services through Thornburg.

Thornburg Investment Management disciplinary disclosures

Thornburg’s disciplinary disclosures are minor, with only one such action reported. Disclosures are any criminal charges, regulatory actions or legal actions against the firm or its affiliated persons, and all SEC-registered firms are required to report these on their Form ADV filed with the SEC.

In the disclosure reported in Thornburg’s Form ADV, the firm was accused of failing to file three voting rights notifications in a timely manner with Bunesanstalt Fur Finanzdienstleistungsaufsicht (BaFin), a financial regulatory authority for Germany. According to the Form ADV, the notifications were filed on time but with errors. By the time Thornburg was notified of the errors, corrected them and refiled the notifications, the deadline had passed. This resulted in a fine of 100,000 euro (approximately $111,000), though Thornburg maintains that because the filings were “materially correct,” the filings were therefore timely.

Thornburg Investment Management onboarding process

If you want to learn more about working with Thornburg Investment Management, you can contact the firm by filling out the contact form provided on its website. You can also call the firm at  800-847-0200 or email at [email protected]

Thornburg mutual funds are available through financial intermediaries. Contact your financial advisor if you want to invest in a Thornburg fund.

The bottom line: Is Thornburg Investment Management right for you?

Thornburg Investment Management offers a well-regarded lineup of mutual funds covering major asset classes. With its roots in municipal bond investing, Thornburg remains a leader in this corner of fixed-income investing, and its unique bond ladder strategy is another way Thornburg that makes its mark.

The bulk of the firm’s clients are individual investors, and it also works with high net worth individuals and institutional investors. The firm’s account minimums, which start at $100,000 for separately managed accounts and wrap programs, make it more accessible compared with many other firms.

However, prospective clients should be aware that the firm does not offer financial planning services. Additionally, clients will want to be aware that performance-based fees apply to certain private funds managed by the firm and that fees for certain funds may be above-average compared to comparable funds on Morningstar. Before choosing a financial advisor, it’s always important to shop around and compare your options to ensure you find the best fit for you.

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