| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | 2.4% | 0.1% |
| 2025 |
|---|
| 2.5% |
Thornburg's Small/Mid Cap Core Fund returned 2.53% in Q3 2025, underperforming the Russell 2500 Index by 647 basis points. The managers maintain a constructive outlook despite near-term macro uncertainty, emphasizing their quality-focused approach targeting companies with durable competitive advantages and strong balance sheets. The fund benefits from small and mid-cap outperformance during the quarter, driven by Federal Reserve rate cuts and increased appetite for domestic cyclicality. Key contributors included Talen Energy and Pure Storage, while Casella Waste Systems detracted. The portfolio employs a barbell strategy balancing higher beta exposure with defensive consistent earners to hedge macro volatility. Managers maintain large overweights to industrials while underweighting healthcare due to limited opportunities. They believe the historically wide valuation discount between small/mid caps and large caps, combined with improving market breadth and clearer Fed policy visibility, supports continued performance normalization across market capitalizations despite expected episodic sentiment swings from election uncertainty and trade policy shifts.
Focus on higher-quality small and mid-cap companies with durable growth characteristics, strong balance sheets, and resilient business models that can navigate uncertainty while benefiting from the historically wide valuation discount versus large caps.
The managers remain constructive on the outlook for small and mid-cap equities despite evolving macro backdrop. They expect near-term choppiness but believe the relative valuation discount versus large caps and improving market breadth support continued normalization. They emphasize focusing on quality businesses with durable competitive advantages.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Nov 4 2025 | 2025 Q3 | AIT, ATGE, BJ, CLH, COHR, CWST, ITT, LPLA, PNFP, PSTG, SMPL, STKL, SXT, TLN, VRT, WAL | AI, Defensive, industrials, Quality, rates, small caps, technology, valuation | - | Thornburg's small/mid cap fund underperformed in Q3 despite sector outperformance, maintaining quality focus on companies with strong balance sheets and competitive advantages. Managers employ barbell strategy balancing growth and defensive positions while overweighting industrials. They remain constructive on historically wide valuation discount versus large caps despite near-term election and trade policy uncertainty. |
| Jul 27 2025 | 2025 Q2 | AGYS, AVTR, BJ, BMRN, CLH, COHR, CWST, CYTK, FTI, LPLA, MYRG, NTNX, PNFP, RPAY, SXT, TXNM, VRT, WD | Barbell, cyclicals, Domestically Focused, Risk Appetite, small caps, Trade Policy, valuation | - | Thornburg's small/mid-cap fund outperformed in Q2 with a barbell strategy balancing cyclical exposure and defensive positions. Managers are cautiously optimistic on domestically-focused companies that should benefit from reduced trade exposure and historically wide valuation discounts versus large caps, despite ongoing tariff uncertainty and macro-driven volatility. |
| Mar 31 2025 | 2025 Q1 | AIT, BJ, CLH, CWST, LPLA, NTNX, PNFP, TXNM, WAL, WH | AI, growth, mid cap, rates, Recession, small cap, Trade Policy, value | - | Thornburg Small/Mid Cap Core Fund fell 11.38% in Q1 2025, underperforming by 388 basis points as AI trade unwound and policy uncertainty drove risk-off sentiment. Managers reduced exposure to volatile growth positions, focusing on profitable companies with strong balance sheets. Recession probability increased to 35% amid tariff concerns and weakening economic indicators. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q3 |
AISemiconductor and software companies were supported by increased spending on data centers and power infrastructure tied to AI adoption during the quarter. |
Data Centers Semiconductors Software Infrastructure |
QualityThe fund maintains emphasis on higher-quality companies with durable growth characteristics, strong balance sheets, and resilient business models. They believe focusing on quality remains essential for businesses with durable competitive advantages. |
Balance Sheets Competitive Advantages Resilient Defensive | |
Small CapsSmall and mid-cap equities outperformed large caps during the quarter, benefiting from expectations of lower rates and increased investor appetite for domestic cyclicality. The relative valuation discount versus large caps remains historically wide. |
Valuation Outperformance Cyclicality Market Cap | |
| 2025 Q2 |
Trade PolicyTrump administration's Liberation Day tariff package sparked early April selloff, though temporary pause in tariff escalation helped drive market recovery. Tariffs remain an overhang and source of ongoing policy uncertainty, but small and mid-cap companies may be insulated as many are domestically focused and less reliant on global supply chains. |
Tariffs Trade Policy Domestic Supply Chain |
Small CapsSmall and mid-cap equities rebounded meaningfully in Q2 after being disproportionately impacted in Q1. The relative discount versus large caps remains near multi-decade wides, presenting compelling opportunities for long-term investors. Portfolio focuses on companies within the small cap segment of the universe ($0-2.5B market cap). |
Valuation Discount Opportunity Market Cap Relative | |
Risk AppetiteMarkets are becoming more macro driven with shorter-term periods where equities vacillate between risk-on and risk-off sentiment. Portfolio is managing more of a barbell approach, balancing higher beta exposure with more defensive, consistent earners to hedge volatility. |
Risk-on Risk-off Barbell Beta Volatility | |
| 2025 Q1 |
AIMarkets experienced substantial volatility driven by an unwind of the artificial intelligence and momentum trade following DeepSeek's arrival, which showcased China's cost-efficient advancement within AI technology. The Magnificent Seven stocks were hit especially hard, down 16%, as fears of peak AI spending emerged. |
Artificial Intelligence DeepSeek Technology Magnificent Seven China |
Trade PolicyU.S. trade and economic policy uncertainty drove substantial market volatility during the quarter. Growing concerns about tariffs and heightened policy uncertainty contributed to recession fears, with the Trump administration's aggressive stance on tariffs likely to increase recession probability forecasts. |
Tariffs Policy Uncertainty Trump Administration Trade | |
RatesThe risk-off environment was challenging for small and mid-cap segments which reacted sensitively to the prospect of reduced rate cuts in 2025. Goldman Sachs now expects three Fed cuts, and markets appear set up for a defensive environment until the Fed is ready to cut rates again. |
Federal Reserve Rate Cuts Interest Rates Monetary Policy |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| No Elevator Pitches found | ||||||||||
| TICKER | COMMENTARY |
|---|---|
| CWST | Casella Waste Systems, Inc. was the largest detractor with an average weight of 3.36% and detracting -0.69% from returns. |
| TLN | Talen Energy Corp. was the top contributor to performance in Q3 2025 with an average weight of 2.66% and contributing 0.97% to returns. |
| PSTG | Pure Storage, Inc. was a top contributor with an average weight of 1.96% and contributing 0.75% to returns. |
| ATGE | Adtalem Global Education, Inc. contributed positively with an average weight of 1.92% and contributing 0.58% to returns. |
| COHR | Coherent Corp. contributed 0.46% to returns with an average weight of 2.77%. |
| VRT | Vertiv Holdings Co. contributed 0.37% to returns with an average weight of 3.15%. |
| PNFP | Pinnacle Financial Partners, Inc. detracted -0.41% from returns with an average weight of 2.59%. |
| SMPL | The Simply Good Foods Co. detracted -0.36% from returns with an average weight of 1.42%. |
| BJ | BJ's Wholesale Club Holdings, Inc. detracted -0.35% from returns with an average weight of 2.46%. |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
|---|---|---|---|---|---|
| No Recent Buys Data | |||||
| Ticker | Put/Call | Amount Sold | Shares Sold | % Change | Weight % | Status |
|---|---|---|---|---|---|---|
| No Recent Sells Data | ||||||
| Industry | Prev Quarter % | Current Quarter % | Change |
|---|---|---|---|
| No industry data available | |||
