Greg Dunn is portfolio manager for Thornburg Investment Management. He manages Thornburg International Growth Fund (TINGX) and Thornburg Core Growth Fund (THIGX), in addition to the International Growth Strategy, International Growth ADR Strategy, and All Cap Growth Strategy.
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Greg joined Thornburg in 2002 as research communications director for the marketing department and was promoted to equity research associate in 2005, associate portfolio manager in 2008, and portfolio manager in 2012.
Prior to joining Thornburg, Greg was an investment management analyst for Smith Barney. Greg holds a BS in business with a concentration in finance from Colorado State University and an MBA from Duke University's Fuqua School of Business.
I spoke with Greg on August 11.
What is your background and what led to becoming manager of the Thornburg International Growth Fund?
I have the typical industry background. I have an undergrad in business with a concentration in finance, and an MBA. I started as an equity analyst working with the growth team here at Thornburg, which at the time just had a domestic growth fund. In 2007 we decided to launch the Thornburg International Growth Fund. By that time, I had been here for five years. We launched the fund and I became an associate PM. In 2012 the portfolio manager I was working with retired, and I became co-portfolio manager.
What is the mandate of TINGX? Can you also describe the portfolio construction and risk-management processes?
Our mandate is growth and we have a flexible perspective. We are a multi-cap international growth fund. That means what you get as an investor is exposure to growth across a broad spectrum of international markets, and across different sized companies. What you see is a portfolio that doesn’t look like a benchmark or like a lot of our peers, but it has very consistent growth with reasonable valuations in a portfolio that’s pretty concentrated and typically holds 50 to 65 stocks.
We follow a bottom-up, fundamental research-driven process. We are collaborative and work very closely together to source and screen new ideas. We perform in-depth fundamental bottom-up research. We build a financial model and strive to understand the pros and cons of the business that we are analyzing, including its business model, revenue model, the competition in its space, and what its ultimate opportunity is. Then we compare that with our view on the valuation. We need to believe it’s a reasonable valuation, because we are growth investors, but we are sensitive to valuations. We like growth, but we don’t want to overpay for it.
What is your approach to currency exposure?
We are reluctant currency hedgers. At the moment, we aren’t hedged in any currencies. In the past, we’ve hedged anywhere from 50% to 100% of our exposure to the pound, the yen or the euro. In recent history, say over the last five years or so, the main driver behind hedging our currency exposure has been driven by a government’s mandate to weaken their currency, which we’ve seen in Japan and in Europe, and we saw in the UK as well. During those periods, we partially or fully hedged some of those currencies. Those are inexpensive currencies to hedge, and very liquid positions to get in and out of.
Outside of those unique situations, we are generally not hedged.
As of August 9, TINGX had a 10-year return of 7.08%, versus 1.68% for its Morningstar benchmark (the MSCI ACWI ex USA index). What has been the primary source of that 540 basis point outperformance?
The primary source of the outperformance has been stock selection. It’s been a function of having a fairly concentrated portfolio and being focused on our bottom-up stock selection. We don’t look like the broad indexes, and we don’t need to. We don’t own some of the big companies that make up the indexes that have stagnated or been in structural decline. We are out in the market looking for interesting, new growth opportunities.
We are a big fan of secular drivers, and over the lifetime of the fund there have been some prominent secular drivers across the markets that have driven some of our bottom-up stock selection, and some of our outperformance. Some of those were in the technology space, the Internet-based businesses, whether in search or online commerce or online travel. We have done well in those different spaces.
Another one that is not quite as prominent, but has been a good driver for many years, has been the payment space. We’ve owned several payments-processing businesses over the years. They have directly benefited from the secular trends of transactions moving from cash and check to electronic processing, and commerce moving from brick-and-mortar retail to online.
But it really does come back to the work we are doing on a stock-by-stock basis, and staying true to our bottom-up process of looking for, identifying and owning good businesses that are growing fast and are reasonably priced.
By Robert Huebscher, read the full article here.