ETF Intel Q&A: Thornburg

Gabrielle Vennitti, Lead Product Manager of ETF Listings at Nasdaq, speaks with Jesse Brownell, Global Head of Distribution at Thornburg Investment Management, about the firm’s growing ETF lineup, international investing trends, and how they’re preparing for potential ETF share class approval.

1. What are some of the key initiatives you are currently focused on at Thornburg?

I would broadly categorize our key initiatives into two areas: continuing to develop solutions to organically meet client demands, and deepening resources and expanding capabilities across the firm, particularly in international equity and income-oriented products. 

A recent enterprise value survey of 2,500 buyers, including financial advisors, RIAs, consultants, and broker-dealers, revealed two themes driving their partnership decisions. First, meeting clients how they want to be met. This undoubtedly refers to technology and product wrappers. Still, it’s also critical for those in the investment management industry to demonstrate a keen understanding of their business, challenges, approach, and goals. Second, evolve as practices evolve. Our clients’ roles are more complex than ever. Today, their practice likely requires a deep understanding of tax considerations, estate planning, wealth transfer, and philanthropic giving. At Thornburg, we’re undertaking a number of initiatives to create efficiencies and boost resources: improving our website, increasing solutions across wrappers, and building an even stronger menu of value add opportunities for our partners

Our clients have long told us that seeking income or investing in international equities is synonymous with Thornburg. Nevertheless, we are not resting on the laurels of our over 40-year track record. We are investing in technology and human capital to raise the bar on how we continue to execute with existing solutions and carefully study areas that warrant product development resources. At each juncture, we ground our decisions in not running too far or too wide, so that we don’t risk downgrading the A+ client experience we strive to deliver. 

2. You launched TXUE, TXUG, TMB, and TPLS on Nasdaq. What trends are you seeing for actively managed ETFs within your peer space?

Several clients came to us seeking optionality in wrappers, which led to the milestone launch of Thornburg’s four active ETFs on Nasdaq in January and February. Just a few months since trading began, we are on the cusp of surpassing $250 million in two international equity and two fixed income strategies. While we generally refrain from sharing fundraising goals and strategy publicly, our Head of Product, Richard Kuhn, and I both reasonably believe we could reach $1 billion in ETF assets by the suite’s first anniversary next January. In fact, according to Morningstar, active ETFs are the top strategy asset managers plan to add to their model portfolios within the next year and a half. Even within the ETF world, the shift from passive to active is remarkable and shows no signs of slowing.

3. Why has international been such a key theme this year?

I believe this year’s strength in stock markets outside the U.S. marks the beginning of a long-term trend. Trade conflicts have sparked a new movement towards self-reliance in countries, including our European allies and those in Asia. They have to spend more money, which in turn equates to increased revenue and earnings. Moreover, a declining dollar, which is part of the policy to create a more favorable environment for U.S. manufacturers to export their products, makes foreign portfolios worth more. Buying international stocks, which have lagged U.S. shares for years and trade at lower valuations, is paying off.

Thornburg is known for its decades of international equity investing. Against the macro backdrop, we offer a number of solutions and wrappers for our clients, from mutual funds, ETFs, and managed accounts, to capitalize on the rotation from U.S. stocks to international names. 

4. What's next for Thornburg over the next 12 months?

When I think about looking forward over the next 12 months, I find it helpful to consider our starting point over the past year. 

A year ago, we were a highly concentrated business in mutual funds. While the bulk of our assets remain in ’40 Act funds, we are working to build a diversified, all-weather business across wrappers, channels, and solutions. Last fall, we launched an alternative private credit strategy, and in January, four active ETFs. We have also strengthened our SMA and CIT offerings by introducing lower minimums and enhancing service and data quality. Additionally, our teams have undertaken significant behind-the-scenes work on automation, streamlining data, and benchmarking the effectiveness of our website. The bottom line is that we’re listening to our clients. Understanding their needs and focus allows us to be a stronger partner to them.

Looking ahead, the industry is on the cusp of ETF share class approval. Thornburg’s product committee is actively discussing options for our client base. We want to be at the forefront of adopting new features, while also being mindful of the implications for investors. Our analysis will help us chart a course through the complexities of operational integration and ensure our approach makes sense for clients.