Global markets experienced a strong rebound in the second quarter of 2025, overcoming an early April dip triggered by new tariff policies. This period saw significant gains across various sectors, with information technology leading the charge as investors redirected capital into high-quality software and semiconductor companies. Amidst this dynamic environment, Thornburg Investment Management's portfolio demonstrated exceptional performance, surpassing the Russell 2500 Index. The firm's strategic focus appears to be effectively capturing opportunities presented by prevailing market conditions, reinforcing its position as a key player in investment management.
The second quarter of 2025 unfolded with remarkable market resilience, following a brief but sharp sell-off at the start of April. This downturn was largely attributed to the Trump administration's \"Liberation Day\" tariff announcement, which initially sent ripples of uncertainty through the financial landscape. However, markets quickly absorbed the shock, demonstrating a strong capacity for recovery.
A standout performer during this recovery phase was the information technology sector. Following an AI-driven reset in the first quarter, investors shifted their focus back to fundamental value, pouring capital into established software and semiconductor firms. This rotation underscored a renewed confidence in the underlying strength and innovation within the tech industry, leading to significant returns for companies in this space.
In this favorable market climate, Thornburg Investment Management's portfolio, specifically its I share class, recorded an impressive return of 10.54% for the second quarter of 2025. This performance notably outpaced the Russell 2500 Index by 195 basis points, highlighting the effectiveness of their investment strategies. The firm's portfolio managers, Steven Klopukh and Tim McCarthy, CFA, have skillfully navigated these volatile yet rewarding market conditions.
Furthermore, an ongoing trend observed by the portfolio managers is the historically elevated discounts of smaller and mid-sized companies compared to large-cap entities. This valuation disparity presents compelling long-term opportunities for astute investors. Thornburg's strategy appears to be geared towards leveraging these relative discounts, aiming to unlock substantial value over time. This approach, combined with their focus on high-quality assets, positions their portfolio for continued growth and outperformance.
Looking ahead, the sustained market recovery, particularly the strength in technology, alongside the attractive valuations in the small and mid-cap segments, suggests a promising outlook. Thornburg Investment Management's strategic alignment with these trends, as evidenced by their strong second-quarter results, underscores their expertise in identifying and capitalizing on market inefficiencies.