Navigating Volatility: Insights into Fixed Income Performance and Global Economic Shifts
Overview of the Limited Term Income Portfolio's Performance in Q3 2025
The Thornburg Limited Term Income Portfolio, specifically its I share class, achieved a commendable return of 1.82% during the third quarter of 2025. This performance notably surpassed its benchmark, the Bloomberg Intermediate U.S. Government/Credit Index, by 31 basis points. The portfolio's strategic positioning, characterized by a bias towards longer duration and higher quality assets, played a crucial role in this success. This approach was underpinned by the prevailing environment of attractive real yields and compressed credit spreads, which the management team adeptly leveraged to generate superior returns.
Strategic Positioning Amidst Evolving Market Dynamics
The fund's decision to maintain a longer duration and high-quality bias was a deliberate response to specific market signals. Real yields, which account for inflation, presented compelling investment opportunities, while corporate credit spreads tightened to levels not observed since the 1990s. Despite these tight spreads, the investment team adopted a cautious stance regarding the addition of incremental credit risk. This prudence stems from the belief that the compensation for taking on additional credit risk is currently near historical lows, suggesting an unfavorable risk-reward balance. This conservative approach underscores the portfolio's commitment to capital preservation while seeking sustainable growth.
The Unforeseen Impact of Protectionist Policies on Global Markets
Despite a significant increase in effective tariff rates—a sevenfold rise since the year's commencement—and the introduction of several new protectionist measures by the current administration, global markets demonstrated remarkable resilience. These measures included, but were not limited to, a 100% tariff on foreign-made movies and substantial tariffs on imported furniture. The unexpected robustness of markets in the face of these headwinds suggests a complex interplay of factors, where the global economy's underlying strength and adaptability may be buffering the immediate adverse effects of trade protectionism. This resilience presents both challenges and opportunities for investors navigating an increasingly fractured global trade landscape.
Anticipating Future Economic Trajectories and Investment Considerations
Looking ahead, the global economy continues to display surprising resilience, even as it contends with escalating pressures. These pressures include the delayed consequences of tariffs and ongoing constraints on fiscal flexibility across various nations. The ability of the economy to withstand these forces warrants careful consideration for future investment strategies. As the economic environment remains fluid, a thorough understanding of these macro-level dynamics will be essential for identifying potential risks and capitalizing on emerging opportunities. Investors are encouraged to remain vigilant and adapt their portfolios to the evolving global economic conditions.
Thornburg Investment Management: A Legacy of Strategic Asset Management
Thornburg Investment Management, a privately held global investment firm, has established itself as a prominent provider of multi-strategy solutions for institutions and financial advisors. With a strong track record spanning several decades, the firm excels in fixed income, equity, and alternative investments. Its diverse offerings include mutual funds, institutional accounts, separately managed accounts for high-net-worth individuals, and UCITS funds tailored for non-U.S. investors. Founded in 1982 and headquartered in Santa Fe, NM, Thornburg is renowned for its disciplined investment approach and deep market expertise. The firm's commitment to delivering robust and consistent returns has made it a trusted partner for a wide range of clients seeking sophisticated investment strategies.