Thornburg Investment Management has become the latest legacy asset manager to enter the ETF space as part of an ongoing trend of financial advisors aiming to meet clients’ needs by tapping into the fast-growing exchange-traded-fund market.
The Santa Fe, New Mexico-based firm with more than $45 billion under management is entering the exchange-traded fund market with the Thornburg International Equity ETF (TXUE) and the Thornburg International Growth ETF (TXUG).
Both ETFs are actively managed and will invest primarily in non-U.S. developed market equities.
TXUE, which was seeded by $40 million from a Thornburg client and is managed by Lei Wang and Matt Burdett, dipped slightly Wednesday morning in its first day of trading. TXUG, managed by Sean Sun and Nicholas Anderson, starts trading Thursday morning.
While the ETFs are similar in some ways to two existing mutual funds, they are not clones, primarily because they will not invest in emerging market equities and the ETF portfolios will be more concentrated than the mutual funds.
TXUE has the same portfolio managers as the $2.8 billion Thornburg International Equity mutual fund (TGVIX) launched in 2001. The mutual fund gained 12% last year and ranked in the sixth percentile of Morningstar’s large-blend category.
TXUG has the same portfolio managers as the $777 million Thornburg International Growth mutual fund (TINGX), launched in 2007. The mutual fund gained 2.4% last year and ranked in the sixty-third percentile of Morningstar’s large-growth category.
Founded in 1982, Thornburg’s lineup includes 21 mutual funds, one closed-end fund and nearly $6 billion worth of separately managed accounts assets.
Like most fund companies that have been around for decades, Thornburg is following the direction of asset flows and making a deliberate push into the ETF market.
Earlier this month, Thornburg filed with the Securities and Exchange Commission for permission to create an ETF share class for its mutual funds.
By filing, Thornburg joins at least three dozen other mutual fund companies that are seeking similar permission. There is no indication that the SEC will approve the multiple requests and the regulator is on no deadline to rule on the matter.
According to the announcement, more ETFs are already on the drawing board, including the Thornburg Core Plus Bond ETF (TPLS) and Thornburg Multi Sector Bond ETF (TMB), which will be launched in the coming months.
Thornburg’s migration into the ETF business was signaled last year with the hiring of Richard Kuhn, a 20-year Invesco veteran who is now head of product at Thornburg.
“Richard has been instrumental in getting us into the ETF market, and we want to make sure we have wrapper optionality for our clients,” said Jesse Brownell, Thornburg’s global head of distribution.
While Thornburg has a full lineup of mutual fund strategies, Brownell said there are no plans to clone or convert any mutual funds.
Brownell said approval of ETF share classes might alter Thornburg’s ETF strategy, but in the meantime, ETFs are a growth area for the asset manager.
Regarding the share class filing, he said, “Regulators are difficult at times to time up, and we have to have all optionality on the table, and that’s how we’re thinking about it.”
“We’re making sure we’re in the best position possible to move if the share class law changes,” he added.