Money market funds, based on their underlying investments, quickly adjust to changes in short-term interest rates. As a result, investors relying on money market funds for income can see that income swing dramatically as interest rates move with the business cycle.
Thornburg’s process of laddering bonds helps to mitigate this volatility. Similar in concept to dollar-cost averaging, cash is continuously received from bonds maturing within the portfolio. This income is reinvested at the far end of the ladder, where interest rates are usually higher. The end result is an income which is typically less volatile than that seen in money market funds.
Past performance does not guarantee future results.
Bond funds are not an exact substitute for money market funds. Investors in bond funds may experience more volatility than those in comparable money market funds. These investments have certain differences, and investors in bond funds took more risk than money market investors to earn their higher returns, including reinvestment risk, credit risk, and inflation risk. Generally, money market funds seek to maintain an investment portfolio with an average maturity of 90 days or less. Our Limited Term Bond Funds have an average maturity normally less than five years and the Intermediate Fund has an average maturity of normally three to ten years. Income earned from either the bond funds or money market funds may be subject to federal, state, or local income tax. Municipal funds are generally exempt from federal income tax, but may be subject to the alternative minimum tax. Unlike money market funds, which seek to preserve the share value at $1.00, the net asset value of bond funds fluctuates daily. It is possible to lose money when investing in either bond funds or money market funds and neither is insured by the FDIC or any other government agency.
The laddering strategy cannot assure or guarantee better performance and cannot eliminate the risk of investment losses.
Source of charts: Morningstar and Thornburg Investment Management
Investments in the Funds carry risks, including possible loss of principal. Bond funds have the same interest rate, inflation, and credit risks that are associated with the underlying bonds. The principal value of a bond will fluctuate relative to changes in interest rates, decreasing when interest rates rise. Unlike bonds, bond funds have ongoing fees and expenses. Funds invested in mortgage backed securities may bear additional risk. Investments in the Funds are not FDIC insured, nor are they deposits of or guaranteed by a bank or any other entity.
Before investing, carefully consider the Fund’s investment goals, risks, charges, and expenses. For a prospectus containing this and other information, contact your financial advisor or visit our literature library. Read it carefully before investing.
2008 Lipper Fund Awards were granted to the fund or family in each Lipper classification that consistently delivered the strongest risk-adjusted performance as of 12/31/07 (calculated with dividends reinvested and without sales charges). Lipper’s large firm universe is comprised of fund families with more than $28 billion in total net assets. Only fund families with at least five bond funds were eligible. Past performance does not guarantee future results. The individual funds may not have ranked number one in their categories.
A basis point (bps) is a unit equal to 1/100th of 1%. 1% = 100 basis points.
The SEC Yield is computed in accordance with SEC standards measuring the net investment income per share over a specified 30-day period expressed as a percentage of the maximum offering price of the Fund’s shares at the end of the period.
