Russ Kinnel: Hi, I'm Russ Kinnel, director of manager research for Morningstar. I'm joined via satellite by Jason Brady. Jason is CEO of Thornburg based in Santa Fe. He's also head of the fixed-income team and manager of Thornburg Income Builder.
Jason, thanks for joining us.
Jason Brady: It's really my pleasure, Russ. Thanks.
Kinnel: Jason, I'd like to start off because Income Builder is a wide-ranging income-oriented fund. Of course today there are so many income-producing instruments that have really been bid up, so I am curious--can you start by telling us just about a couple of big areas you are avoiding or at least significantly underweight?
Brady: Sure. So, the portfolio is actually underweight fixed income relative to kind of its home base of 25% fixed income, 75% global equities. So lower in fixed income. Also we tend to be more international than the typical income portfolio, but that's skewed even a little more today as valuations in the U.S., particularly for rate-sensitive sectors, is pretty high.
Kinnel: And what areas do you find attractive?
Brady: Outside the U.S. there are some interesting things. The telecom industry is fairly low in valuation on a global basis, although each individual case is different, tends to be a pretty local sector. We also like financials. If you have low rates obviously that's a challenge for lots of kinds of financials to the extent that some of our portfolio is sensitive to rising rates in a negative direction. Obviously, a number of banks are sensitive in a positive direction. So, it provides some nice portfolio balance as well.
Kinnel: I know your top holding is China Mobile. Can you tell us about that one?
Brady: Sure. So, as we discussed, telecom is fairly interesting on a global basis, although you really have to look at, as we do, each name from a bottom-up sense, and the telecom business is pretty local. But China Mobile is not particularly demanding from a valuation case. In addition, what we are seeing, even though telecom is capital-intensive, you are seeing them move their customers up in speeds which gives them much better spectrum usage. It's a little bit in the weeds, but what that means is their ability and willingness to pay is actually rising. That's critical for us in the Income Builder and that thesis has been validated recently by them raising their dividend payout.
Kinnel: Thanks, Jason. I appreciate you taking the time to talk with us.
Brady: It's really my pleasure. Thank you.
Kinnel: From Morningstar, I'm Russ Kinnel.