Most Popular ArticlesNovember 24, 2009
Brian McMahon is the chief executive officer and chief investment officer for Thornburg Investment Management, where he is responsible for the company’s overall investment activity. Brian is also a co-portfolio manager for the $3.8 billion Thornburg Investment Income Builder Fund (TIBAX). The fund’s goal is income production, and it is in Morningstar’s World Allocation category. It has outperformed its benchmark, the Morningstar Moderate Target Risk, over the last year (43.40% versus 14.30%), three years (3.15% versus 1.68%) and five years (8.31% versus 3.40%). It’s yield is 6.83%. The A shares have an expense ratio of 1.25%. Data are as of November 19.
We spoke with McMahon on November 11.
I’d like to understand your economic forecast – whether it is v- or u-shaped – and how that guides your asset allocation decisions.
I’m not sure if the recovery will be v- or u-shaped, but I believe we will get a quicker recovery outside the US than inside the US. In fact, I think it is already underway. The reason is that the US economy has more profound structural adjustments to make.Â
What are those adjustments?
We became far too dependent on housing and on an expansion of retail industries – basically an expansion of debt-financed consumption. The US became addicted to that over the last 20 years – particularly in the last 10 years.Â
That did not happen in the rest of the world. Some retailers here need to retrench or go out of existence. We are over-retailed and over-housed, with far too much construction, relative to the rest of the world.
It will look more v-shaped outside the US and more u-shaped inside the US.
When you refer to outside the US, are you referring to developed or emerging economies?
Both, but definitely in emerging markets. From the end of Q4 of 2008 to the end of Q3 of 2009, some emerging markets like Russia and maybe Turkey were down almost 10% in their GDP – more than the US. But it was because production stopped, and now it is ramping up. Over the next four quarters they will probably be up 10%.Display article as PDF for printing.
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