Narrow market leadership, elevated valuations, and unevenly priced risk are raising the bar for portfolio construction. For many investors, the challenge is maintaining equity exposure while reducing reliance on concentration, duration sensitivity, and multiple expansion. In this Q&A, Matt Burdett, Head of Equities at Thornburg, explains how the Thornburg Equity Income Builder Fund is positioned to deliver resilient income and diversification through disciplined global stock selection.
What role is Equity Income Builder designed to play in a portfolio?
We think of the Fund as a diversified global equity allocation where income plays a meaningful role in total return. Investors often use it as a core holding with a defensive tilt, or as a complement to growth-oriented or U.S.-heavy strategies.
The idea isn’t to replace growth exposure, but to balance it. By focusing on high-quality global companies with durable cash flows, the strategy brings valuation discipline and diversification back into portfolios that may have become more concentrated over time.
How has the Fund delivered income across market cycles?
One thing that’s been very consistent is dividend growth. That’s been driven by companies with resilient earnings and management teams that take capital allocation seriously. Dividends increased again in 2025, which reinforces our focus on sustainability rather than chasing yield.
From a total return standpoint, the Fund has tended to participate in market upside while cushioning more of the downside. That balance has helped deliver positive returns in most calendar years since inception and contributed to a smoother return profile across different environments.
Markets feel stretched, and leadership remains narrow. What is the key challenge today?
In many parts of the market, investors aren’t being paid much for taking risks. Valuations are elevated, and the margin for error is thin. In that kind of environment, broad, benchmark-driven exposure can struggle, especially when returns are concentrated in a small number of stocks.
That’s why we stay very focused on bottom-up stock selection and balance-sheet strength. When markets become less forgiving, those fundamentals really start to matter.
What changes in global equity markets matter most for income investors?
For a long time, capital appreciation did most of the heavy lifting for equity returns. That’s starting to change. Returns are becoming more dispersed across regions and sectors, which means income and dividend growth are again becoming more important contributors to total return.
In our view, that shift favours strategies that can source income from different parts of the market rather than relying on a narrow leadership group.
How is the portfolio positioned today?
The portfolio is built around high-quality global businesses with durable cash flows and the ability to sustain and grow dividends. While markets delivered positive returns in 2025, leadership remained quite narrow in some places. Our positioning reflects a preference for balance and income resilience rather than leaning heavily into a small group of dominant names.
Where is dividend growth coming from?
It’s largely coming from business quality rather than leverage or short-term cycles.
In telecoms, recurring revenues and scale support steady cash generation. Utilities and energy benefit from regulated assets and long-lived infrastructure. Healthcare holdings tend to have stable demand and strong balance sheets. In financials, dividend growth reflects more conservative payout ratios and improved capital efficiency. And in select technology holdings, dividends are supported by strong free cash flow rather than aggressive payout policies.
Where are you most cautious?
We’re careful around businesses where dividends depend on leverage, refinancing conditions, or very supportive capital markets. As the cost of capital rises, dividend sustainability must be supported by free cash flow. We’re also mindful of situations in which valuation has run ahead of fundamentals, and income has become secondary to growth narratives.
How does this approach support downside resilience?
Downside resilience comes from diversification across sectors and regions, strong balance sheets, and a focus on recurring revenues. Because income is sourced from multiple areas of the market, the portfolio isn’t reliant on any single economic outcome. Historically, that’s translated into meaningfully lower downside capture during market drawdowns.
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