Navigating the Developing World: Insights from the Thornburg Fund

As we turn the calendar page to a fresh year, and reflect on the close of Q4 2025, it’s always a good time to pause and truly assess where we stand, especially when it comes to the often-unpredictable landscape of developing world markets. Frankly, it was a quarter, much like the ones before it, that kept us on our toes – a blend of promising growth stories alongside some lingering macroeconomic headwinds. Our Thornburg Developing World Fund navigated these currents with a steadfast hand, focusing, as always, on those high-quality companies we believe in for the long haul.

You know, the broader emerging markets index, as measured by the MSCI EM, actually managed to eke out a modest positive return for the quarter. That said, it wasn't a uniformly rosy picture across the board. Far from it! We saw a real bifurcation in performance, with certain regions shining brighter than others. For example, countries like India, with its robust domestic consumption and government-backed infrastructure push, continued to show remarkable resilience and growth. It’s a story we’ve been watching closely and one where we've maintained meaningful exposure.

Then you have other pockets, such as parts of Latin America, notably Brazil and Mexico, which also presented interesting opportunities. Brazil, benefiting from commodity price shifts and a surprisingly effective approach to taming inflation, offered some compelling valuations. Mexico, on the other hand, continues to ride the tailwinds of 'nearshoring,' where companies are increasingly relocating manufacturing closer to the U.S. market. This trend, let me tell you, is a powerful structural shift that we believe has significant runway.

Of course, we can't talk about emerging markets without addressing the elephant in the room: China. Its economic narrative remains complex, burdened by property market woes and persistent geopolitical tensions. While we acknowledge China's vast potential, our approach has been, and continues to be, highly selective. We’re not shying away entirely, but rather focusing our investments on niche, high-quality businesses with strong competitive advantages and less direct exposure to the more volatile segments of their economy. It's about finding the diamonds in the rough, if you will, rather than betting on broad market recovery.

Looking ahead to Q1 2026 and beyond, our strategy remains rooted in a rigorous, bottom-up research process. We’re constantly sifting through thousands of companies, searching for those with solid balance sheets, proven management teams, and compelling growth prospects – all at what we believe are attractive valuations. The global macroeconomic environment, with ongoing inflation concerns and central bank rate policies, certainly keeps things interesting. But we believe that active management, coupled with a deep understanding of local nuances, is absolutely critical for unlocking value in these dynamic markets.

Ultimately, investing in the developing world requires both patience and a discerning eye. There will always be volatility, yes, that’s just the nature of the beast. But we are convinced that the long-term structural growth drivers – things like a rising middle class, technological adoption, and demographic shifts – present a truly compelling opportunity for investors who are willing to look beyond the immediate headlines. Our commitment, plain and simple, is to identify and invest in those companies poised to thrive in this evolving global landscape, delivering value for our shareholders one carefully chosen investment at a time.