Thompson, Hickey, Cunningham, Clow, April & Dolan, P.A. ATTORNEYSAND COUNSELORSAT LAW
Daniel H. April
Janet Clow
David F. Cunningham
Patrick J. Dolan
John M. Hickey
C.W.N. Thompson, Jr.
January 26, 2016
Via EDGAR correspondence and E-Mail
Ashley Vroman-Lee
U.S. Securities and Exchange Commission
Division of Investment Management, Disclosure Review Office
100 F Street N.E.
Washington, D.C. 20549
| Re: | Thornburg Investment Trust |
| Registration Number under the Securities Act of 1933: 33-14905 |
| Registration Number under the Investment Company Act of 1940: 811-05201 |
Dear Ms. Vroman-Lee:
I state below the above-referenced registrant’s responses to comments received from the staff on January 13, 2016 respecting post-effective amendment no. 101 to its Registration Statement on Form N-1A, filed on December 1, 2015.
The revisions to the registration statement which are described below are expected to be made in substantially the same form described, in the registrant’s post-effective amendment which is expected to be filed on or about January 28, 2016. In those instances where we identify disclosure items analogous to the items which were specific subjects of staff comments, and the registrant responds to those comments by revisions to the disclosures referenced in staff comments, we expect to make conforming revisions to the analogous disclosures.
General Comment
1.Material Information. The staff asked the registrant to confirm that a further amendment to the registration statement will be filed to update material information not available at the time that post-effective amendment number 101 was filed.
Response. The registrant will include in a post-effective amendment which is expected to be filed on or about January 28, 2016 all material information which was omitted from post-effective amendment no. 101, including specifically all data which is required by Form N-1A to be updated as of December 31, 2015.
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Ashley Vroman-Lee
January 26, 2016
Page 2
Thornburg Funds Prospectus and Related Summary Prospectuses
2.Thornburg Low Duration Municipal Fund, “Principal Investment Strategies” (pages 6-7). The staff noted the sentence appearing in the first paragraph of the referenced section which reads: “[b]ecause the magnitude of changes in value of interest-bearing obligations is greater for obligations with longer durations given an equivalent change in interest rates, the Fund seeks to reduce changes in its share value compared to longer duration fixed income portfolios by maintaining a portfolio of investments with a dollar-weighted average duration of normally no more than three years.” The staff suggested that a subsequent sentence, which provides an example of the effect of interest rate changes on the price of an obligation with a duration of 2, be changed to illustrate the effects of interest rate changes on the price of an obligation with a duration of 3. The staff stated its view that this change would conform the example more closely to the limitation stated in the first quoted sentence.
Response. The registrant notes that three years represents the maximum dollar-weighted average portfolio duration that the Fund seeks to maintain under normal conditions. The registrant believes that it is more helpful to an investor’s understanding of the concept of duration to provide an example of an obligation within the limitation stated in the strategy, rather than providing an example of an obligation which is at the top of the limitation. The registrant therefore declines to make the suggested revision.
3.Thornburg Strategic Municipal Income Fund, “Principal Investment Strategies” and “Principal Investment Risks” (pages 15-16). Noting the sentence appearing in the second paragraph under the caption “Principal Investment Strategies” which reads: “[t]he Fund may invest in municipal obligations of any maturity, but seeks to maintain a portfolio of investments having a dollar-weighted average effective duration of normally one to ten years,” the staff suggested that the registrant include in its disclosure an example of how the price of an obligation with a particular duration may be affected by changes in interest rates. Specifically, the staff suggested that the registrant consider including an example to illustrate the effects of interest rate changes on an obligation with a duration of ten years. The staff proposed that the example could be included under the caption “Principal Investment Risks” or under the caption “Principal Investment Strategies.”
Response. The registrant agrees that an example illustrating the effects of interest rates changes on an obligation with a particular duration may be helpful to investors. The registrant notes, however, that ten years represents the maximum dollar-weighted average portfolio duration that the Fund seeks to maintain under normal conditions. The registrant believes that it would be more helpful to an investor’s understanding of the concept of duration to provide an example of an obligation within the range stated in the strategy, rather than providing an example of an obligation which is at the top of the range. The registrant notes in that regard that, historically under normal conditions, the Fund’s average portfolio duration has been around 7.5. Accordingly, the registrant will add the following disclosure to the Fund’s prospectus under the caption “Principal Investment Strategies”:
“Duration is commonly expressed as a number, which is the expected percentage change in an obligation’s price upon a 1% change in interest rates. For example, an obligation with a duration of 7.5 would be expected to change in price by approximately 7.5% in response to a 1% change in interest rates.”
4.Thornburg Strategic Municipal Income Fund, “Past Performance of the Fund” (page 17). The staff noted that the average annual total returns table identifies the Fund’s benchmark index as the “BofA Merrill Lynch Master Index,” and asked whether that was the full name of the index. The staff suggested that, if “BofA Merrill Lynch Master Index” is not the index’s full name, the registrant consider including the index’s full name in the average annual total returns table.
Thompson, Hickey, Cunningham, Clow, April& Dolan,P.A. ATTORNEYSAND COUNSELORSAT LAW
Ashley Vroman-Lee
January 26, 2016
Page 3
Response. Although the issuer of the index uses different names to refer to the index, the name “BofA Merrill Lynch Municipal Master Index” is one of the names customarily used by the issuer of the index and is also commonly used in the industry in reference to that index. In that regard, and in view of the staff’s comment, the registrant will add the word “Municipal” to the index name in the Fund’s average annual total returns table, so that the index will now be referred to in that table as the “BofA Merrill Lynch Municipal Master Index.”
5.Thornburg Limited Term U.S. Government Fund, “Fund Summary” (pages 30-33). The staff asked whether the Fund’s name had changed, noting that prior versions of the registrant’s prospectus referred to the Fund as the “Government Fund” but that post-effective amendment no. 101 refers to the Fund as the “Limited Term U.S. Government Fund.”
Response. The Fund’s name has not changed. Instead, the registrant has determined to use a different shorthand form of the Fund’s name throughout the Registration Statement. The new shorthand form of the Fund’s name is defined on the cover page of each of the prospectuses and statements of additional information included in post-effective amendment no. 101.
6.Thornburg Low Duration Income Fund, “Principal Investment Strategies” (pages 34-35). The staff repeated the comment stated above under item 2 above with respect to Low Duration Municipal Fund.
Response. The registrant declines to make the suggested revision, for the reasons stated in the registrant’s response to item 2 above.
7.Thornburg Limited Term Income Fund, “Principal Investment Risks” (pages 38-39). The staff noted the last sentence of the discussion of credit risk under the referenced caption, which reads: “[l]ower-rated or unrated obligations held by the Fund may have, or may be perceived to have, greater risk of default and ratings downgrades.” The staff suggested that the registrant consider revising the first quoted sentence to clarify that the reference to “lower-rated or unrated obligations” refers to obligations the Fund is permitted to purchase and is not inconsistent with the Fund’s policy not to invest in any debt obligation rated at the time of purchase lower than BBB by Standard & Poor’s or Baa by Moody’s or of equivalent quality as determined by the manager.
Response. The registrant will clarify the quoted sentence to read as follows:
“Lower-rated or unrated obligations in which the Fund may invest may have, or may be perceived to have, greater risk of default and ratings downgrades.”
8.Thornburg Strategic Income Fund, “Principal Investment Strategies (pages 40-41). The staff noted the reference to “derivative instruments such as options, futures contracts, options on futures contracts and swap agreements (including, but not limited to, credit default swap agreements)” in the itemization of the Fund’s permitted investments, and asked the registrant to describe in its response letter to the staff how the registrant values those derivative instruments.
Response. The Trustees of the Trust have adopted a valuation policy and procedures that governs the valuation of these investments. Pursuant to that policy and procedures, the registrant generally values investments in exchange-traded options at the last bid price for those options, generally values investments in futures contracts and other exchange-traded derivative instruments at the latest published price for each such instrument on its primary exchange, and generally values swaps, over-the-counter options, and other over-the-counter derivatives at prices obtained from market makers in those instruments.
Thompson, Hickey, Cunningham, Clow, April& Dolan,P.A. ATTORNEYSAND COUNSELORSAT LAW
Ashley Vroman-Lee
January 26, 2016
Page 4
9.Thornburg International Value Fund, “Principal Investment Strategies” (pages 49-50). Noting that the Fund’s name includes the word “international,” the staff asked the registrant to state in its response to the staff what percentage of the Fund’s assets are generally comprised of international investments. In this regard, the staff noted the staff guidance included in the adopting release that accompanied the adoption of Rule 35d-1 under the Investment Company Act of 1940, in which the staff indicated that while funds that use the terms “international” and “global” in their names are not subject to the 80% requirement stated in that rule, the staff would expect such funds to invest their assets in investments “tied economically to a number of countries throughout the world.”
Response. The registrant confirms to the staff that it is cognizant of the guidance issued by the staff in this area, and that it understands the use of the word “international” in the Fund’s name to connote diversification among investments tied economically to a number of different countries throughout the world. The registrant notes that the disclosure of the Fund’s principal investment strategies indicates that the Fund will invest “primarily” in foreign securities or depository receipts of foreign securities, and confirms that this disclosure connotes that under normal circumstances foreign securities will represent a substantial proportion of the Fund’s portfolio. The registrant also notes that, while the specific percentage of Fund assets which are comprised of international investments will vary over time, more than 80% of the Fund’s assets were comprised of international investments at December 31, 2015.
10.Thornburg Investment Income Builder Fund, “Fees and Expenses of the Fund” (page 61). The staff requested that the registrant delete the paragraph captioned “Explanation of Acquired Fund Fees and Expenses,” or move that disclosure from its current location to a different portion of the prospectus outside of the Fund Summary discussion.
Response. The referenced disclosure is the product of a series of earlier discussions among members of the staff and our office in September and October of 2012. These discussions included the submission of drafts of the disclosure and telephone conferences about the drafts, and also ultimately included revisions to the drafts following our conferences with the staff. The purpose in creating the disclosure and placing the disclosure in its current location is to explain “acquired fund fees and expenses” and the actual effect of those fees and expenses on the Fund for persons reading the line item for “Acquired Fund Fees and Expenses” in the “Annual Fund Operating Expenses” table as required by Instruction 3(f) to Item 3 of Form N-1A. In view of these circumstances, the registrant expects to retain the referenced disclosure in its current location.
11.Thornburg Investment Income Builder Fund, “Past Performance of the Fund” (pages 63-64). The staff stated its view that the blended benchmark against which the Fund compares its average annual total returns may not meet the definition of an “appropriate broad-based securities market index” set forth in Instruction 5 to Item 27(b)(7) of Form N-1A. The staff requested that the registrant add disclosure for a second index that meets the definition of an appropriate broad-based securities market index as interpreted in the staff’s comment.
Response. Form N-1A defines an “appropriate broad-based securities market index” to mean an index “that is administered by an organization that is not an affiliated person of the Fund, its investment advisor, or principal underwriter, unless the index is widely recognized and used.” The SEC has also stated that the purpose of including performance information for a broad-based securities market
Thompson, Hickey, Cunningham, Clow, April& Dolan,P.A. ATTORNEYSAND COUNSELORSAT LAW
Ashley Vroman-Lee
January 26, 2016
Page 5
index is “to provide investors with a basis for evaluating a fund’s performance and risks relative to the market” (SEC Rel. No. IC-23064 (Mar. 13, 1998)). The registrant notes that the constituent components of the blended index used by the Fund are both administered by organizations that are not affiliated persons of the Fund, TIM, or TSC, consequently clearly meeting the definition stated in Form N-1A. We also believe that in general the blended index will better reflect the mix of the Fund’s expected principal investment exposures over time than any available single index, and note in that regard that management has not identified a non-blended index that more appropriately reflects the Fund’s expected mix of investments. Accordingly the registrant declines to make the suggested revision.
12.Thornburg Global Opportunities Fund, “Principal Investment Strategies” (pages 65-66). Noting that the Fund’s name includes the word “global,” the staff repeated the comment stated above under item 9 above with respect to International Value Fund.
Response. The registrant confirms to the staff that it is cognizant of the guidance issued by the staff in this area, and that it understands the use of the word “global” in the Fund’s name to connote diversification among investments tied economically to a number of different countries throughout the world. The registrant also notes that, while the specific percentage of Fund assets which are comprised of international investments will vary over time, more than 40% of the Fund’s assets were comprised of international investments at December 31, 2015.
13.Thornburg Developing World Fund, “Principal Investment Strategies” (pages 69-70). Noting that the Fund’s name includes the phrase “developing world,” the staff repeated the comment stated above under item 9 above with respect to International Value Fund.
Response. The registrant confirms to the staff that it is cognizant of the guidance issued by the staff in this area, and notes that the Fund has a policy under normal conditions to invest at least 80% of its assets in equity securities and debt obligations of developing country issuers, which the registrant defines as those issuers that are domiciled or otherwise tied economically to one or more developing countries.
14.Thornburg Better World International Fund, “Principal Investment Strategies” (pages 73-74). Noting that the Fund’s name includes the word “international,” the staff repeated the comment stated above under item 9 above with respect to International Value Fund.
Response. The registrant confirms to the staff that it is cognizant of the guidance issued by the staff in this area, and that it understands the use of the word “international” in the Fund’s name to connote diversification among investments tied economically to a number of different countries throughout the world. The registrant notes that the disclosure of the Fund’s principal investment strategies indicates that the Fund will invest “primarily” in foreign securities or depository receipts of foreign securities, and confirms that this disclosure connotes that under normal circumstances foreign securities will represent a substantial proportion of the Fund’s portfolio. The registrant also notes that, while the specific percentage of Fund assets which are comprised of international investments will vary over time, more than 75% of the Fund’s assets were comprised of international investments at December 31, 2015.
15.“Additional Information About Fund Investment Goals and Strategies, and Risks of Fund Investment Strategies – Investing with Derivatives” (pages 78-86). The staff noted the reference to investments by certain Funds in collateralized loan obligations (“CLOs”) under the caption “Investing in Structured Finance Arrangements” on page 84 of the prospectus. The staff asked whether any Fund
Thompson, Hickey, Cunningham, Clow, April& Dolan,P.A. ATTORNEYSAND COUNSELORSAT LAW
Ashley Vroman-Lee
January 26, 2016
Page 6
intends to invest more than 15% of its assets in CLOs, and whether any of the CLO investments that a Fund may make are issued by issuers that rely on exceptions from the definition of an investment company that is required to be registered, as set forth in Section 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940. The staff noted that it may consider investments in CLOs, and in particular those investments in CLOs issued by issuers relying on Sections 3(c)(1) or 3(c)(7), to be illiquid under certain circumstances. We noted during our call with you on January 13, 2016 that Thornburg Strategic Income Fund is the only Fund that identifies investments in CLOs among its principal investment strategies, and you asked that we provide our response to the staff specifically as to that Fund.
Response. The registrant hereby confirms that Thornburg Strategic Income Fund has not during its operating history held positions in CLOs (including CLOs issued by issuers relying on Sections 3(c)(1) or 3(c)(7)) that exceed 15% of the Fund’s net assets. Additionally, while none of the registrant’s Funds have a specific percentage limitation on investments in CLOs, each Fund which may invest in CLOs has an investment limitation that prohibits the Fund from making any investment if, as a result, more than 15% of the Fund’s net assets would be invested in illiquid securities.
Thornburg Funds Statement of Additional Information
16.Investment Limitations (pages 30-44). The staff noted that all of the Funds have a fundamental investment limitation not to invest more than 25% of Fund assets in any one industry. The staff also noted that, for a number of the Funds, that concentration limitation is qualified by a statement which says that the Fund does not view municipal obligations to be “industries” under certain circumstances. The staff called attention to Investment Company Act Release No. 9785, in which the SEC has taken that position that only tax-exempt municipal obligations are eligible to be excluded from a fund’s concentration policy, and asked the registrant to consider revising its qualifying statement to say that only tax exempt municipal obligations will be excluded from the limitation.
Registrant. Although we question the existence of any material distinction in this context between tax-exempt and taxable municipal obligations in applying a concentration policy of this type, and although we are not certain that the cited Release provides authority for the staff’s view on this point, we note that the “Investment Limitations” section of the registrant’s Statement of Additional Information already includes the type of language requested by the staff. We note, for example, that the last paragraph of page 30 of the registrant’s Statement of Additional Information states that Thornburg Low Duration Municipal Fund views municipal obligations not to represent industries for purposes of the Fund’s concentration limitation only if “the interest payable on those obligations is exempt from federal income tax.” The registrant’s Statement of Additional Information includes similar language for those other Funds which include this type of qualification to their concentration policy.
Other Matters
This letter constitutes our representation, on behalf of the registrant, that the registrant will not raise as a defense in any securities related litigation the comments raised by the staff in respect to the described amendment. We understand that the staff’s request for this representation, and the registrant’s representation, should not be construed as confirming that there is or is not, in fact, an inquiry, investigation or other matter involving the registrant.
Please contact me or Charles Thompson with any questions. We appreciate the staff’s time and attention to our filings.
Thompson, Hickey, Cunningham, Clow, April& Dolan,P.A. ATTORNEYSAND COUNSELORSAT LAW
Ashley Vroman-Lee
January 26, 2016
Page 7
| Sincerely, |
| /s/ Daniel April |
| Daniel April |
Thompson, Hickey, Cunningham, Clow, April& Dolan,P.A. ATTORNEYSAND COUNSELORSAT LAW