In the final quarter of 2025, international equity markets experienced robust growth, influenced significantly by a shift in U.S. monetary policy and diverse approaches by global central banks, all set against a backdrop of ongoing geopolitical tensions. This period also saw the Thornburg International Growth Fund (I share class) report a return of -1.6%, trailing the MSCI ACWI ex-U.S. Growth Index by 416 basis points. This commentary delves into the market landscape and the fund's strategic positioning.

A major development in December 2025 was the Federal Reserve's decision to implement its second interest rate reduction, signaling a potential easing cycle. This move profoundly impacted global financial markets, with investors anticipating a more accommodative monetary environment. Concurrently, other central banks worldwide pursued varied policies, creating a complex and dynamic investment climate for international growth funds.

Several factors contributed to the fund's relative underperformance during the quarter. Stock selection within the consumer discretionary sector was a significant detractor. Additionally, allocation decisions and stock choices in communication services negatively impacted returns. Conversely, strong stock picking in the United Kingdom, an overweight position in Taiwan, and an underweight stance in Australia positively influenced the fund's relative performance.

Throughout 2025, the fund strategically increased its exposure to the financials sector. This decision was driven by an improved outlook for earnings visibility and attractive risk-reward profiles within the sector. Furthermore, the portfolio maintained a constructive view on the artificial intelligence (AI) investment cycle, selectively augmenting its holdings in the high-bandwidth memory ecosystem. This targeted investment aimed to capitalize on supply-demand imbalances and robust pricing trends, as the escalating requirements of AI systems continue to drive demand for such components.

Despite the fourth quarter's underperformance, the fund's strategic adjustments in sector allocation and its focus on key growth themes like AI reflect a forward-looking approach. The emphasis on regions with strong stock-picking opportunities and a dynamic response to evolving monetary policies illustrate the fund's adaptive investment philosophy in a complex global market environment.