VIDEO: ETF of the Week: TXUE

Chuck Jaffe: One fund, on point for today. The expert to talk about it. Welcome to the ETF of the Week!

Yes, this is the ETF of the Week, where we get the latest take from Todd Rosenbluth, the head of research at VettaFi. And if you go to VettaFi.com, you’ll find all the tools you need to be a savvier, smarter ETF investor, and to get more details on the new, newsworthy, trending and timely ETFs that we talk about here. 

Todd Rosenbluth, it’s great to chat with you again.

Todd Rosenbluth: Excited to be back, Chuck.

Chuck Jaffe: Your ETF of the week is…

Todd Rosenbluth: The Thornburg International Equity ETF (TXUE).

Chuck Jaffe: TXUE. The Thornburg International Equity ETF, a fund that basically made its debut at the start of this year. And why is this fund — fairly new — your pick for ETF of the Week this week?

Todd Rosenbluth: So, we’re starting to hear more and more from advisors and investors that they’re looking overseas. They’re finally more comfortable expanding their portfolio outside of the United States. We have this week, as you and I are recording this, just after the meeting that the U.S. and China had to hopefully improve trade relations. That’s likely to help investors get more comfortable investing overseas, but who want the benefits of an experienced management team.

And so even though TXUE is a relatively new ETF, the team behind this has a long and successful track record running the Thornburg International Equity Mutual Fund. That’s five-star-rated. This ETF is just a newer way of getting exposure to it. We thought it was worth diving in.

Chuck Jaffe: And the lesson in there … specific to established funds, basically making ETF variations of a traditional fund is that it’s like saying, I like the vehicle. The ETF is a different chassis, but it’s basically the same car, right? So that if you look at any fund company where you say they’ve got an established fund in this space, even though it may not be identical, once you see that, you throw away the concern over new, right?

Todd Rosenbluth: If you’re dealing with an active manager, you want to look at whether that active manager is qualified to be running that sleeve of your portfolio. And so, within a new ETF or an ETF that’s three or four months old, you don’t have that. But you do have that with a fund family that’s using the same manager. It’s using the same name. 

This is not a tweak necessarily of it. Thornburg is using international equity followed by the vehicle. So, that gives me more comfort in terms of the similarities. And when we looked inside the portfolio, we saw similarities as well. 

Thornburg has an experienced team. They have a tried-and-true way of investing globally. Looking at a few different ways of analyzing companies and basic value and consistent earners being the two dominant of those three ways.

We think this is a good fund worth paying attention to, despite its short ETF history.

Chuck Jaffe: You talk about looking inside the portfolio. One of the things is that although international funds as opposed to global or worldwide funds, are supposed to be more international. They have to have more of their holdings be nondomestic. There are still plenty of international funds that buy U.S. multinationals as their primary holdings or what have you, make a big part of their portfolios.

This fund, when you dig in on the holdings, I mean, it’s more than 90% international stocks. They are not getting their exposure to the U.S. multinationals, which means, presumably, that you’re getting that international “get me offshore” that you were looking for with a fund that’s international. And then also, that you’re avoiding some of the overlap problems that those other guys create because they’re owning the Nvidias of the world or what have you, that you already have in your domestic portfolios, right?

Todd Rosenbluth: You’re right. So it’s roughly 5% of the portfolio that’s in U.S. stocks, which you’re right. It’s important to note there are some. There is a slight U.S. exposure, but companies like Orange, BNP Paribas, L’Oreal, AstraZeneca, those are some of the holdings that you would not have in your S&P 500 or Russell 1000 equity exposure. You are getting that diversification.

And countries like France and Japan and Germany, those are the three top countries for this ETF. So, you are geographically diversifying as well.

Chuck Jaffe: As for international exposure, you and I have talked in the past that U.S. investors really don’t have enough. They haven’t necessarily needed it for a while, because this has been the best market. Up to this point this year, international markets have done much better than domestic markets. But as you and I are recording this, we are watching the U.S. market rebound, post-tariff news.

So, how much of a portfolio would you ideally see someone have internationally? And could this be for somebody who has avoided international but agrees with what those advisors are telling you: “give me some international exposure, I’m ready for it”? Can this be it, or is this just a piece of what you want internationally?

Todd Rosenbluth: So, it’s a multipart question. Let me try to break that down. Typically, we find that investors have a 70/30 or 60/40, the higher number being equities to fixed income. And then a slice of that is toward international equity. So 10%-15% of your equity exposure, at a minimum, probably should be international equity to have a diversification — perhaps even more, if you want to reduce your reliance on the Nvidias, the large-cap growth stocks from the United States. 

Having a part of your portfolio dedicated toward international equities makes sense. This Thornburg fund is a good one to take a closer look at, if you believe in active management. There’s roughly 50 stocks within this portfolio. So, it is a more concentrated approach to international investing.

It probably pairs well with another international equity strategy, the same way that you might want to have more than one U.S. equity allocation. You might want to have more than one international equity allocation. It’s risky to just have one international equity fund, even though this fund family has historically performed well, Thornburg has. There’s still the risk of their potential underperformance if the companies that they’re focusing on are out of favor.

Chuck Jaffe: The other side is, this is a large-cap fund. You might want to get more exposure to small-caps, or maybe to different markets as well.

Todd Rosenbluth: That’s right. I’m looking at the website; the median market capitalization is over $60 billion. I think they have some exposure to small- and midsize companies. That’s unlike an index that tends to be rigid in the exposure. But yes, you might want to diversify and have some small-cap exposure and we might talk about one of those next week.

Chuck Jaffe: Well, I look forward to next week already! But meanwhile, TXUE, Thornburg International Equity ETF, it’s the ETF of the Week. Todd, great stuff. We’ll see you again next week. Look forward to that one already!

Todd Rosenbluth: Thanks, Chuck.

Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And I am Chuck Jaffe, and I’d love it if you check out my show on MoneyLifeShow.com, or by looking for it wherever you find your favorite podcasts. 

Now, if you’re looking for more and better information on your favorite ETFs, or maybe funds like we’re talking about that might become your favorite ETFs, check out VettaFi.com, where they’ve got a full suite of tools that will help you learn more. They’re on X at @Vetta_Fi, and Todd Rosenbluth, my guest, their head of research, he’s on X as well at @AToddRosenbluth

The ETF of the Week is here for you every Thursday. Make sure you don’t miss an episode by following along on your favorite podcast app. And until next week, when we’ve got another great ETF for you, happy investing everybody!

For more information, please visit VettaFi.com | ETF Trends.