VIDEO: ETF of the Week: THOR

On this episode of the “ETF of the Week” podcast, VettaFi’s Head of Research, Todd Rosenbluth, discussed the Thornburg Premium Income Builder ETF (THOR) with Chuck Jaffe of Money Life. The pair discussed several topics related to the ETF, in order to give investors a deeper understanding of it.   

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

Welcome to the ETF of the Week, where we examine trending, new, newsworthy, unique and intriguing exchange-traded funds with Todd Rosenbluth. He’s head of research at VettaFi. 

And if you go to ETFDb.com, which is a VettaFi site, you will find the tools and research you need to dig into the funds we talk about here and to make yourself a savvier, smarter investor in ETFs.

Todd Rosenbluth, great to chat with you again!

Todd Rosenbluth: It’s great to be back, Chuck!

Chuck Jaffe: Your ETF of the Week is…

Todd Rosenbluth: The Thornburg Premium Income Builder ETF, T-H-O-R or THOR.

Chuck Jaffe: THOR, the Thornburg Premium Income Builder. And you know, I know my Norse mythology. I remember it from when I was a kid. So, uh… Thor’s hammer is Mjölnir, and it means “that which grinds and crushes,” if I remember correctly. So why are we grinding and crushing on THOR today?

Todd Rosenbluth: Well, this is an environment that needs strength. And this new ETF, which just launched about a month ago, evokes strength to me. So, this is a global ETF that’s generating income in a couple of ways. It’s investing in dividend-paying stocks, actively managed and actively chosen by the Thornburg team. And then it is selectively using options to generate additional income.

And now, this is a new ETF that launched only a month ago. But Thornburg has a 20-plus-year history of investing this way. They’ve got a mutual fund that’s five-star rated, run by the same team of managers, delivering excellent returns, crushing its competition, crushing the Morningstar peer group. And given the market volatility that we’re in right now, I think this is a good fund for this environment.

Chuck Jaffe: Let’s clarify something there and just make sure that everybody understands, because you and I have talked at times about classic funds coming out in ETF wrappers. In other words — and there have been a couple of funds that have basically said, “We’re converting to an ETF.” 

Thornburg has Thornburg Income Builder in a couple of different flavors, et cetera. This is a fund that is basically based on the mutual fund, but it’s not the exact same, correct?

Todd Rosenbluth: Correct. So the mutual fund that I’m referring to, TIBIX, is a standalone entity from THOR, the ETF. So, the track record is a good reference point, but is not going to be identical. It is not a new share class of an existing fund. And so, you’re right, that is important. The portfolio might not look the same.

The track record won’t have 20 years of history to go off of, but when you’re looking at a new actively managed ETF, it helps, in my opinion, to understand the pedigree and the investment process that’s behind it. And I think you can use that as a reference point. 

Thornburg has been slowly building out an ETF lineup, and this is an ETF that I’m excited that they brought to market — not just because it’s a really cool ticker, but because it brings some of the best of what Thornburg has in a much more accessible format, a lower-cost product for investors that might be familiar with the Thornburg strategy.

So yeah, new standalone entity. But you can use the long-standing mutual fund as a reference point.

Chuck Jaffe: Let’s stay with that as a reference point, because you mentioned lower costs, and the expense ratio on this fund. Well, TIBIX, the classic fund, is about 90 basis points (0.9%). On the new ETF, it’s about 70 basis points, maybe a little bit above that, which is lower than the traditional fund version. But it’s kind of high for an income-oriented fund.

I know expenses are not something that you always worry about, but what makes it worth it to pay this if I can get another income fund in there? Is it that options overlay and some things that add to the expense ratio that I want in there, or is it something else?

Todd Rosenbluth: Fair point. This fund, as an ETF, is towards the higher end of the ETF spectrum in terms of costs, and there are lower-cost alternatives. What you’re paying for is both that active management and security selection, and then that active management in the use of options. So, options incur costs and are relevant for people to be aware of.

I think of this fund — and maybe we’re going to get there when we compare and contrast this fund with others — there are other options-based strategies that are out there. Mostly, they are tracking the broader benchmark, the S&P 500 or the Nasdaq-100, and then the active management is more on the options aspect of it. This is using active management to choose the individual stocks as well as the individual options that are part of the portfolio, and that comes with a cost.

Chuck Jaffe: I think I said at some point in that question, I think I called it a bond fund or an income fund. This is an income-oriented fund. It is not a bond fund. It is a stock fund that is looking to generate income. So let me ask, what’s the expected yield on this?

Todd Rosenbluth: So I guess we shall see. This fund is just a month out. But when I look at the stocks inside the portfolio, these are dividend payers with a long-standing record of paying dividends. So Kimberly-Clark and AT&T in the United States; Orange, ING Group, BNP Paribas, and BT Group — those are non-U.S. companies. You’re going to get a healthy mix of non-U.S. companies.

And I think this is part of the value that Thornburg brings. They are a global active manager that’s looking for the best ideas, regardless of where they’re domiciled. And so you’re going to get broader exposure. So I think it’s too early to know what the yield on this is going to be. I think it’s worth paying close attention for people.

And then we’ll get greater clarity as to how high that dividend yield is going to be once we’ve got at least a couple of months of record.

Chuck Jaffe: In terms of where this fits in a portfolio, it is a large-cap stock fund. It’s not like most of our audience is going, “I got a big hole in my portfolio there.” So, how does this get used? And especially, again, looking to get income — dividend-paying stocks is not exactly a part that’s going to be underrepresented for a lot of people.

Todd Rosenbluth: So we are increasingly seeing advisors look for income and have an income sleeve within their portfolio. And so that’s where we’ve seen some of those options-based strategies fall. 

They’re stocks. There’s also some bond-like characteristics and defensive characteristics. So I think this can fall into your global income part of the portfolio. If you don’t have that, then this could certainly be the global income part of your portfolio as this fund establishes itself.

So, you’re right, people do own dividend-paying stocks. But those stocks that I mentioned are probably underexposed within the portfolio. Kimberly-Clark is an S&P 500 constituent, but it’s certainly not in the top 10 or even the top 20. So you can overweight towards a higher-income part of the market with THOR.

Chuck Jaffe: This fund, as we’ve said several times, is brand new. From that perspective, it doesn’t have a lot in assets yet. We know that critical mass for most ETFs is somewhere around $50 million. Not that we’re worried that it’s not going to get there, but since you’re putting this on people’s radar screens, are you putting it on there now? Are you putting it on there to say, “Yeah, let me see it grow into critical mass before you get in there”?

Todd Rosenbluth: I think if you look inside the portfolio and you see things that are appealing to you, and you understand the management process, and you can look to that mutual fund as a reference point, there’s no reason to be waiting until this fund hits $50 million in assets under management. 

If this makes sense in a portfolio — because it reduces the volatility of your portfolio, it increases the income potential of your portfolio — it’s actively managed, which gives you the chance to continue to have it shift based on market dynamics and what’s appealing in the marketplace. I don’t think there’s a reason to necessarily be waiting, but I certainly understand it isn’t available on all platforms, if you work with an advisor. It’s new. 

You might want to keep this on your radar, and that’s okay.

Chuck Jaffe: It’s THOR, and it might bring some thunder to your portfolio! It’s the Thornburg Premium Income Builder, the ETF of the Week from Todd Rosenbluth at VettaFi. Todd, great stuff. We’ll see you again next week.

Todd Rosenbluth: Thanks a lot, Chuck.

Chuck Jaffe: The ETF for the week is a joint production of VettaFi and Money Life with Chuck Jaffe. And yeah, I’m Chuck Jaffe. You can learn all about my hour-long weekday show by going to MoneyLifeShow.com or you can just search for it wherever you find your favorite podcasts. Now, if you’re searching for great information on your favorite ETFs or maybe your next favorite ETFs, go to ETFDb.com.

That’s a VettaFi website, and it has details that are going to help you make yourself a smarter investor. You can also learn about VettaFi at VettaFi.com, and they’re on X at @Vetta_Fi. Todd Rosenbluth, their head of research, my guest, he’s on X as well. He’s at @ToddRosenbluth. 

The ETF of the Week is here for you every Thursday. Follow us on your favorite podcast app to make sure you don’t miss an episode. We’ll introduce you to another great ETF next week. Until then, happy investing everybody!

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Note: This article was created in part through assistance from AI tools. The content has been thoroughly reviewed and edited by the author.

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