Investment News - Thrivent Reprint - 3

OVERALL SMALL COMPANY

THRIVENT MUTUAL FUNDS

Philosophically, we have
a yield orientation, which
is probably a legacy of our
insurance-company roots.
We're fairly adept at looking at
all areas to generate income,
which means the investments
don't have to be fixed or even be
a bond. We've been doing a lot
more with specialty alternatives,
and recently launched a multidimensional income fund that
has a much higher percentage of
alts, including carefully selected
closed-end bond funds and
preferred stocks.
INCSS: Where does Thrivent
see fixed-income going in
2018?
Mark Simenstad: Like others,
we see interest rates going
higher. Since it's hard to nail
down where rates will end up,
we try to add value in other
ways, such as being better
positioned on the yield curve.
In fact, we've benefited from
flattening. We still think that
fixed-income fundamentals
are solid, so we're taking risk,
but not excessive risk. We like
leveraged loans, preferred stocks
and closed-end funds. We're
more cautious on the straight
high-yield market.

INCSS: David, explain how
equity research is conducted
at Thrivent.

INCSS: And where does the
team see equity markets going
in 2018?

David Francis: Like our
approach to fixed income, we
have a bottom-up, long-term
focus in equities, where we
try to think in at least threeyear time horizons. We have
55 professionals in total in
our group, and our portfolio
managers - who think of
themselves as entrepreneurs
and own the investment
process for their area - are
supported by 24 experienced
fundamental research analysts
split among large cap and
midcap stocks. Each career
analyst is a sector specialist
and their average tenure is
17 years. We like to say there
is not so much as a Thrivent
process to running money, but
a Thrivent culture. Most of the
value-added we bring to bear
is in stock selection, although
we get some incremental value
from sector positioning from
time to time. We think our
process was the reason for our
success last year. We didn't
have any grand super-long or
super-short strategy; the results
were a function of fundamental
research paying off.

David Francis: We expect
modest gains in equity markets
this year - probably in the
mid-single digits. Coming
into January, valuations were
pretty full. And while it's always
unpleasant to see a correction
as concentrated as the one in
February, it certainly was overdue
by most metrics.
We're seeing economic
growth of 3.5% to 4%
embedded in interest rates and
stocks, and expect to see a little
bit of price-earnings contraction.
Overall, we have relatively
modest expectations, although
after a stretch of low volatility we
expect more volatile markets.
By the end of the year, Europe
may be moving to a more normal
central bank policy. And here in
the U.S., we'll have our mid-term
elections. Who knows what will
happen there.

Reprinted with permission from the InvestmentNews. © 2018 Crain Communications Inc.
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