The Lord Abbett Review—A Special Report on Active Management

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Does active management still have a vital role in modern portfolios? What part does asset allocation really play in investment returns? Is stock picking still viable in today’s market? This special issue tackles these critical questions, and more.

Investment Perspective

12/05/2011

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Proponents of passive management argue that markets are so efficient that average investors cannot hope to consistently outperform. Even so, mispricing and volatile swings in investor sentiment occur frequently, and will never be eliminated completely. As Lord Abbett Partners Robert Fetch, Director of Domestic Equity Portfolio Management, and Walter Prahl, Director of Quantitative Research, point out in one of this issue’s featured articles, “Why the Market Needs Active Management,” these factors provide fund managers—at least those who are disciplined, experienced, and willing to venture away from their benchmarks—with opportunities to outperform.

. Highlights of the issue include:

Asset Allocation: Setting the Record Straight

Financial advisors have increasingly eschewed active management for exchange-traded funds, believing asset allocation to be the chief factor behind long-run portfolio returns. But recent research has shown that active management plays an equal role. Walter Prahl, Lord Abbett Partner & Director of Quantitative Research, explores the implications for advisors and others who have opted strictly for passive investment vehicles.

Is Stock Picking a Dying Art?

Intra-market correlations have remained high in recent years, leading some observers to declare that stock selection on the basis of fundamentals is an exercise in futility. But there is ample evidence to the contrary. In this article, we look at recent research on a concept called “Active Share” that shows that stock pickers have historically outperformed not only passive investing but other forms of active management as well.

The opinions in the preceding commentary are as of the date of publication and subject to change based on subsequent developments and may not reflect the views of the firm as a whole. This material is not intended to be legal or tax advice and is not to be relied upon as a forecast, or research or investment advice regarding a particular investment or the markets in general, nor is it intended to predict or depict performance of any investment. Investors should not assume that investments in the securities and/or sectors described were or will be profitable. This document is prepared based on information Lord Abbett deems reliable; however, Lord Abbett does not warrant the accuracy or completeness of the information. Investors should consult with a financial advisor prior to making an investment decision.

Investors should carefully consider the investment objectives, risks, charges, and expenses of the Lord Abbett funds. This and other important information is contained in each fund’s summary prospectus and/or prospectus. To obtain a prospectus or summary prospectus on any Lord Abbett mutual fund, contact your investment professional or Lord Abbett Distributor LLC at 888-522-2388 or visit us at www.lordabbett.com. Read the prospectus carefully before you invest.

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