Use this form to give us your feedback or report any problems you experienced finding information on our Website.
* Indicates Required Fields
Thank you for providing feedback.
International equity markets posted positive performance during the first quarter of 2013, with significant dispersion across regions and sectors. International returns lagged U.S. returns for the quarter, primarily driven by a weak British pound, euro, and Japanese yen. Japan, a strong performer during the fourth quarter of last year, continued its strong equity market recovery by rising more than 10% in U.S. dollar terms during the quarter. Developed markets continued their recent relative strength versus emerging markets, outperforming by more than 6% during the quarter according to Bloomberg. Among the major sectors, healthcare, consumer staples, and consumer discretionary led the way. Three sectors, energy, materials, and technology, lagged the market.
Despite continued monetary easing by major central banks around the world, many European economies contracted in the fourth quarter of 2012. Across emerging markets, Asia and Latin America showed relatively greater strength. Among Europe's largest economies, Germany, France, and the United Kingdom contracted in the fourth quarter, which was not expected. European politics continued to add to the economic uncertainty, with a general election in Italy leaving the country's commitment to austerity programs unclear. The uncertain result caused some equity and bond market turmoil, as did a bailout program for the banking system of Cyprus. Despite these developments and continued economic sluggishness, results for Europe's major stock markets were mixed; Germany, France, and the United Kingdom rose slightly while Spain and Italy finished down.
In Asia, the election of Prime Minister Shinzo Abe, and his reflationary policies, resulted in a sharp drop in the value of the Japanese yen and a surge in the local equity market. Abe campaigned on a platform of aggressive monetary and fiscal policy, including a weaker yen, aimed at ending Japan's longstanding deflation.
China, on the other hand, announced that it would slightly moderate the growth of its money supply in an effort to prevent the return of higher inflation. After slowing early in 2012, the Chinese economy appeared to regain its momentum, with real growth amounting to 7.8% year over year, according to China's National Bureau of Statistics. The Chinese stock market declined somewhat in the first quarter.
In Latin America, Brazil's economy expanded less than expected in the fourth quarter of 2012, marking two years of slower growth. Mexico continues to benefit from its increasing competitiveness relative to China, and from proximity to the relatively strong U.S. economy. Markets in Latin America were largely up at the end of the first quarter, though Brazil declined slightly.
The Fund returned 9.23%, reflecting the performance at the net asset value (NAV) of Class A shares, with all distributions reinvested for the quarter ended March 31, 2013. The Fund's benchmark, the S&P Developed Ex-U.S. Small Cap® Index,1 returned 6.85% in the same period. Average annual total returns, which reflect performance at the maximum 5.75% sales charge applicable to Class A share investments and include the reinvestment of all distributions, as of March 31, 2013, are: one year: 7.55%; five years: 1.15%; and 10 years: 11.02%. Expense ratio: 1.52%.
Performance data quoted represent past performance, which does not guarantee future results. Current performance may be higher or lower than the performance data quoted. The investment return and principal value of an investment in the fund will fluctuate so that shares, on any given day or when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, call Lord Abbett at 1-888-522-2388 or visit us at www.lordabbett.com.
Overall, strong stock selection was the reason for the Fund's relative outperformance versus the index, during the first quarter of 2013. Within the financials sector, Takara Leben Co. Ltd., a Japan-based real estate company, reported strong sales and profit for its third quarter fiscal year, noting substantial growth in condominium sales as the leading driver. In addition, Takara Leben has differentiated itself by developing the use of solar panels on condos. Safilo Group SpA, an Italy-based eyewear designer and manufacturer, exceeded consensus expectations with its fourth quarter results within the consumer discretionary sector. The company is expected to sign additional agreements that will fortify the already impressive group of licensing contracts. Within the materials sector, shares of West Fraser Timber Co. Ltd., a Canada-based wood products company, steadily increased during the first quarter, as data about the U.S. housing market showed signs of recovery.
Detracting from relative performance was stock selection in the energy and industrials sectors. Within the energy sector, shares of Electromagnetic Geo Services, a Norway-based electromagnetic technology company that performs research for oil and gas companies, plummeted after issuing a profit warning in early January. The company faced headwinds brought on by a diminishing order backlog and lack of secured contracts for 2013. Shares of Torc Oil & Gas Ltd., a Canada-based oil and gas company, contracted before its fourth quarter earnings report was released, the first of the newly combined Vero Energy and Torc Oil & Gas Ltd. Updates regarding the Alberta Bakken pilot program were limited earlier in the quarter sparking investor uncertainty. Within the industrials sector, shares of Lonrho plc, a United Kingdom-based company involved with the development of businesses in Africa, declined due to weak fourth quarter performance results, notably an operating loss when an operating profit was expected. Inventory delays in the agribusiness division, and smaller than usual fish size for its Oceanfresh segment, were reasons for weak performance.
Please refer to www.lordabbett.com under the "Portfolio" tab for a complete list of holdings of the Fund, including the securities discussed above.
While all eyes have returned to Europe, neither the crisis in Cyprus nor the inconclusive elections in Italy have shaken the European bond markets; Spanish and Italian yields remain below 5% according to Bloomberg. While global growth remains fragile, equity market valuations appear attractive relative to history and fixed income alternatives. While valuations look attractive, we believe that corporate earnings need to grow from current levels to drive markets higher.
Recent earnings revisions have been a mixed bag, with positive revisions from Japan, Australia and the U.K. Emerging markets and Europe ex-U.K. have shown negative revisions year to date.
Following last year's leadership change in China, we are increasingly concerned that much of the growth in China will be linked to government spending. Three of our analysts have spent time in various parts of that country in recent weeks and found little to be enthusiastic about on a bottom-up basis.
A recent trip to Japan revealed tangible evidence that real estate is beginning to enjoy a meaningful recovery in Tokyo. We have positioned the portfolio to take advantage of this and are now overweight the Japanese equity market for the first time in many years. Exporters appear poised to do better given the recent weakness in the yen and we have focused on industrial companies.
Relative to the index, we have emphasized companies in the consumer staples and consumer discretionary sectors. We remain underweight the health care, industrials and materials sectors.
Performance data quoted is historical. Past performance is not indicative of future results. Current performance may be higher or lower than the performance quoted. The investment return and principal value of an investment in the Fund will fluctuate so that shares, on any given day or when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent quarter-end, go to quarter ending performance on our Website or call Lord Abbett at (888) 522-2388.
1 The Fund’s dividend yield is shown without sales charges (at NAV) and with maximum sales charges (at MOP). The Fund’s dividend yield takes into account any fee waiver or expense limitation arrangements, if any. Without such fee waivers or expense limitation arrangements, the Fund’s dividend yield would have been lower. Information regarding any fee waivers or expense limitation arrangements applicable to the Fund is provided with the Fund’s expense ratio information.
2 The Fund’s unsubsidized dividend yield is shown without sales charges (at NAV) and with maximum sales charges (at MOP). The Fund’s unsubsidized dividend yield reflects what the yield would have been without the affect of fee waivers or expense limitation arrangements.