Inflation Focused Fund | Lord Abbett

 

Inflation Focused Fund

Seeks to deliver inflation protection while providing lower duration risk and volatility.

LIFFX (As of 03/31/2021)

 
 
LIFFX
TIPS*
Average Yield to Maturity
2.15%
1.11%
Average Effective Duration
1.79 years
7.40 years
Expense Ratio
0.60%
0.19%

*iShares TIPS Bond ETF. "TIPS" are Treasury Inflation-Protected Securities. See further explanation at the bottom of the page.
The Average Yield to Maturity (YTM) and Average Effective Duration are based on a weighted average of the YTM and Effective Duration of the bonds held in the portfolio.

Why Inflation Focused?

Potential for Higher Income, Lower Duration, and True Inflation Protection

This strategy has provided a high income stream while offering inflation protection with one-third the duration of the average TIPS-based portfolio

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Inflation Focused Fund F Share Data as of 03/31/2021. Performance is based on total return at net asset value, including the reinvestment of all distributions, but excludes sales charges which are not applicable to Class I Shares. The performance of other share classes may be lower than the performance shown, particularly share classes with applicable sales charges. The average TIPS-based portfolio referenced is based on the iShares TIPS Bond ETF. *Category: Morningstar Inflation-Protected Bond Funds. Source: Morningstar, Inc. Morningstar peer group rankings are based on all share classes within the category and include the reinvested dividends and capital gains, if any, and exclude sales charges. The fund is ranked within a universe of funds similar in investment objectives. Number of funds in the category for the one-year time period (205); three-year (198); and five-year (175). 1Ratings (other than U.S. Treasury securities or securities issued or backed by U.S. agencies) provided by Standard & Poor's, Moody's, and Fitch. For certain securities that are not rated by any of these three agencies, credit ratings from other agencies may be used. Where the rating agencies rate a security differently, Lord Abbett uses the average rating based on numeric values assigned to each rating. Ratings range from AAA (highest) to D (lowest). Bonds rated BBB or above are considered investment grade. Credit ratings BB and below are lower- rated securities (junk bonds). High-yielding, non-investment-grade bonds (junk bonds) involve higher risks than investment-grade bonds. Adverse conditions may affect the issuer's ability to pay interest and principal on these securities. A portion of the portfolio's securities may not be rated. Breakdown is not an S&P credit rating or an opinion of S&P as to the creditworthiness of such portfolio. Ratings apply to the creditworthiness of the issuers of the underlying securities and not the fund or its shares. Ratings may be subject to change.  2"Other" may include municipal bonds and non-index holdings.

Performance data quoted reflect past performance and are no guarantee 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. You can obtain performance data current to the most recent month-end by calling Lord Abbett at 888-522-2388 or referring to lordabbett.com.

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How Do We Do It?

Our Strategic Design

Bar Chart

Strategically creating a portfolio targeted to deliver:

  • Higher yield - generating higher returns if inflation remains low
  • Low duration - providing less interest rate risk if inflation increases

Inflation Focused Design vs. TIPS

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Insights

Investing amid Inflation Uncertainty

So far, inflation has not accelerated after massive U.S. fiscal stimulus—but it’s still early in the game. Giulio Martini shares his insights on the implications for investors.

Inflation Protection: Why You Should Think Twice about TIPS

Investors may not realize the degree of interest-rate risk that TIPS carry. We believe there are more attractive approaches to protecting portfolios against inflation

Inflation: What the April CPI Jump Might Mean for Fed Policy

While the larger than expected increase in the U.S. consumer price index took markets by surprise, the U.S. Federal Reserve likely will remain focused on labor costs.

The Result...

Performing as ExpectedBar ChartSource: FRED, Morningstar. As of 05/31/2021. Past performance is not a reliable indicator or guarantee of future results. Lord Abbett Inflation Focused Fund performance is based on total return of Class F Shares at net asset value and includes the reinvestment of all distributions, but excludes sales charges which are not applicable to Class F Shares. The performance of other share classes may be lower than the performance shown, particularly share classes with applicable sales charges. The red lines indicate periods of visual increase in the 10-Year Breakeven Inflation Rate. Category: Morningstar Inflation-Protected Bond Funds Average. Morningstar peer group averages are based on all share classes within the category and include the reinvested dividends and capital gains, if any, and exclude sales charges.

The 10-Year Breakeven Inflation Rate rose 302% from a bottom of 0.50 in March 2020 to 2.4 in May 2021Bar ChartAs of 05/31/2021. Source: FRED, Morningstar, Y Charts. Past performance is not a reliable indicator or guarantee of future results.  Lord Abbett Inflation Focused Fund performance is based on total return at net asset value and includes the reinvestment of all distributions. Morningstar Category: Inflation Protected Bond. Number of Funds in category for time period shown: 211. Morningstar peer group rankings are based on all share classes within the category and include the reinvested dividends and capital gains, if any, and exclude sales charges. The performance shown above only represents specific time periods in which inflation was rising. The Fund may not have performed similarly during other periods, especially periods of deflation or lower than expected inflation.

 

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Lord Abbett at a Glance

We are committed to providing every client with an independent perspective, an active approach to investment management, and a range of intelligently designed products.

Ask about our Inflation Focused Fund.

Financial professionals: 888‑522‑2388.

A Note about Risk: Although the Fund invests in inflation-linked investments, there is no guarantee that the Fund will generate returns that exceed the rate of inflation in the U.S. over time. During periods of deflation or when inflation is lower than anticipated, the Fund is likely to underperform funds that hold fixed income securities similar to those held by the Fund but do not hold inflation-linked investments. The Fund may invest substantially in inflation-linked derivatives and other types of derivatives and is exposed to the risk that the value of a derivative instrument does not move in correlation to the value of any underlying securities, market index or interest rate, or moves in an opposite direction than anticipated by the Fund. Investing in derivatives also involves greater liquidity, leverage, and counterparty risk. Because derivatives may involve a small amount of cash relative to the total amount of the transaction, the magnitude of losses from derivatives may be greater than the amount originally invested by the Fund. In addition, the Fund must also be able to correctly forecast market movements and other factors to be successful with its derivatives investments. The Fund is subject to the general risks associated with investing in fixed income securities, including market, credit, liquidity, and interest rate risk. These factors can affect the Fund’s performance.

Diversification does not protect against losses in a declining market.

Actively mananged mutual funds tend to have higher fees than passive ETFs due to the active nature of their management and the increased level of participation in the portfolios day to day management.

Morningstar Information:

Morningstar, Inc. ©2021. All rights reserved. The information contained herein is the proprietary information of Morningstar, Inc., may not be copied or redistributed for any purpose and may only be used for non-commercial, personal purposes. The information contained herein is not represented or warranted to be accurate, correct, complete or timely. Morningstar, Inc., shall not be responsible for investment decisions, damages, or other losses resulting from the use of this information. Past performance is no guarantee of future performance. Morningstar, Inc. has not granted consent for it to be considered or deemed an “expert”under the Securities Act of 1933.

Effective Duration is the change in the value of a fixed-income security that will result from a 1% change in market interest rates.

Yield to maturity is the rate of return anticipated on a bond if held until it matures. Yield to maturity assumes all the coupon payments are reinvested at an interest rate that equals the yield-to-maturity.The yield to maturity is the long-term yield expressed as an annual rate.

TIPS (Treasury Inflation-Protected Securities) are treasury securities indexed to inflation in order to protect investors from the negative effects of inflation. The principal of a TIP is adjusted according to the CPI-U. With a rise in the index, or inflation, the principal increases. With a fall in the index, or deflation, the principal decreases. Though the rate is fixed and paid semi-annually, interest payments vary because the rate is applied to the adjusted principal. Specifically, the amount of each interest payment is determined by multiplying the adjusted principal by one-half the interest rate. Upon maturity, TIPS pay the original or adjusted principal amount, whichever is greater. Because TIPS are adjusted for inflation, a change in real interest rates (but not nominal interest rates) will affect the value of TIPS. When real interest rates rise, the value of TIPS will decline, and when real interest rates fall, the value of TIPS will rise.

CPI Swaps are derivative instruments used to hedge inflation risk by transferring inflation risk from one party to another through an exchange of cash flows.

We are providing the comparison to the iShares TIPS Bond ETF because we believe it is the closest proxy that we can get to for performance of a standard TIPS portfolio. Mutual funds and exchange-traded funds (ETFs) have a lot in common. Both types of funds consist of a mix of many different assets and represent a common way for investors to diversify. There are key differences, though, in the way they are managed. ETFs can be traded like stocks, while mutual funds only can be purchased at the end of each trading day based on a calculated price. Mutual funds also are actively managed, meaning a fund manager makes decisions about how to allocate assets in the fund. ETFs, on the other hand, usually are passively managed and based more simply on a particular market index.