Do Concentrated Funds Juice Up Returns?
Alpha is the return on an investment that is in excess of the expected return, given the investment’s level of risk. In a portfolio of securities, this excess return is attributed to the portfolio manager’s skill. This implies that it requires some form of active management, such as selecting securities (selection alpha) or timing a market, sector, or asset class correctly (timing alpha).
Active Share is a methodology used to evaluate a fund's actual performance and volatility against a benchmark. The methodology is not an indicator of how a specific investor's investment will perform. This should not be used as a tool or evaluation in making any investment decision. We strongly recommend that you consult with your financial advisor before making an investment decision.
Correlation is a statistical measure that indicates how closely two entities (e.g., securities, indexes, or portfolios) move in relation to each other. A correlation of 1.0 indicates that a move up or down by one is matched by a move in the same direction by the other. A correlation of -1.0 indicates that a move up or down will be matched by move in the opposite direction. A correlation of 0.0 indicates that the two entities have no statistical relationship.
Risks to Consider: The value of investments in equity securities will fluctuate in response to general economic conditions and to changes in the prospects of particular companies and/or sectors in the economy. Small cap stocks tend to be more volatile and can be less liquid than other types of stocks. Small cap companies may also have more limited product lines, markets, or financial resources and typically experience a higher risk of failure than large companies. While growth stocks are subject to the daily ups and downs of the stock market, their long-term potential as well as their volatility can be substantial. Value investing involves the risk that the market may not recognize that securities are undervalued, and they may not appreciate as anticipated. No investing strategy can overcome all market volatility or guarantee future results.
Neither diversification nor asset allocation can guarantee a profit or protect against loss in declining markets.
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 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. This material is being provided as general information only and is not intended to be legal or tax advice. Investors should not assume that investments in the securities 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 before making an investment decision.