Error!

X

There was a problem contacting the server. Please try after sometime.

Sorry, we are unable to process your request.

Error!

X

We're sorry, but the Insights and Intelligence Tool is temporarily unavailable

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.

Error!

X

We're sorry, but the Literature Center checkout function is temporarily unavailable.

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.

Financial Professionals

Forgot password

Forgot Your LordAbbett.com password?

If you are a registered user, but have forgotten your LordAbbett.com password, please enter your email address.
Once your email address is verified, we will send you an email with instructions on how to reset your password.

EMAIL ADDRESS
e.g. joe@firm.com

Financial Professionals

Forgot Password

Thank you.

An email has been sent to with instructions on resetting your password.

Financial Professionals

Reset Password

NEW PASSWORD
Your password must be a minimum of characters.
CONFIRM NEW PASSWORD

Financial Professionals

Reset Password

Confirmation Message

Your LordAbbett.com password was successully updated. This page will be refreshed after 3 seconds.

OK

Financial Professional*

  • Gain access to exclusive LinkedIn Groups
  • Simplify your login
LOGIN WITH LinkedIn
LOGIN WITH LinkedIn

A verification Email Has Been Sent

Close

An email verification email has been sent to .
Follow the instructions to complete the email validation process.

I have not received my verification email

Check your SPAM mailbox and make sure that twelcome@lordabbett.com is allowed to send you mail.

I'm still having trouble

If you're still having trouble verifying your email address. feel free to contact us.

1-888-522-2388
clientservices@lordabbett.com


OK

We're sorry. We found no record of the email address you provided.

Close

Register For a LordAbbett.com Account
Using Your Email Address.

  • Registered Financial Advisors gain access to:
  • Our data mining tool, Insight & Intelligence
  • Best in-class practice management content
  • Educational events, videos and podcasts.
  • The Lord Abbett Review - Subscribe now!

Registered but Having Problems?

If you believe you are registered and are having problems verifying your email address, feel free to contact us.

1-888-522-2388 clientservices@lordabbett.com

Terms & Condition

X

These Terms of Use ("Terms of Use") are made between the undersigned user ("you") and Lord, Abbett & Co. ("we" or "us"). They become effective on the date that you electronically execute these Terms of Use ("Effective Date").

A. You are a successful financial consultant that markets securities, including the Lord Abbett Family of Funds;

B. We have developed the Lord Abbett Intelligence System (the "Intelligence System"), a state of the art information resource that we make available to a limited community of broker/dealers through the Internet at a secure Web site (the "LAIS Site"); and

C. We wish to provide access to the Intelligence System to you as an information tool responsive to the demands of your successful business pursuant to these Terms of Use. Accordingly, you and we, intending to be legally bound, hereby agree as follows:]

1. Overview. · Scope. These Terms of Use (which we may amend from time to time) govern your use of the Intelligence System. · Revisions; Changes. We may amend these Terms of Use at any time by posting amended Terms of Use ("Amended Terms of Use") on the LAIS Site. Any Amended Terms of Use will become effective immediately upon posting. Your use of the Intelligence System after any Amended Terms of Use become effective will be deemed to constitute your acceptance of those Amended Terms of Use.We may modify or discontinue the Intelligence System at any time, temporarily or permanently, with or without notice to you. Purpose of the Intelligence System. The Intelligence System is intended to be an information resource that you may use to contribute to your business research. The Intelligence System is for broker/dealer use only; it is not to be used with the public in oral, written or electronic form. The information on the Intelligence System and LAIS Site is for your information only and is neither the tax, legal or investment advice of Lord Abbett or its third-party sources nor their recommendation to purchase or sell any security.

2. Your Privileges. · Personal Use. Your use of the Intelligence System is a nontransferable privilege granted by us to you and that we may deny, suspend or revoke at any time, with or without cause or notice. · Access to and Use of the Intelligence System. The User ID and password (together, an "Access ID") issued by us to you (as subsequently changed by you from time to time) is for your exclusive access to and use of the Intelligence System. You will: (a) be responsible for the security and use of your Access ID, (b) not disclose your Access ID to anyone and (c) not permit anyone to use your Access ID. Any access or use of the Intelligence System through the use of your Access ID will be deemed to be your actions, for which you will be responsible. · Required Technology. You must provide, at your own cost and expense, the equipment and services necessary to access and use the Intelligence System. At any time, we may change the supporting technology and services necessary to use the Intelligence System. · Availability. We make no guarantee that you will be able to access the Intelligence System at any given time or that your access will be uninterrupted, error-free or free from unauthorized security breaches.

3. Rights in Data. Our use of information collected from you will be in accordance with our Privacy Policy posted on the LAIS Site. Our compliance with our Privacy Policy will survive any termination of these Terms of Use or of your use of the Intelligence System.

4. Your Conduct in the Use of the Intelligence System. You may access, search, view and store a personal copy of the information contained on the LAIS Site for your use as a broker/dealer. Any other use by you of the Intelligence System and the information contained on the LAIS Site these Terms of Use is strictly prohibited. Without limiting the preceding sentence, you will not: · Engage in or permit any reproduction, copying, translation, modification, adaptation, creation of derivative works from, distribution, transmission, transfer, republication, compilation or decompilation, reverse engineering, display, removal or deletion of the Intelligence System, any portion thereof, or any data, content or information provided by us or any of our third-party sources in any form, media or technology now existing or hereafter developed, that is not specifically authorized under these Terms of Use.

· Remove, obscure or alter any notice, disclaimer or other disclosure affixed to or contained within the Intelligence System, including any copyright notice, trademark and other proprietary rights notices and any legal notices regarding the data, content or information provided through the Intelligence System.

· Create a hyperlink to, frame or use framing techniques to enclose any information found anywhere on the LAIS Site without our express prior written consent.

· Impersonate any person, or falsely state or otherwise misrepresent his or her affiliation with any person in connection with any use of the Intelligence System.

· Breach or attempt to breach the security of the Intelligence System or any network, servers, data, or computers or other hardware relating to or used in connection with the Intelligence System; nor (b) use or distribute through the Intelligence System software or other tools or devices designed to interfere with or compromise the privacy, security or use of the Intelligence System by others or the operations or assets of any person.

· Violate any applicable law, including, without limitation, any state federal securities laws. 5. Your Representations and Warranties. You hereby represent and warrant to us, for our benefit, as of the time of these Terms of Use and for so long as you continue to use the Intelligence System, that (a) you are, and will continue to be, in compliance with these Terms of Use and any applicable laws and (b) you are authorized to provide to us the information we collect, as described in our Privacy Policy.

6. Disclaimer of Warranties.

· General Disclaimers.

THE INTELLIGENCE SYSTEM, THE LAIS SITE AND ALL DATA, INFORMATION AND CONTENT ON THE LAIS SITE ARE PROVIDED "AS IS" AND “AS AVAILABLE” AND WITHOUT ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND. WITHOUT LIMITING THE PRECEDING SENTENCE, LORD ABBETT, ITS AFFILIATES, AGENTS, THIRD-PARTY SUPPLIERS AND LICENSORS, AND THEIR RESPECTIVE EMPLOYEES, CONTRACTORS, DIRECTORS, OFFICERS AND SHAREHOLDERS (COLLECTIVELY, THE “LORD ABBETT GROUP”) EXPRESSLY DISCLAIM ALL WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, AND NONINFRINGEMENT. YOU EXPRESSLY AGREE THAT YOUR USE OF THE LAIS SITE, THE INTELLIGENCE SYSTEM, AND THE DATA, INFORMATION AND CONTENT PRESENTED THERE ARE AT YOUR SOLE RISK AND THAT THE LORD ABBETT GROUP WILL NOT BE RESPONSIBLE FOR ANY (A) ERRORS OR INACCURACIES IN THE DATA, CONTENT AND INFORMATION ON THE LAIS SITE AND THE INTELLIGENCE SYSTEM OR (B) ANY TERMINATION, SUSPENSION, INTERRUPTION OF SERVICES, OR DELAYS IN THE OPERATION OF THE LAIS SITE OR THE INTELLIGENCE SYSTEM.

· Disclaimer Regarding Investment Research.

THE INTELLIGENCE SYSTEM INCORPORATES DATA, CONTENT AND INFORMATION FROM VARIOUS SOURCES THAT WE BELIEVE TO BE ACCURATE AND RELIABLE. HOWEVER, THE LORD ABBETT GROUP MAKES NO CLAIMS, REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY, TIMELINESS, COMPLETENESS OR TRUTHFULNESS OF SUCH DATA, CONTENT AND INFORMATION. YOU EXPRESSLY AGREE THAT YOU ARE RESPONSIBLE FOR INDEPENDENTLY VERIFYING YOUR INVESTMENT RESEARCH PRIOR TO FORMING YOUR INVESTMENT DECISIONS OR RENDERING INVESTMENT ADVICE. THE LORD ABBETT GROUP WILL NOT BE LIABLE FOR ANY INVESTMENT DECISION MADE BY YOU OR ANY OTHER PERSON BASED UPON THE DATA, CONTENT AND INFORMATION PROVIDED THROUGH THE INTELLIGENCE SYSTEM OR ON THE LAIS SITE.

· Survival.

THIS SECTION 6 SHALL SURVIVE ANY TERMINATION OF THESE TERMS OF USE OR YOUR USE OF THE INTELLIGENCE SYSTEM..

7. Limitations on Liability.

NONE OF THE MEMBERS OF THE LORD ABBETT GROUP WILL BE LIABLE TO YOU OR ANY OTHER PERSON FOR ANY DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, SPECIAL OR EXEMPLARY DAMAGES (INCLUDING LOSS OF PROFITS, LOSS OF USE, TRANSACTION LOSSES, OPPORTUNITY COSTS, LOSS OF DATA, OR INTERRUPTION OF BUSINESS) RESULTING FROM, ARISING OUT OF OR IN ANY WAY RELATING TO THE INTELLIGENCE SYSTEM, THE LAIS SITE OR YOUR USE THEREOF, EVEN IF THE LORD ABBETT GROUP HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS SECTION 7 WILL SURVIVE ANY TERMINATION OF THESE TERMS OF USE OR YOUR USE OF THE INTELLIGENCE SYSTEM.

8. Miscellaneous Provisions.

· Governing Law. This Agreement will governed by and construed in accordance with the laws of the State of New York, without giving effect to applicable conflicts of law principles.

THE UNIFORM COMPUTER INFORMATION TRANSACTIONS ACT OR ANY VERSION THEREOF, ADOPTED BY ANY STATE, IN ANY FORM ("UCITA") WILL NOT APPLY TO THESE TERMS OF USE. TO THE EXTENT THAT UCITA IS APPLICABLE, THE PARTIES HEREBY AGREE TO OPT OUT OF THE APPLICABILITY OF UCITA PURSUANT TO THE OPT-OUT PROVISION(S) CONTAINED THEREIN.

The Intelligence System is not intended to be used by consumers, nor are the consumer protection laws of any jurisdiction intended to apply to the Intelligence System. You agree to initiate and maintain any action, suit or proceeding relating to these Terms of Use or arising out of the use of the Intelligence System exclusively in the courts, state and federal, located in or having jurisdiction over New York County, New York.

YOU HEREBY CONSENT TO THE PERSONAL JURISDICTION AND VENUE OF THE COURTS, STATE AND FEDERAL, LOCATED IN OR HAVING JURISDICTION OVER NEW YORK COUNTY, NEW YORK. YOU AGREE THAT YOU WILL NOT OBJECT TO A PROCEEDING BROUGHT IN YOUR LOCAL JURISDICTION TO ENFORCE AN ORDER OR JUDGMENT OBTAINED IN NEW YORK.

· Relationship of Parties. The parties to these Terms of Use are independent contractors and nothing in these Terms of Use will be construed as creating an employment relationship, joint venture, partnership, agency or fiduciary relationship between the parties.

· Notice. All notices provided under these Terms of Use will be in writing and will be deemed effective: (a) when delivered personally, (b) when received by electronic delivery, (c) one business day after deposit with a commercial overnight carrier specifying next day delivery, with written verification of receipt, or (d) three business days after having been sent by registered or certified mail, return receipt requested. We will only accept notices from you in English and by conventional mail addressed to: General Counsel Lord, Abbett & Co. 90 Hudson Street Jersey City, N.J. 07302-3973 We may give you notice by conventional mail or electronic mail addressed to the last mail or electronic mail address transmitted by you to us.

· Third-Party Beneficiaries. The members of the Lord Abbett Group are third-party beneficiaries of the rights and benefits provided to us under these Terms of Use. You understand and agree that any right or benefit available to us or any member of the Lord Abbett Group hereunder will also be deemed to accrue to the benefit of, and may be exercised directly by, any member of the Lord Abbett Group to the extent applicable.

· Survival. This Section 8 will survive any termination of these Terms of Use or your use of the Intelligence System. The undersigned hereby signs these Terms of Use. By electronically signing and clicking "Accept" below, these Terms of Use will be legally binding on me. To sign these Terms of Use, confirm your full name and enter your User ID and Password (as your electronic signature) in the fields indicated below and click the “I Accept” button.

 

Fixed-Income Insights

The twin prospects of normalization in interest rates and more typical returns for equities in 2014 may lend appeal to convertible bonds.

In Brief


  • Convertible bonds, which share characteristics of both equity and fixed-income securities, may provide relatively attractive income, while enabling participation in rising equity markets.
  • Better economic growth could enhance corporate earnings and promote attractive equity returns. Bonds that are convertible into equities tend to participate in that equity movement.
  • Convertible bonds tend to be negatively correlated with U.S. government bonds. That could lend additional appeal to the asset class amid concerns about a continued rise in interest rates.
  • The key takeaway: Convertible bonds may be part of an investment strategy that can help investors transition to a period during which interest rates normalize and equity performance returns to closer-to-average levels.

Investors may think they face a dilemma as the calendar has flipped into 2014. Should they be distraught with the prospect of another year of negative returns in high-quality fixed-income categories? Should they worry that after a 32% rally in the S&P 500® Index in 2013 (based on Bloomberg data), the current valuation on the equity market presents a poor entry point for new exposure?

Their conundrum may be more imagined than real. The improvement in U.S. economic growth that prompted the Federal Reserve to taper its monthly bond purchases, along with the related losses in high-quality fixed-income categories, will likely support both lower-quality bonds and equities in 2014.

That said, where, then, can investors who are seeking a tidy solution that addresses income, equity participation, and a degree of protection from equity market losses find a timely opportunity in the New Year? Convertible securities may be the answer.

Hybrid Vehicles
Convertibles, although often overlooked, may provide relatively attractive income, while enabling participation in rising equity markets. And historically they have provided some downside protection during periods of declining stock prices. [There is no guarantee that they will continue to do so in the future.] Should investors decide to finally deploy the significant cash reserves they hold as 2014 dawns, convertibles may offer them a vehicle that will allow them to increase equity exposure, yet retain some desirable characteristics of bonds.

Investor concerns about higher interest rates and lower bond prices are legitimate, at least with regard to long-term Treasury securities. The Fed's return to a less aggressively accommodative monetary policy seems certain to push interest rates higher on those securities that it will no longer purchase, namely agency mortgage-backed securities and longer-dated Treasuries. In 2013, the anticipation of tapering pushed longer-term U.S. Treasury yields higher and, subsequently, produced negative returns among traditional high-quality bond havens. The gradual unwinding of the Fed's $85 billion monthly bond purchase program begins a multiyear process of interest rate normalization, whereby overnight rates, according to the Fed, will return to 4% from their current level of near 0%, and other rates will fall into line.

While bonds of lower-quality and shorter maturities could provide some protection from interest rate risk throughout this process, long-term, high-quality bonds appear to be at risk to provide low, if not negative returns.

Kicking the Tires
While lower-quality bonds, because of their economic sensitivity, should perform relatively well as the Fed tapers, convertibles offer perhaps an even more interesting alternative for 2014. If Fed tapering is dependent on better economic growth, that growth could enhance corporate earnings and promote respectable equity returns. Bonds that are convertible into equities tend to participate in that equity movement, depending upon the proximity of the price of the underlying stock to the strike price of the convertible. For example, during 2013, convertibles (as represented by the BofA Merrill Lynch All Convertibles, All Qualities Index) returned 27%, compared to a 32% gain for the large cap S&P 500 and a 37% return for the small and mid cap benchmark Russell 2500 Index, or about 82% and 72%, of equity index returns, respectively. (All performance data are from Bloomberg.)

At the same time, convertible bonds tend to be negatively correlated with U.S. government bonds. This relationship was vividly portrayed in 2013 as the Barclays U.S. Government Bond Index fell 2.6%, according to data from Barclays, while the BofA Merrill Lynch All Convertibles, All Qualities Index enjoyed a 27% gain, according to Bloomberg. Chart 1 shows that 2013 was not an anomaly, at least not in terms of direction of performance. Over the past decade, convertible bonds have had a correlation of -0.26 with the Barclays U.S. Government Bond Index, while the Barclays U.S. Aggregate Bond Index, considered a proxy for the traditional "core" strategy of high-quality government and corporate bonds, had a correlation of +0.88 with the same government bond index.


 

Chart 1. Convertibles Historically Have Had a Low Correlation with Government Debt

Correlation with Barclays U.S. Government Bond Index, November 1, 2003-November 30, 2013

Source: Morningstar.
1 Barclays U.S. Aggregate Bond Index.
2 BofA ML Convertible Bond All Qualities Index.

Correlation is a statistic that measures the degree of association between two variables.

Past performance is no guarantee of future results.
For illustrative purposes only and does not reflect any Lord Abbett mutual fund or any particular investment. Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment. 


Over the past 20 years, convertible bonds have generally provided positive performance during periods of rising interest rates. Chart 2 illustrates convertible bond performance in periods when the 10-year U.S. Treasury note rose at least 100 basis points (bps) in yield. A negative correlation to government securities and a strong relationship with equities could be an attractive investment feature, depending on investors' expectations for the next few years.


 

Chart 2. Convertibles Historically Have Held Their Own During Periods of Rising Interest Rates

Index returns during the last seven periods of greater than 100-basis-point increases in the 10-year Treasury yield (month-end data)

Source: Lord Abbett.
1 Citi Treasury Benchmark 10-Year Index.
2 BofA ML Convertible Bond All Qualities Index.
3 S&P 500 Index.

Past performance is no guarantee of future results.
For illustrative purposes only and does not reflect any Lord Abbett mutual fund or any particular investment. Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment. 


The Right Model for 2014?
All well and good, you may say, but how have convertibles performed when the equity market hits a rough road? Surely, there must be a cost to an investment that can provide such an intriguing combination of fixed-income and equity characteristics. Indeed, the economic sensitivity of convertible bonds cuts both ways. As equity prices decline, so will those of related convertible issues—but not as significantly as one may think. At some point, the bond characteristics of the convertible kick in—that is, the price stops falling when the convertible becomes attractive as a pure bond. At this point, if the underlying stock continues to fall, the convertible maintains its value as a bond. Indeed, the traditional return profile of convertible securities indicates that while they might capture approximately 70% of an upswing in the underlying equities, they might participate in only about 40% of a decline in the underlying equities.

Although convertibles may not perform in a similar manner in the future, this could mean that investors who would like to increase equity holdings, but are fearful of a market decline, might consider convertible bonds as a less volatile strategy to gain equity exposure. Other equity investors looking to protect their downside risk, yet fearful of missing out on additional upside moves in the market, also may select convertible bonds as a less volatile substitute for current equity holdings. Such investors may be willing to capture less than 100% of a stock's upside in exchange for the historical downside protection that convertibles have historically provided.

Given the twin dilemmas that many investors face—a need for income, but a fear of rising rates, and a desire for equity exposure, but a fear of falling prices—convertible bonds may be part of an investment strategy that helps investors transition to a period where interest rates gradually normalize at a higher level and equity returns adjust to more typical levels.

 


ABOUT THE AUTHOR

The Investment Conversation

 

video

Our new blog features timely commentary and analysis from Lord Abbett experts. Join the conversation.

RELATED FUND
The Fund seeks to deliver current income and the opportunity for capital appreciation by investing primarily in convertible securities.