Principles of Portfolio Construction: Bank Loan Strategy
A Note about Risk: The value of investments in debt securities will fluctuate in response to market movements. When interest rates rise, the prices of debt securities are likely to decline, and when interest rates fall, the prices of debt securities tend to rise. Investments in high-yield securities, sometimes called junk bonds, carry increased risks of price volatility, illiquidity, and the possibility of default in the timely payment of interest and principal. Lower-rated investments may be subject to greater price volatility than higher-rated investments. Moreover, the specific collateral used to secure a loan may decline in value or become illiquid, which would adversely affect the loan's value. The portfolio's investments in foreign securities may present increased market, liquidity, currency, political, information, and other risks. These risks can be greater in the case of emerging country securities. Certain of the portfolio's derivative transactions may give rise to leverage risk. Leverage, including borrowing for investment purposes, may increase volatility in the portfolio by magnifying the effect of changes in the value of the portfolio's holdings. The use of leverage may cause investors to lose more money in adverse environments than would have been the case in the absence of leverage.
Additional 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.
Treasuries are debt securities issued by the U.S. government and secured by its full faith and credit. Income from Treasury securities is exempt from state and local taxes.
The Fund's portfolio is actively managed and may change significantly over time.
Bonds are categorized by quality, and bond quality is related to the return investors expect to receive on a bond. In general, the lower the quality of the bond, the higher the return an investor expects to compensate for the risk of the bond defaulting.
ABOUT THE MANAGER
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.