Image alt tag

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.

Tracked Funds

You have 0 funds on your mutual fund watch list.

Begin by selecting funds to create a personalized watch list.

(as of 12/05/2015)

Pending Orders

You have 0 items in your cart.

Subscribe and order forms, fact sheets, presentations, and other documents that can help advisers grow their business.

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.

Reset Your Password

Financial Professionals*

Your password must be a minimum of characters.

Confirmation Message

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

OK

 

Market View

Renewed fears of inflation have led to an increase in demand for U.S. Treasury inflation-protected securities. But is that the best approach for inflation protection?

The belief that U.S. economic growth will expand following Donald Trump’s victory in the U.S. presidential contest has sparked fresh concerns about an uptick in inflation. In fact, inflation expectations already had begun to increase in September, based on better U.S. economic data and indications from the U.S. Federal Reserve (Fed) that policymakers may be more comfortable allowing inflation to increase.  Trump’s surprise win simply served to kick inflation expectations into higher gear.

Unsurprisingly, investor interest in inflation-protection strategies (which already had been strong in the run-up to the election) has increased further. Lipper data showed that investors in U.S.-based mutual funds poured $1 billion into inflation-protected bond funds in the week ended November 9 (covering the period leading up to the election and its immediate aftermath), marking the funds' second-biggest inflows since records began in October 2002, according to a Reuters report. An additional $500 million in the week ended November 16 added to the inflation-protected category’s longest straight run of weekly inflows since the first half of 2011, according to a cnbc.com report.

A post-election upshift in yields for longer-dated U.S. debt has caused the yield curve to steepen. Such a steepening suggests markets believe the president-elect could make longer-dated U.S. debt a riskier asset. This possibly is due to expectations of fiscal policy increasing borrowing or a sharp rise in inflation due to protectionist trade policies, a primary focus of the Trump campaign. “If Trump truly plans on injecting money into infrastructure development and growing the economy, that could be inflationary," noted one Lipper researcher in the Reuters article.

Though inflation remains low relative to historical levels, and some experts are skeptical of a sustained move higher, investors’ expectations of a significant increase in prices for U.S. goods and services have been steadily rising in the past few months. (See Chart 1.) These expectations have been supported by perceptions that the Fed will be tolerant of a modest rise in inflation if it accompanies improved U.S. economic growth.

 

Chart 1. Inflation Expectations Have Increased
Inflation expectations, November 17, 2014–November 17, 2016

Source: Bloomberg. Five-year inflation expectation is represented by the five-year zero coupon inflation swap rate.
The historical data are for illustrative purposes only, do not represent the performance of any specific portfolio managed by Lord Abbett or any particular investment, and are not intended to predict or depict future results. Investors may experience different results. Returns during other times may vary. Due to market volatility, the market may not perform in a similar manner in the future. Indexes are unmanaged, do not reflect the deduction or expenses, and are not available for direct investment.
Past performance is no guarantee of future results.  

 

"One lesson learned during [the 1970s] is that inflation expectations can matter a great deal," said former U.S. Federal Reserve Bank of Philadelphia president Charles Plosser, in a speech in 2009. "And if [those expectations] become unanchored—that is, if the public comes to believe that the Fed will not do what is necessary to preserve price stability—then inflation can rise quickly regardless of the amount of so-called slack in the economy."

One particular beneficiary of higher U.S. inflation expectations has been demand for Treasury inflation-protected securities (TIPS), which is a type of U.S. Treasury bond that is the cornerstone of the inflation-protection funds mentioned earlier.  (See box, “TIPS: A Closer Look.”) But while investors are attracted to the inflation-adjustment component of TIPS, they might not be interested in having exposure to another aspect of these securities: their relatively high duration.  Essentially, the benchmark 10-year TIPS is a low-yielding U.S. Treasury security, which now has an effective duration of approximately nine years. The typical TIPS mutual fund has a duration of 6.7 years, according to Morningstar data.

TIPS: A Closer Look

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 Consumer Price Index for All Urban Consumers (CPI-U), more commonly referred to as the Consumer Price Index (CPI). 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 semiannually, 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. 

If investors are looking to diversify their bond portfolios, TIPS might not be the best solution. Since they are long-duration, government-related securities, they have had high correlation with U.S. Treasuries and other high-quality fixed-income securities (as represented by the Bloomberg Barclays U.S. Aggregate Bond Index [Bloomberg Barclays Aggregate]). As a result, during periods of rising interest rates, investors in TIPS have been disappointed with their experience, realizing the negative effects of greater interest-rate sensitivity just when they were expecting protection. 

 

Chart 2. TIPS Have a Historical Positive Correlation with U.S. Treasuries
Correlation coefficients of listed asset classes, January 1, 2004–October 31, 2016

Source: Bloomberg and Zephyr.
1Bloomberg Barclays U.S. Treasury Index. 2Bloomberg Barclays U.S. Aggregate Bond Index. 3Bloomberg Barclays U.S. TIPS Index. 4Deutsche Bank Breakeven 5-Year CPI Swaps Index.
Note: Data represent correlation coefficients of listed asset classes from 01/01/2004 - 10/31/2016. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment. Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment.

 

Those negative qualities became evident in recent days. As Table 1 indicates, in the first week following the election, the representative Bloomberg Barclays U.S. TIPS Index experienced a negative return of 1.79%, while the broad bond-market benchmark Bloomberg Barclays Aggregate was down 1.76%. So, while investors allocated to TIPS in order to diversify their portfolio and protect from an uptick in inflation, their TIPS positions declined as much as the broad bond market. (See Table 1.)   

A similar experience occurred in 2013, the year of the market’s so-called “taper tantrum,” when interest rates rose on expectations that the Fed would reduce its quantitative-easing program: TIPS declined more than 8%, as TIPS yields increased with nominal Treasury yields, leading to large price declines.

 

Table 1. TIPS and Related Investments Have Suffered Negative Returns amid Rising Interest Rates
Total return for the listed indexes and securities for the indicated dates

Source: Morningstar and Bloomberg.
Past performance is no guarantee of future results. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.
Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment. An investor may not experience similar results.

 

What other avenues are available for fixed-income investors concerned about the effects of an increase in inflation on their investment returns? As we noted earlier, TIPS carry significant duration risk and high correlations with U.S. Treasury securities. Other traditional inflation-protection strategies come with significant drawbacks that may undercut their hedging capability. For example, two of the primary vehicles, commodities and real estate, are highly volatile and subject to idiosyncratic supply and demand factors.

Fortunately, there is an effective alternative to TIPS and commodities: a strategy that employs a portfolio of professionally managed swaps tied to the U.S. Consumer Price Index (CPI). By capturing movements in inflation expectations and changes in headline CPI, the value of CPI swaps is more directly targeted toward inflation, without the interest-rate exposure of a traditional TIPS strategy. (See box, “CPI Swaps: A Closer Look.”) Unlike TIPS, CPI swaps have a negative historical correlation (-0.50) with Treasuries, which may lead to more efficient diversification for investors' fixed-income holdings. 

These qualities make CPI swaps an integral part of an alternative inflation-protection strategy investors may wish to consider. By combining a portfolio of short-term, credit-sensitive bonds with an overlay of CPI swaps, asset managers have the potential to create a portfolio with a higher yield and lower duration than a traditional TIPS strategy. This strategy may provide the inflation protection that investors want without the potential duration risk of TIPS.

CPI Swaps: A Closer Look

Interest-rate swaps consist of a contract between two parties that stipulates that one party will make fixed payments, while the other will make variable payments. CPI swaps are a type of interest-rate swap in which the fixed payment is based on the current, expected rate of inflation, while the variable payment is based on the actual rate of inflation. The actual rate of inflation is measured by the cumulative change in the headline Consumer Price Index (CPI), which includes food and energy.

CPI swaps come in a few varieties, the most common of which is a zero-coupon swap. These are called "zero-coupon" because the only payment occurs when the contract matures. Thus, there is no cash commitment when a party enters a zero-coupon swap agreement or during the life of the contract.

If the actual rate of inflation exactly matches the expected rate of inflation at the beginning of the swap agreement, the swap expires with no value.  The value of the swap will increase or decrease with changes in the actual rate of inflation.  Even though the zero-coupon swap has only one cash flow at maturity, the swap is marked to market on a daily basis, driven by changes in inflation and inflation expectations.

For example, as inflation and inflation expectations increase, the value of the CPI swap will increase and add to the returns of the underlying bond portfolio. Conversely, if inflation expectations decrease, the value of the swap will detract from the underlying bond portfolio. If actual inflation exactly matches what had been expected at the initiation of the swap agreement, the CPI swap will have no impact on the returns of the underlying bond portfolio. Note that in certain environments when inflation expectations are falling sharply, CPI swaps may generate negative returns. However, such periods of falling inflation expectations and interest rates are generally very positive environments for high-quality bond holdings.  The role of an inflation protection strategy should be to perform well during periods of higher inflation and negative returns for high-quality bonds—like the environment the U.S. fixed-income market has seen had for the past three months.

Given that inflation has, historically, presented a risk to U.S. investors, and that there is a possibility of higher inflation in the future, hedging that risk in an effective manner is critical. By pairing a portfolio of CPI swaps with a short-term bond portfolio, investors may get the inflation protection they desire, with the potential for higher income and lower duration risk than a typical TIPS strategy.

 

MARKET VIEW PDFs


  Market View
  U.S. Market Monitor

CONCERNED ABOUT INFLATION?
The Lord Abbett Inflation Focused Fund seeks to deliver total returns that exceed the rate of inflation in the U.S. over a full inflation cycle. Learn more.

CONTRIBUTING STRATEGIST

Lord Abbett's Blog

videoOur blog, The Investment Conversation, features timely commentary and analysis from Lord Abbett experts. Join the conversation.

Please confirm your literature shipping address

Please review the address information below and make any necessary changes.

All literature orders will be shipped to the address that you enter below. This information can be edited at any time.

Current Literature Shipping Address

* Required field