Market Review as of 06/30/2015

The U.S. equity market (as represented by the S&P 500® Index1) advanced slightly during the second quarter of 2015, supported by a generally supportive earnings season and signs of strength in the domestic labor and housing markets. The quarter was not without some bouts of volatility, however, with questions surrounding the timing and magnitude of the Federal Reserve’s (“the Fed”) first rate hike, political headwinds related to Greek solvency, and fears of a slowing Chinese economy all contributing to investor concerns during the period. In addition, U.S. real gross domestic product (GDP) in the first quarter contracted 0.2% (according to the third estimate by the U.S. Bureau of Economic Analysis2), with declines in exports and state and local government spending among the primary detractors.  

The Fed noted that U.S. economic activity, as a whole, likely expanded around the country between early April and late May, with most districts reporting slight gains in employment and wages along with advances in consumer spending. Construction, real estate activity, and home prices also rose across most districts during the period, while manufacturing was primarily flat, with more than half of the districts reporting tempered manufacturing growth due to the downturn in the oil and gas industry.3

Elsewhere in the world, the European Central Bank’s continued quantitative easing was not enough to overcome the political risk related to Greece’s status in the eurozone, sending European markets generally lower. Chinese markets fluctuated during the quarter, as the supportive decision by the People’s Bank of China to cut its lending rate for the fourth time since November 2014 was offset by uncertainty surrounding the economy’s overall strength. Japanese equities continued to rise in the second quarter, buoyed by the continuation of aggressive monetary easing policies from the Bank of Japan, leading the U.S. dollar to reach a 13-year high relative to the Japanese yen in June.

The S&P 500 advanced 0.28% during the three-month period, but remained below new highs set earlier in the quarter. Gains occurred in five of 10 major sectors. The consumer staples, energy, industrials, materials, and utilities sectors underperformed the broader market. Value stocks (as represented by the Russell 3000® Value Index4) underperformed growth stocks (as represented by the Russell 3000® Growth Index5), while large cap stocks (as represented by the Russell 1000® Index6) trailed small cap stocks (as represented by the Russell 2000® Index7). 

Fund Review as of 06/30/2015

The Fund returned -2.17%, reflecting the performance at the net asset value (NAV) of Class A shares, with all distributions reinvested for the period ended June 30, 2015, compared to its benchmark, the Russell Midcap® Value Index,8 which returned -1.97% for the same period. Average total returns, which reflect performance at the maximum 5.75% sales charge applicable to Class A share investments and include the reinvestment of all distributions, as of  June 30, 2015, are: one year: 1.02%; and since inception (December 29, 2011): 16.90%.  Expense ratio: gross: 1.09%, and net: 0.85%.

Performance data quoted represent past performance, which is no guarantee of future results. Current performance may be higher or lower than the performance data 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. To obtain performance data current to the most recent month-end, call Lord Abbett at 888-522-2388 or visit us at

Consistent with our Calibrated investment approach that seeks to achieve excess returns through a focus on security selection, individual stock positions drove relative performance during the quarter. The Fund’s overweight position in Kohl’s Corp., an operator of department stores, was a detractor from relative performance. Although the company reported strong first-quarter results, shares of the company traded lower as sales and traffic trends fell below investor expectations. The Fund’s overweight position in Whirlpool Corp., a home appliances manufacturer, also detracted from relative performance. Shares of Whirlpool were affected by weaker demand in Latin American markets.  Another detractor from relative performance was the Fund’s overweight position in PBF Energy Inc., an independent petroleum refiner and supplier that faced a challenging industry environment.

The Fund’s overweight position in Community Health Systems Inc., an owner and operator of hospitals, contributed to relative performance. Shares of Community Health benefited from the U.S. Supreme Court’s ruling to uphold the Affordable Care Act. The ruling removed significant legislative risks surrounding the industry.  Rowan Companies plc, a global drilling services company, contributed to relative performance after posting solid first-quarter results through strong cost controls. With Rowan’s fleet fully contracted, we believe the company should remain relatively well insulated from industry volatility.  Finally, the Fund’s overweight position in Fifth Third Bancorp, a diversified financial services company, contributed to relative performance. Shares of Fifth Third continue to benefit from stabilizing loan growth trends and management’s commitment to return capital in the form of dividends and share buybacks.

Please refer to under the “Portfolio” tab for a complete list of holdings of the Fund, including the securities discussed above.

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