Market Review as of 12/31/2014

The U.S. equity market (as represented by the S&P 500® Index1) advanced during the fourth quarter of 2014, bolstered by reports indicating growing strength in the U.S. economy. But the market became more volatile as well, with falling oil prices and global economic weakness raising concerns. U.S. real gross domestic product (GDP) in the third quarter expanded 5.0%, (according to the third estimate by the U.S Bureau of Economic Analysis), exceeding Wall Street expectations.2  Business investment and consumer spending, particularly on durable goods, were among the primary contributors. 

The Federal Reserve (the “Fed”) noted that U.S. economic activity expanded around the country, with most districts reporting gains in employment and advances in consumer spending. Manufacturing, construction, and real estate activity also expanded, while lower oil prices presented concerns in two districts.3

Elsewhere, the eurozone narrowly avoided slipping back into recession, and falling prices led to concerns about deflationary pressures.  In Japan, economic activity contracted, making it likely that this year’s planned tax hike will be delayed. In China, the economy appeared to decelerate to its slowest pace in nearly 25 years, prompting the central bank to cut its official interest rate for the first time in two years.

The S&P 500 Index rose 4.9% during the quarter, but remained below new highs set earlier in the quarter. Gains occurred in seven of 10 major sectors. The energy, materials, and telecom sectors underperformed the broader market. Value stocks (as represented by the Russell 3000® Value Index4) edged out growth stocks (as represented by the Russell 3000® Growth Index5). Large cap stocks (as represented by the Russell 1000® Index6) underperformed small caps (as represented by the Russell 2000® Index7). 

Fund Review as of 12/31/2014

The Fund returned 8.72%, reflecting the performance at the net asset value (NAV) of Class A shares, with all distributions reinvested for the period ended December 31, 2014, compared to its benchmark, the Russell Midcap® Value Index,8 which returned 6.05% 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  December 31, 2014, are: one year: 9.07%; and since inception (December 29, 2011):  19.61%.  Expense ratio: gross: 1.09%; 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 excess returns exclusively through security selection, individual stock positions drove relative performance during the quarter. The Fund’s overweight position in Whirlpool Corp., a manufacturer and marketer of home appliances, contributed to performance as shares steadily rose during the quarter. The company benefited from positive cyclical trends in developed markets as well as an acceleration of growth in emerging markets. The Fund’s overweight position in Rock-Tenn Co., a packaging manufacturer, also contributed to relative performance.  Shares increased during the quarter after better-than-expected sales and cost savings exceeded analyst expectations. Another contributor to relative performance was the Fund’s overweight position in SCANA Corp., an integrated utilities company. The firm’s shares rose after a quarterly earnings release showed a marked improvement in year-over-year earnings. 

The Fund’s overweight position to Ultra Petroleum Corp., an independent exploration and production company, detracted from relative performance. Despite reporting strong results for the most recent quarter, Ultra saw its shares decline in sympathy with oil prices. Rowan Companies, an offshore oil and gas contract driller, also detracted from relative performance during the quarter, as falling oil prices weighed on its share price. Finally, the Fund’s overweight position to Huntsman Corp., a manufacturer of organic chemical products, detracted from relative performance. Huntsman’s share price fell after the company announced job cuts across various business sectors

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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