Market Review as of 03/31/2015

The U.S. equity market (as represented by the S&P 500® Index1) barely edged up during the first quarter of 2015, amid a moderating economy and the prospect of a hike in interest rates. Hindered by harsh weather, a strong dollar, and slow global growth, U.S. real gross domestic product (GDP) expanded by 2.2% in the fourth quarter (according to the third estimate by the U.S. Bureau of Economic Analysis), down from 5.0% in the previous quarter.2 Exports, spending by state and local governments, and personal consumption expenditures bolstered growth, though spending on durable goods weakened.  

The Federal Reserve (the “Fed”) noted that U.S. economic activity expanded around the country, with most districts reporting increased home sales and improvement in employment, though wage pressures remained moderate. Manufacturing, construction, and real estate activity was mixed, while banking conditions were mostly positive.3

Elsewhere, the eurozone showed improvement, primarily as a result of strengthening in Germany. In Japan, fourth-quarter 2014 economic activity bounced back from a contraction in the third quarter. In China, the economy continued to slow, prompting the People’s Bank of China to cut its official interest rate in February, the second reduction in three months.  

The S&P 500 rose 0.95% during the quarter, with gains occurring in six of 10 major sectors. The consumer staples, consumer discretionary, telecom services, and healthcare sectors outperformed the broader market. Growth stocks (as represented by the Russell 3000® Growth Index4) outperformed value stocks (as represented by the Russell 3000® Value Index5). Small caps (as represented by the Russell 2000® Index6) outperformed large cap stocks (as represented by the Russell 1000® Index7). 

Fund Review as of 03/31/2015

The Fund returned 7.12%, reflecting the performance at the net asset value (NAV) of Class A shares, with all distributions reinvested for the quarter ended March 31, 2015. The Fund outperformed its benchmark, the Russell 2000® Growth Index,8 which returned 6.63% for the same period. Average annual 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 March 31, 2015, are: one year: 2.52%; five years: 17.55%; and 10 years: 13.04%.  Expense ratio: 0.98%

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

Security selection within the industrials sector was the largest contributor to relative performance during the first quarter. Within the sector, Astronics Corp., a supplier of products to the aerospace and defense industries, contributed most. Shares of Astronics surged after the company reported earnings in late February that beat consensus estimates and also announced that a previously anonymous large test systems customer was Apple. The largest individual contributor during the quarter was our position in health care company Foundation Medicine Inc., a commercial stage biopharmaceutical company. Shares of the company rose after Roche’s pharmaceuticals division announced that it was taking a 50% stake at a substantial premium to the stock’s previous closing price.

The largest detractor during the quarter was stock selection within the consumer discretionary sector. The most significant detractor within this sector was our position in LifeLock, Inc., a provider of proactive identity-theft protection services. Shares of the firm faced some weakness as a result of a large insider sale that occurred in January, and the company reported mixed quarterly earnings in February that beat consensus estimates, but saw slower user growth than anticipated. Also detracting within the sector was our position in, Inc., a digital promotion platform. The firm reported fourth quarter revenue below consensus estimates and also lowered fiscal year guidance, which further disappointed investors.

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


The U.S. economy continues to show signs of self-sustainability, although economic and earnings growth may be dampened somewhat by the strengthening U.S. dollar. In our view, the chief risk in domestic equity markets is over-aggressiveness from the Fed; however, we believe that low inflation and minimal wage growth likely will keep monetary policy accommodative for the time being. Overall, we continue to believe that the United States is in the middle of a steady recovery, and as a result, we continue to position the portfolio to be balanced among secular and cyclical growth stocks, which tend to perform best in slow growth environments. 

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