Market Review as of 09/30/2015

The U.S. equity market (as represented by the S&P 500® Index1) declined during the third quarter of 2015 amid a bout of substantial volatility in August and September. The impact of slowing Chinese growth on the global economy and ongoing uncertainty surrounding the timing and magnitude of the Federal Reserve’s (Fed) first rate hike contributed to investor concerns. On the positive side of the ledger, expanding U.S. real gross domestic product (GDP) provided support for U.S. equities during the period. GDP in the second quarter increased by 3.9% (according to the third estimate by the U.S. Bureau of Economic Analysis2), with a rise in exports and state and local government spending among the primary contributors. 

The Fed noted that U.S. economic activity, as a whole, continued to expand around the country between July and mid-August, with most districts reporting modest to moderate growth in labor demand and advancement in consumer activity. Additionally, most districts reported positive developments in their residential and commercial real estate markets. Existing home sales and residential leasing showed wide improvements, commercial construction rose in most districts, and commercial leasing increased across the board. Manufacturing activity during the period was mostly positive, although four of the 12 districts reported a mixed picture, and two cited declines.3

International equity markets also experienced notable volatility during the quarter, primarily as a result of weakness in the Chinese economy. The People’s Bank of China (PBoC) devalued the yuan following disappointing Chinese economic data, leading to increased investor concern across global markets. Commodities also experienced sharp moves during the period, with concerns once again tied to the transition in China from an export-based economy to one that relies more on domestic consumption. Ultimately, this broader uncertainty hurt global equities unilaterally.

The S&P 500 declined -6.44% during the three-month period. Of the 10 major sectors, only the utilities sector managed a positive return for the quarter. Despite posting losses, the consumer staples, consumer discretionary, financials, and information technology sectors outperformed 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) outperformed small cap stocks (as represented by the Russell 2000® Index7). 

Fund Review as of 09/30/2015

The Fund returned -15.70%, reflecting the performance at the net asset value (NAV) of Class A shares, with all distributions reinvested for the quarter ended September 30, 2015. The Fund underperformed its benchmark, the Russell 2000® Growth Index,8 which returned -13.06% 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 September 30, 2015, are: one year: -6.04%; five years: 12.61%; and 10 years: 9.77%.  Expense ratio: 1.00%.

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

The leading detractor from relative performance during the period was security selection in the information technology sector. Within this sector, the Fund’s position in Benefitfocus, Inc., a cloud-based benefits software solutions provider, detracted most. Despite beating consensus revenue estimates when it reported in late July, Benefitfocus saw its shares decline in the first half of the quarter due to a secondary equity offering and this weakness persisted as the market turned negative in August and September. Another detractor within the information technology sector was the fund’s position in FireEye, Inc., a provider of cyber-security solutions. The firm reported second quarter earnings and offered third quarter guidance above expectations; however, the departure of their CFO sent shares lower during the period.

The largest contributor during the quarter was stock selection in the health care sector. Within this sector, the Fund’s position in Abiomed, Inc., a medical device manufacturer, contributed most. Shares of the company rose in early August after Abiomed reported second quarter revenue well ahead of consensus estimates, driven by increasing utilization rates, and raised its fiscal year guidance. Also contributing within the health care sector were the Fund’s holdings of Depomed, Inc., a specialty pharmaceutical company focused on central nervous system conditions. Shares of Depomed advanced during the first half of the quarter after it received a takeout offer from a large competitor.  

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


Slowing Chinese growth has led to global economic and commodity price weakness. Domestically, economic improvement continues, and our view is that a prolonged period of depressed energy prices along with a slowly expanding economy and a strong U.S. dollar creates a favorable environment for the U.S. consumer. We have shifted the Fund’s positioning to reflect this view, favoring companies and industries that are tied to domestic growth, and moving to underweight positions in industries that are most exposed to global economic and commodity price weakness.

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