Diversified Equity Strategy Fund Class A | Lord Abbett

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Diversified Equity Strategy Fund

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Summary

Summary

What is the Diversified Equity Strategy Fund?

The Fund seeks to deliver long-term growth of capital by investing primarily in Lord Abbett Funds that invest in stocks across all market capitalizations of U.S. and select international companies.

Fund Basics

Total Net Assets
-
Inception Date
Dividend Frequency
-
Number of Holdings
-

Investment Team

martini
Giulio Martini

Partner, Director of Strategic Asset Allocation

38 Years of Industry Experience

Robert A. Lee
Robert A. Lee

Partner & Co-Director of Taxable Fixed Income

32 Years of Industry Experience

Supported By 8 Investment Professionals with 26 Years Avg. Industry Experience

Your Representative

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Performance

Performance

Portfolio

Portfolio

Portfolio Positioningas of 03/31/2017

  • The Diversified Equity Strategy Fund underperformed its benchmark, a blend of 85% Russell 3000® Index/15% MSCI EAFE Index with Gross Dividends, during the first quarter of 2017. During the period, both the Fund’s strategic allocation and the performance of the underlying investment strategies detracted from performance.
  • The Fund’s weightings in domestic large-cap and mid-cap value stocks detracted from relative performance, as these categories underperformed the Fund’s benchmark.
  • The Fund’s allocations to domestic large-cap growth stocks and international small-cap equities contributed to relative performance, as these strategies outperformed the Fund’s benchmark.
  • During the quarter, the Fund’s weighting in the financials sector declined, while its allocation to the information technology sector increased. The financials and information technology sectors are the largest weightings in the Fund.

Dividends & Cap Gains

Dividends & Cap Gains

Fees & Expenses

Fees & Expenses

Fund Review

Fund Review

Fund review pdfFund Review

Market Review as of 12/31/2016

The U.S. equity market (as represented by the S&P 500® Index1) finished positive for the period. Donald Trump defeated Hillary Clinton to become the forty-fifth president of the United States and set up the markets for a strong post–election rally to finish off 2016 due to expectations for increased infrastructure spending and broad tax reform under the new administration. At its December meeting, the U.S. Federal Reserve (Fed) raised its benchmark interest rate for the second time in a decade, from a range of 0.25–0.50% to a range of 0.50–0.75%, and indicated that it was targeting three rate hikes in 2017. The unemployment rate edged higher, from 4.6% in November to 4.7% in December, and the U.S. economy added 156,000 jobs, missing an expected increase of 178,000 but showing a 2.9% annualized gain in hourly wages. A positive corporate earnings season also contributed to market performance during the quarter. Seventy-two percent of companies in the S&P 500 reported third-quarter earnings above their mean estimates, but just 55% of companies in the index reported third-quarter sales above their mean estimates.2 According to the third estimate from the Bureau of Economic Analysis,  U.S. real gross domestic product in the third quarter expanded by 3.5%,3 an upward revision from previous estimates, with a rise in nonresidential fixed investment, personal consumption expenditures, and state and local government spending as the primary contributors. The Fed noted that between early October and mid-November 2016, U.S. economic activity, as a whole, continued to expand in most districts around the country. The strong dollar was cited as a headwind to more robust demand for manufactured products in a few districts, due to exports becoming more expensive. Most districts reported higher retail sales, especially for apparel and furniture. In addition, some districts reported a tightening in labor market conditions and slight upward pressure on overall prices.4

International equities (as represented by the MSCI EAFE Index5) declined during the fourth quarter. The key themes during the quarter were the international ramifications from the U.S. election, the Italian constitutional referendum, and the OPEC oil output cut. The November election of Trump drove the Japanese yen sharply lower, resulting in a double-digit rally in Japan’s Nikkei to close out the year. The Mexican peso also has suffered significantly since the election, as Trump repeatedly threatened to build a border wall with Mexico and took aim at multinational exporters and free-trade agreements. In Italy, a referendum on constitutional reforms to make laws easier to pass was voted down, causing Prime Minister Matteo Renzi to submit his resignation. The Italian government also formed a €20 billion facility in December to provide stability to its banking sector after capital levels fell and bad debt rose at several Italian banks. Oil prices rose during the fourth quarter, as the Organization of Petroleum Exporting Countries reached a deal to reduce oil production for the first time since 2008.

The S&P 500 returned 3.82% during the fourth quarter. Of the 11 major sectors, the financials, energy, industrials, materials, and telecommunication services sectors outperformed the broader market. Value stocks6 outperformed growth stocks,7 while large-cap stocks8 lagged small-cap stocks.9

Fund Reviewas of 12/31/2016

The Fund* underperformed its benchmark, a blend consisting of 85% Russell 3000® Index10/15% MSCI EAFE Index with Gross Dividends,11 for the quarter ended December 31, 2016.

During the period, both the Fund’s strategic allocation and performance of the underlying investment strategies detracted from performance. The Fund’s allocation to U.S. large-cap growth equities detracted from relative performance, as domestic growth stocks underperformed the Fund’s benchmark. The Fund’s weighting in domestic large-cap value stocks contributed to performance, as large-cap value equities outperformed the Fund’s benchmark.

Within the Fund’s domestic large-cap growth strategy, which underperformed its underlying benchmark, security selection in the information technology sector was the largest detractor from relative performance during the period. Ellie Mae, Inc., a provider of on-demand software solutions and services for the residential mortgage industry in the United States, detracted most. Shares of Ellie Mae fell as investors anticipated that potential changes in the regulatory environment would no longer benefit its business model in the future. Security selection in the consumer discretionary sector was another detractor from relative performance during the period. Amazon.com, Inc., online consumer products retailer, detracted most. Shares of Amazon.com fell as part of a general move downward of “FANG” stocks after the election.

Within the Fund’s U.S. large-cap value equity strategy, which outperformed the benchmark during the period, security selection in the consumer staples sector was a large contributor to relative performance.

Tobacco producer Reynolds American, Inc. contributed most. The stock reacted positively to British American Tobacco plc’s offer to acquire the 58% of Reynolds that it does not already own. In addition, security selection in the health care sector contributed to relative performance during the period. UnitedHealth Group, a diversified health care company, contributed most. The company delivered earnings results that beat expectations, raised full-year guidance, and reported strong membership growth.

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

1The S&P 500® Index is widely regarded as the standard for measuring large cap U.S. stock market performance and includes a representative sample of leading companies in leading industries.

2 FactSet Earnings Insight, December 2, 2016.

3“News Release: Gross Domestic Product,” Bureau of Economic Analysis, December 22, 2016.

4“Beige Book–November 2016,” Board of Governors of the Federal Reserve System, November 30, 2016.

5The MSCI EAFE Index (Europe, Australasia, Far East) is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the United States and Canada. The MSCI EAFE Index consists of the following 21 developed market country indexes: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

6The Russell 3000® Value Index measures the performance of those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values.

7The Russell 3000® Growth Index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values.

8The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index.

9The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

10The Russell 3000® Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market.

11The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the United States and Canada. The MSCI EAFE Index consists of the following 21 developed market country indexes: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. The MSCI EAFE Index with Gross Dividends approximates the maximum possible dividend reinvestment. The amount reinvested is the entire dividend distributed to individuals resident in the country of the company, but does not include tax credits. 

 

MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein.  The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products.  This report is not approved, reviewed or produced by MSCI.

 

The indexes are presented for informational purposes only and are not presented to illustrate any specific product or security. Unless otherwise specified, indexes reflect total return, with all dividends reinvested. Indexes are unmanaged, do not reflect deduction of fees or expenses, and are not available for direct investment.

 

A Note about Risk: The Fund invests in underlying funds that may engage in a variety of investment strategies involving certain risks; the Fund is subject to the particular risks of an underlying fund in proportion to a respective investment.  Performance of an underlying fund may be lower than the performance of the asset class it represents.  The value of investments in equity securities will fluctuate in response to general economic conditions and to changes in the prospects of particular companies and/or sectors in the economy.  Investments in small and/or mid-sized company stocks typically involve greater risk, particularly in the short term, than those in larger, more established companies.  Investments in either growth or value stocks may shift in and out of favor for long periods of time, depending on market and economic conditions.  Foreign securities may pose greater risks than domestic securities, including greater price fluctuation, less government regulation, and higher transaction costs.  Foreign investments also may be affected by changes in currency rates or currency controls.  The Fund is subject to the risks associated with derivatives, which may be different from and greater than the risks associated with investing directly in securities and other investments.  These factors can affect Fund performance.

 

The views and information discussed in this commentary are as of December 31, 2016, are subject to change, and may not reflect the views of the firm as a whole.  The views expressed in market commentaries are at a specific point in time, are opinions only, and should not be relied upon as a forecast, research, or investment advice regarding a particular investment or the markets in general.  Information discussed should not be considered a recommendation to purchase or sell securities.

 

Investors should carefully consider the investment objectives, risks, charges, and expenses of the Lord Abbett Funds.  This and other important information is contained in the Fund’s summary prospectus and/or prospectus.  To obtain a prospectus or summary prospectus on any Lord Abbett mutual fund, contact your investment professional, Lord Abbett Distributor LLC at 888-522-2388 or visit us at www.lordabbett.com.  Read the prospectus carefully before investing.

Fund Documents

Fund Documents

Fund Document Not Available.
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Minimum initial investment varies depending on the class of shares you buy and the type of account. IRAs, SIMPLEs, and SEP accounts with payroll deductions have no minimums. Please see Fund prospectuses for additional information.      

                    

 

IMPORTANT INFORMATION

 

A Note about Risk: The Fund invests in underlying funds that may engage in a variety of investment strategies involving certain risks; the Fund is subject to the particular risks of an underlying fund in proportion to a respective investment.  Performance of an underlying fund may be lower than the performance of the asset class it represents.  The value of investments in equity securities will fluctuate in response to general economic conditions and to changes in the prospects of particular companies and/or sectors in the economy.  Investments in small and/or mid-sized company stocks typically involve greater risk, particularly in the short term, than those in larger, more established companies.  Investments in either growth or value stocks may shift in and out of favor for long periods of time, depending on market and economic conditions.  Foreign securities may pose greater risks than domestic securities, including greater price fluctuation, less government regulation, and higher transaction costs.  Foreign investments also may be affected by changes in currency rates or currency controls.  The Fund is subject to the risks associated with derivatives, which may be different from and greater than the risks associated with investing directly in securities and other investments.  These factors can affect Fund performance.

The Fund invests all of its net assets directly in the underlying funds. The percentages shown are based on individual securities owned in one or more of the underlying funds. The Fund's portfolio is actively managed and therefore, its percentage allocations may change from time to time. Holdings are for informational purposes only and are not a recommendation to buy, sell, or hold any security.

 

Performance data quoted is historical. Past performance is not indicative of future results. Current performance may be higher or lower than the performance 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 quarter-end, go to quarter ending performance on our Website or call Lord Abbett at (888) 522-2388.

 

 

CUSIP identifiers have been provided by CUSIP Global Services, managed on behalf of the American Bankers Association by Standard & Poor’s Financial Services, LLC, and are not for use or dissemination in a manner that would serve as a substitute for any CUSIP service. The CUSIP Database, © 2011 American Bankers Association. “CUSIP” is a registered trademark of the American Bankers Association.

 

Class A  Except as noted below, returns with sales charges reflect a maximum sales charge of 5.75% for equity funds, 2.25% for all tax-free income funds, fixed income funds and multi-asset class funds. There are also ongoing 12b-1 service fees (and, in certain cases, distribution fees).

Class A Shares purchased subject to a front-end sales charge have no contingent deferred sales charge (CDSC). However, certain purchases of Class A shares made without a front-end sales charge may be subject to a CDSC of 1% if the shares are redeemed before the first day of the month in which the one year anniversary of the purchase falls. The CDSC is not reflected in the performance with maximum sales charge.

Except as noted below, returns with sales charges reflect a maximum sales charge of 2.50%. There are also ongoing 12b-1 service and distribution fees.

Class A Shares purchased subject to a front-end sales charge have no contingent deferred sales charge (CDSC). However, certain purchases of Class A shares made without a front-end sales charge may be subject to a CDSC of 1.50% if the shares are repurchased before the first day of the month in which the one year anniversary of the purchase falls. The CDSC is not reflected in the performance with maximum sales charge.

Class A Shares purchased subject to a front-end sales charge have no contingent deferred sales charge (CDSC). However, certain purchases of Class A shares made without a front-end sales charge may be subject to a CDSC of 1.50% if the shares are repurchased before the first day of the month in which the one year anniversary of the purchase falls. The CDSC is not reflected in the performance with maximum sales charge.

With Sales Charge - Returns with sales charges reflect applicable fees and expenses and include all distributions reinvested.

 

Without Sales Charge - Returns shown are without sales charges and have all distributions reinvested. If a sales charge had been deducted, the results would have been lower.

 

Returns shown at less than a year reflect aggregate total returns.

 

Double-Digit Returns - instances of high double-digit returns were achieved primarily during favorable market conditions and may not be sustainable over time.   

 

Indexes reflect total return, unless otherwise specified, with all dividends reinvested. Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment.

 

Lipper Category Average - Peer group averages are based on universes of funds with the same investment objectives. The average return for the peer group is based on the returns of each individual fund within the group for the period shown. This average assumes reinvestment of dividends.

 

Fund Expense Ratio Detail: Reflects expenses for the Fund's fiscal year-end and is subject to change. Fund expenses may fluctuate with market volatility. A substantial reduction in Fund assets (since its most recently completed fiscal year), whether caused by market conditions or significant redemptions or both, will likely cause total operating expenses (as a percentage of Fund assets) to become higher than those shown.

 

Gross Expense Ratio includes Management fees, Distribution and Service (12b-1) fees, Acquired Fund Fees and Expenses, and Other Expenses. 

 

 

Lipper Category Average Expense Ratio reflects the average net expenses of Class A shares of all funds with in the peer group based on Lipper data available.

 

Dividends and Capital Gains: The information presented in this section is intended for general information and is not intended to be relied upon and should not be relied upon, as financial, legal or tax advice for any particular investor. We strongly recommend that you contact your financial, legal or tax advisor regarding your particular tax situation.

The information presented in this section is not written or intended to be used, and cannot be used, for the purpose of avoiding any tax liabilities or penalties.

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