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 Lord Abbett Fundamental Equity Fund returned -8.73%, reflecting the performance at the net asset value (NAV) of Class A shares with all distributions reinvested for the quarter ended September 30, 2015, compared to the Fund’s benchmark, the Russell 1000® Value Index,8 which returned -8.39% 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: -10.41%; five years: 8.77%; and 10 years: 5.96%. Expense ratio: 0.95%.

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

Stock selection within the financials sector detracted from relative performance during the period. Shares of Affiliated Managers Group Inc., an investment management company, declined as a result of broader weakness in equity markets in the third quarter, and the stock underperformed the benchmark, given Affiliated’s sensitivity to financial market performance. In addition, shares of Capital One Financial Corp., a bank holding company, fell after the firm missed revenue and earnings estimates; this was due to higher expenses and lackluster growth in various areas of the business. Within the consumer discretionary sector, shares of Time Warner Inc., a media and entertainment company, fell as the market reacted poorly to the company’s second quarter results and reconfirmed guidance.

Stock selection within the information technology sector contributed to the Fund’s relative performance during the period. Shares of Vantiv, Inc., a technology holding company, jumped following the firm’s acquisition of a new payment-processing business, and stabilization in its legacy business. In addition, shares of Google Inc., a provider of products and services across screens and devices, increased after the company announced a corporate reorganization, which gave greater shareholder visibility into the revenue drivers of the business. Within the industrials sector, shares of General Dynamics Corporation, an aerospace and defense company, contributed to relative outperformance, as the company beat earnings estimates and increased guidance.

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


We believe the domestic equity market as a whole to be near a fairly valued level owing to an improving economic backdrop. However, a number of individual companies are still being underappreciated by consensus, allowing for compelling idea generation and driving our belief that individual stock picking should be the primary driver of alpha in the Fund.

We continue to focus on U.S.-centric companies that have financial and capital management flexibility to compete strategically. As a result of this view, we are paying close attention to stock-specific decisions, near-term fundamentals, and focusing on the rigorous execution of our buy/sell discipline.

The Fund is overweight in the information technology sector, and we continue to favor companies that benefit from an increase in technology infrastructure spending and information security. The Fund is underweight within the materials and energy sectors, given the weaker outlook for commodity prices and global economic growth.

Contact a Representative