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 Lord Abbett Growth Leaders Fund returned 4.16%, reflecting the performance at the net asset value (NAV) of Class A shares, with all distributions reinvested for the quarter ended December 31, 2014.  The Fund underperformed its benchmark, the Russell 1000® Growth Index,8 which returned 4.78% 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 December 31, 2014, are: one year: 3.78%; three years: 18.76% and since inception (June 30, 2011): 13.01%. Expense ratio, gross: 1.02%, and 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

Security selection within the information technology sector was the leading detractor from relative performance during the quarter. An overweight position in Google, Inc., a global technology company, detracted most within the sector. Shares declined during the quarter driven by mixed quarterly earnings that were weighed down by a declaration in paid “clicks” growth that hurt overall revenue. Investments in the consumer discretionary sector were another detractor from relative performance during the period. Within this sector, the leading detractor was Zulily, Inc., an e-commerce company. The firm reported solid quarterly earnings in early November; however, management offered conservative forward guidance that was potentially indicative of a deceleration in user growth, which worried investors and drove the company’s share price lower.

An underweight position in the energy sector was the most significant contributor to relative performance, as a continued decline in oil prices sent the entire sector into a bear market. The healthcare sector also contained several strong contributors to relative performance. An out-of-benchmark position in Receptos, Inc., a biopharmaceutical company focused on therapeutics for immune disorders, was among the largest contributors within the sector. The firm reported solid quarterly earnings and strong data from multiple trials during the quarter, which helped drive its shares higher throughout the period. Edwards Lifesciences Corporation, a developer of technologies that treat structural heart diseases and critically ill patients, was another contributor within the sector. The company saw its share price surge during the quarter, led by continued strong sales of its leading trans-catheter heart valve that helped the company report revenues that beat consensus expectations.

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 has continued to gradually expand, leading Fed policymakers to shift their language toward a normalization of monetary policy. However, our view is that continued slack in global markets, particularly in Japan, China, and Europe, will keep U.S. interest rates at low levels. We believe that these factors—reasonably accommodative monetary policy along with steady U.S. economic growth—will create a favorable backdrop for stocks moving forward, and that the secular growth areas of the market will outperform stable growth, while large and small capitalization stocks will trade in relative parity. We have positioned the Fund accordingly, with emphasis on secular growth sectors such as information technology and health care, while maintaining an underweight to the energy sector, which we believe will continue to exhibit weakness.

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