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 4.64%, reflecting the performance at the net asset value (NAV) of Class A shares with all distributions reinvested for the period ended March 31, 2015, outperforming the Russell 2000® Index,6 which returned 4.32% for the same period.  Average annual total return, which reflects 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: -0.41%; three years: 9.79%; five years: 10.23%; and 10 years: 9.35%. Expense ratio: 1.20%.

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

A significant contributor to the portfolio’s relative performance was industrial holding Hexcel Corporation. Shares of the composites company steadily climbed in the first quarter, driven by commercial aerospace sales and rebounding demand in the space and defense sector. In addition, shares of Patrick Industries Inc., a manufacturer and distributor of component products and materials, jumped following the announcement of the acquisition of Better Way Partners, LLC, which is expected to be immediately accretive.  

Also contributing to the portfolio’s relative performance was consumer discretionary holding Cinemark Holdings Inc. Shares of the motion picture exhibition business rose due to strong first quarter results, driven by better-than-expected performance in both the firm’s Domestic and International segments.

Security selection within the health care sector detracted from the portfolio’s relative performance during the quarter. Within the sector, shares of ExamWorks Group Inc., a provider of independent medical examinations and medical-related services, detracted from relative performance, as currency headwinds muted the company’s performance. In addition, shares of Team Health Holdings, Inc., a provider of outsourced physician staffing and administrative services, detracted from relative performance, as issues surrounding the implementation of the Affordable Care Act have kept the stock from moving higher.

Another meaningful detractor from the portfolio’s relative performance was energy holding Bristow Group Inc. Shares of the offshore energy helicopter services provider stumbled as a result of a weaker earnings outlook due to the strong dollar and falling commodity prices.

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


We believe that the economic outlook for the United States remains favorable among developed countries. Furthermore, we expect the Federal Reserve to begin gradually raising interest rates at some point during 2015, provided that the economy continues to exhibit signs of strength and inflation remains at an acceptable level. We are increasingly confident in European stability, given the accommodative monetary measures taken by the European Central Bank.

The financials sector remains the portfolio’s largest absolute weight, despite decreased exposure during the quarter. Our preference is to broadly diversify sector exposure across banks, capital markets, insurance, and REITs, given the murkiness in interest-rate outlook. We increased exposure to the consumer discretionary sector during the period, as we believe the U.S. consumer should benefit from lower energy prices and an improving job market. We increased portfolio exposure to the industrials sector during the period by adding exposure to companies that are expected to realize benefits from lower energy prices.

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