Market Review as of 06/30/2015

The U.S. equity market (as represented by the S&P 500® Index1) advanced slightly during the second quarter of 2015, supported by a generally supportive earnings season and signs of strength in the domestic labor and housing markets. The quarter was not without some bouts of volatility, however, with questions surrounding the timing and magnitude of the Federal Reserve’s (“the Fed”) first rate hike, political headwinds related to Greek solvency, and fears of a slowing Chinese economy all contributing to investor concerns during the period. In addition, U.S. real gross domestic product (GDP) in the first quarter contracted 0.2% (according to the third estimate by the U.S. Bureau of Economic Analysis2), with declines in exports and state and local government spending among the primary detractors.  

The Fed noted that U.S. economic activity, as a whole, likely expanded around the country between early April and late May, with most districts reporting slight gains in employment and wages along with advances in consumer spending. Construction, real estate activity, and home prices also rose across most districts during the period, while manufacturing was primarily flat, with more than half of the districts reporting tempered manufacturing growth due to the downturn in the oil and gas industry.3

Elsewhere in the world, the European Central Bank’s continued quantitative easing was not enough to overcome the political risk related to Greece’s status in the eurozone, sending European markets generally lower. Chinese markets fluctuated during the quarter, as the supportive decision by the People’s Bank of China to cut its lending rate for the fourth time since November 2014 was offset by uncertainty surrounding the economy’s overall strength. Japanese equities continued to rise in the second quarter, buoyed by the continuation of aggressive monetary easing policies from the Bank of Japan, leading the U.S. dollar to reach a 13-year high relative to the Japanese yen in June.

The S&P 500 advanced 0.28% during the three-month period, but remained below new highs set earlier in the quarter. Gains occurred in five of 10 major sectors. The consumer staples, energy, industrials, materials, and utilities sectors underperformed 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) trailed small cap stocks (as represented by the Russell 2000® Index7). 

Fund Review as of 06/30/2015

The Fund returned -0.20%, reflecting the performance at the net asset value (NAV) of Class A shares with all distributions reinvested for the period ended June 30, 2015, outperforming its benchmark, the Russell 2500Index8, which returned -0.34% 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 June 30, 2015, are: one year: -0.47%; three years: 16.40%; five years: 14.04%; and since inception (December 30, 2005): 10.72%. Expense ratio: 1.17%.

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 was the largest contributor to the portfolio’s outperformance relative to its benchmark. Within the sector, shares of HCC Insurance Holdings, Inc., a specialty insurer, jumped following the announcement that the company would be acquired by Tokio Marine Holdings, Inc. In addition, shares of Signature Bank, a full-service commercial bank located throughout the New York metropolitan area, steadily rose, as loan origination exceeded its peer group, despite structural and regulatory expenses.  Within the consumer staples sector, shares of Pinnacle Foods, Inc., a marketer and distributor of food products in North America, climbed, as the company performed well due to strong innovation and improved product mix. In addition, rumors of a merger with ConAgra Foods, Inc. benefited the stock.

Security selection, particularly within the consumer discretionary sector, was a key detractor from the portfolio’s performance. Shares of Urban Outfitters, Inc., a lifestyle retail company, fell largely due to lower sales and a first-quarter earnings miss. In addition, shares of Sally Beauty Holdings, Inc., a retailer and distributor of beauty supplies, struggled following a mixed second quarter. Gross margin improvements were offset by a modest slowdown in comparable sales.

Another meaningful detractor from the portfolio’s relative performance was information technology holding Fidelity National Information Services, Inc. Shares of the provider of banking and payment technology fell, as management revised guidance for 2015 lower due to foreign exchange headwinds and increasing expenses.

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 Fed 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 remain cautious toward stocks with significant European exposure, given the eurozone’s continued volatility and uncertainty.

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