Market Review as of 03/31/2016

The U.S. equity market (as represented by the S&P 500® Index1) rebounded from its worst start to any year to finish modestly higher during the first quarter of 2016. After the Federal Reserve (the Fed) raised interest rates for the first time since 2006, in December 2015, it decided to hold its benchmark interest rate unchanged during the first quarter, citing global financial market weakness as a concern. A disappointing corporate earnings season contributed to investor uncertainty during the quarter. According to research from FactSet, fourth quarter 2015 earnings suffered a slight year-over-year decline, and less than 70% of companies in the S&P 500 Index reported earnings above their mean estimates. Reasonably constructive economic data during the period helped offset some of this sluggishness. According to the third estimate from the Bureau of Economic Analysis,  U.S. real gross domestic product (GDP) in the fourth quarter expanded by 1.4%,2 an upward revision from previous estimates, with a rise in personal consumption expenditures and residential fixed investment among the primary contributors. 

The Fed noted that U.S. economic activity, as a whole, continued to expand in most districts around the country between December 2015 and February 2016. The majority of districts reported increased consumer spending and positive developments in their residential estate markets. Conversely, manufacturing activity struggled in a number of regions due in large part to further weakness in the energy sector.3

International equities4 also experienced an uneven first quarter, led by notable volatility in China’s capital markets at the beginning of the quarter. Chinese equities suffered sharp losses to start 2016, triggering trading halts, and concerning investors who were already skeptical of the market’s growth prospects. In January, the Bank of Japan introduced negative rates on excess reserves in an effort to stimulate economic growth and support Japanese markets during this tumultuous period. In Europe, markets were bolstered by the European Central Bank’s announcement in March that it would add to its existing monetary easing program.

The S&P 500 returned 1.35% during the first quarter. Of the 10 major sectors, only the health care and financials sectors underperformed the broader market. Value stocks5 outperformed growth stocks,6 while large cap stocks7 outperformed small cap stocks.8


Fund Review as of 03/31/2016

The Fund returned 3.00%, reflecting the performance at the net asset value (NAV) of Class A shares with all distributions reinvested for the period ended March 31, 2016, underperforming its benchmark, the Russell 2500Index9, which returned 0.39% 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 March 31, 2016, are: one year: -9.40%; three years: 7.10%; five years: 6.70%; and since inception (December 30, 2005): 9.49%. 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 health care sector contributed to relative performance. Shares of Exam Works Group, Inc., an independent medical examinations and management services company, increased following a strong fourth quarter earnings report in which sales increased year over year, topping consensus estimates. In addition, shares of HealthSouth Corporation, an owner and operator of inpatient rehabilitation hospitals, rose, as shares were driven by better-than-expected hospital admission in the company’s fourth-quarter earnings report. Within the energy sector, shares of EQT Corporation, an energy production company, steady increased, as the company continues to hit growth targets and possesses a strong balance sheet.

Security selection, within the materials sector detracted from the Fund’s relative performance. Shares of Westrock Company, a provider of packaging solutions and containerboard manufacturer, stumbled, as reported earnings were below consensus estimates and the company announced the closing of a mill. In addition, shares of Berry Plastics Group, Inc., a provider of plastic consumer packaging and engineered materials, fell due to concerns surrounding the company’s leverage paired with a weaker macro environment. Another detractor from the Fund’s relative performance was telecommunications services holding Zayo Group Holdings, Inc., a provider of bandwidth infrastructure. Its shares slid as revenues and EBITDA were below consensus expectations in the company’s second quarter earnings report. 

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. We remain cautious toward stocks with significant international exposure, given continued global volatility and uncertainty. The financials sector remains the Fund’s largest absolute weight. Our preference is to diversify sector exposure broadly across banks, capital markets, insurance, and high-quality REITs, given the uncertainty in interest rates. The Fund remains underweight the industrials sector relative to its benchmark as concerns around commodities and growth in China continue to weigh on stocks in the sector.

Contact a Representative