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 Fund returned -8.07%, reflecting the performance at the net asset value (NAV) of Class A shares with all distributions reinvested for the period ended September 30, 2015, outperforming its benchmark, the Russell 2500Index8, which returned -10.30% 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: -2.95%; three years: 11.46%; five years: 9.92%; and since inception (December 30, 2005): 9.48%. 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 was the largest contributor to the Fund’s outperformance relative to its benchmark. Within the sector, shares of AmSurg Corp., an owner and operator of ambulatory surgery centers, advanced during the quarter. Revenues topped expectations driven in part by strong volume in its ambulatory surgery centers (ASC) business. In addition, shares of Mednax, Inc., a provider of physician services, increased. The company continues to acquire medical practices that provide future growth opportunities.

Within the information technology sector, shares of Vantiv, Inc., a technology holding company, jumped following strong second quarter results, driven by improved organic revenue growth in its merchant services division.

Security selection, particularly within the consumer discretionary sector, was a key detractor from the Fund’s performance. Shares of Ascena Retail Group, Inc., a national specialty retailer, stumbled due to a poor preannouncement of fourth quarter earnings, driven by softer than expected performance at its Justice and Dressbarn segments/stores. In addition, shares of Sally Beauty Holdings, Inc., a retailer and distributor of beauty supplies, were weaker due to compressed margins as the company increased promotional activity aimed at spurring demand.

Another meaningful detractor from the Fund’s relative performance was materials holding Allegheny Technologies Inc. Shares of Allegheny Technologies, a specialty materials and components producer, slid as slowing demand lowered sales in the jet engine and air frame segments. 

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 by late 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 international exposure, given continued global volatility and uncertainty.

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