Market Review as of 12/31/2015

The U.S. equity market1 advanced during the fourth quarter of 2015, rebounding from the correction experienced in the previous quarter. Markets were supported during the period by a reasonably positive earnings season in which 74% of the companies in the S&P 500 beat consensus earnings estimates. In December, the U.S. Federal Reserve (Fed) raised interest rates for the first time since 2006, as economic data during the quarter continued to suggest a strengthening domestic economy. Specifically, U.S. real gross domestic product (GDP) in the third quarter expanded by 2.0%2, with a rise in personal consumption expenditures and state and local government spending among the primary contributors. 

The Fed noted that U.S. economic activity, as a whole, continued to increase at a modest pace around the country between October and December. Most districts reported improving growth in consumer activity, and positive developments in their residential and commercial real estate markets. Conversely, manufacturing activity struggled in a number of regions3.

International equities4 also rebounded in the fourth quarter, as generally accommodative monetary policies around the globe helped lift equity markets. In Europe, markets were bolstered by the European Central Bank’s announcement that it would be willing to increase the size of its quantitative easing program. In Japan, expectations of further quantitative easing by the Bank of Japan increased, while an upward revision to third quarter GDP growth showed that the country narrowly avoided a technical recession. Finally, the People’s Bank of China cut interest rates for the sixth time in a year, as it sought to support economic growth in its economy.

The S&P 500 returned 7.04% during the fourth quarter. Of the 10 major sectors, the materials, consumer staples, healthcare, industrials, and information technology sectors outperformed the broader market. Value stocks5 underperformed growth stocks6, while large cap stocks7 outperformed small cap stocks8


Fund Review as of 12/31/2015

The Fund returned 1.70%, reflecting the performance at the net asset value (NAV) of Class A shares with all distributions reinvested for the period ended December 31, 2015, underperforming its benchmark, the Russell 2500Index9, which returned 3.28% 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, 2015, are: one year: -8.44%; three years: 10.78%; five years: 7.40%; and since inception (December 30, 2005): 9.41%. 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

Security selection, particularly within the information technology sector, was a key detractor from the portfolio’s performance. Shares of Akamai Technologies, Inc., a provider of cloud services, stumbled due to weak guidance and lower revenue expectations. In addition, shares of Fidelity National Information Services, Inc., a provider of banking and payments technology, consulting and outsourcing solutions, fell due to demand softness and weak guidance. Another meaningful detractor from the portfolio’s relative performance was health care holding HealthSouth Corporation. Shares of HealthSouth Corporation, an owner and operator of inpatient rehabilitation hospitals, fell as the company missed their EBITDA and cut guidance.

Stock selection within the financials sector contributed to relative performance. Within the sector, shares of Western Alliance Bancorporation, a bank holding company, increased following a strong third quarter earnings report due to better-than-expected loan growth. In addition, shares of Signature Bank, a full-service commercial bank, benefited from strong loan growth which drove revenues. Within the consumer discretionary sector, shares of Jarden Corporation, a global consumer products company, increased following the announcement of the Newell Rubbermaid acquisition.

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 portfolio’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 portfolio 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.

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