| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 4.88% | -0.32% | -0.32% |
Lord Abbett's Floating Rate Fund returned -0.32% in Q1 2026, outperforming its benchmark's -0.55% return despite challenging market conditions. The quarter was marked by AI disruption concerns weighing on Technology/Software sectors and escalating geopolitical tensions in the Middle East that pushed oil prices higher and delayed rate cut expectations. The fund's outperformance was driven by credit selection within Single B and CCC rating tiers, particularly benefiting from underweights to underperforming positions. The manager maintained a barbell approach, increasing allocations to higher-rated Bs and BBs while reducing CCC exposure to focus on quality. Default activity increased with the U.S. loan default rate reaching 3.04%. Looking forward, the team remains constructive on the credit environment, citing U.S. economic resilience, moderate inflation expectations, and the Fed's eventual cutting path. They continue targeting loans with high carry while focusing on higher quality exposure and balanced sector positioning given ongoing geopolitical uncertainties.
Despite market volatility and geopolitical headwinds, the manager maintains a constructive view on leveraged loans as an attractive source of carry with elevated yields, focusing on higher quality exposure while monitoring credit stress and positioning for eventual Fed rate cuts.
The manager remains constructive on the overall credit environment and bank loan market amid a favorable economic backdrop. They continue to favor the credit environment given longer-term views including U.S. economic resilience, inflation expectations staying only moderately high, and the Fed maintaining a cutting path. However, they continue to monitor macroeconomic indicators across the labor market and inflationary pressures that could potentially lead to more persistent market volatility.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| May 11 2026 | 2026 Q1 | - | credit, energy, Geopolitical, loans, rates, technology | - | Lord Abbett's floating rate fund outperformed despite AI disruption fears and Middle East tensions driving market volatility. The team upgraded credit quality by reducing CCC exposure while adding to BBs, benefiting from superior credit selection. They remain constructive on loans as a carry source, focusing on higher quality positions while monitoring geopolitical risks and credit stress indicators. |
| Jan 30 2026 | 2025 Q4 | - | CLO, credit, Fed Cuts, floating rate, high yield, Leveraged Loans | - | Lord Abbett Floating Rate Fund outperformed in Q4 through superior credit selection, particularly in CCC-rated loans. The fund maintains its barbell rating approach while targeting high-carry opportunities in a tight spread environment. With the Fed delivering additional rate cuts and solid economic fundamentals supporting loan issuers, the manager remains constructive on leveraged loans heading into 2026. |
| Nov 5 2025 | 2025 Q3 | - | credit, Fed policy, floating rate, high yield, Leveraged Loans | - | Lord Abbett's floating rate fund matched benchmark returns at 1.78% in Q3 2025, benefiting from CCC credit selection and high yield allocation while suffering from Single B positioning. The fund maintains a barbell credit approach targeting high-carry loans with constructive outlook supported by Fed easing and improving credit fundamentals. |
| Aug 7 2025 | 2025 Q2 | - | credit, Fed, floating rate, loans, rates, Spreads | - | Lord Abbett's floating rate fund matched benchmark returns at 1.78% in Q3 2025, benefiting from credit selection in CCCs while maintaining a barbell approach favoring BBs and CCCs over Single Bs. The fund targets high-carry loans amid tight spreads and expects Fed cuts to improve borrower fundamentals, though inflation and geopolitical risks remain concerns. |
| Mar 31 2025 | 2025 Q1 | - | credit, Defensive, loans, Quality, rates, volatility | - | Lord Abbett's Floating Rate Fund underperformed in Q1 due to underweight BB positioning and sector selection issues, prompting a defensive shift toward higher-quality loans and defensive sectors. Despite market volatility and policy uncertainty, management remains constructive on bank loans given attractive 9%+ yields, improved credit fundamentals, and extended maturities providing downside protection. |
| Sep 30 2024 | 2024 Q3 | - | bank loans, CLO, credit, Fed policy, floating rate, Rate Cuts | - | Lord Abbett's floating rate fund delivered solid Q3 returns despite Fed rate cuts, maintaining conviction in bank loans given 8%+ starting yields and strong CLO demand. The fund repositioned toward balanced sector exposure while increasing Single B credit allocation. Management remains constructive on floating rate opportunities despite growth concerns and elevated default activity in lower-tier credits. |
| Jun 30 2024 | 2024 Q2 | - | bank loans, carry, CLO, credit, floating rate, rates | - | Lord Abbett's floating rate fund matched benchmark returns of 1.87% in Q2 while focusing on carry opportunities with yields above 9%. The fund favors cyclical exposure and BB-rated loans over single-Bs, remaining constructive on bank loans benefiting from higher rates and strong CLO technicals despite concerns about liability management exercises affecting recoveries. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
Credit StressDefault activity in the loan index increased with the par-weighted U.S. loan default rate finishing at approximately 3.04%. The fund reduced CCC exposure, focusing on select holdings that were more sensitive to market headwinds while maintaining overweight positions in higher-rated, more liquid BBs. |
Defaults Credit Quality BBs CCCs Distressed |
AIAI disruption concerns were a primary driver of negative performance in Technology/Software sectors. The fund benefited from underweights to certain Software/Services exposure that underperformed given headwinds pertaining to AI-Disruption risk and broader market sentiment. |
Technology Software Disruption Market Sentiment | |
EnergyGeopolitical tensions in the Middle East disrupted energy markets and pushed oil prices higher, delaying expectations for rate cuts. The Energy sector demonstrated strong returns over the quarter, though the fund's underweight allocation to Energy was a drag on relative returns. |
Oil Geopolitical Middle East Energy Sector | |
| 2025 Q4 |
AIManager believes AI revolution is fundamentally different from dot-com bubble due to current compute capacity constraints versus future demand. Views infrastructure buildout as most secure part of AI food chain, explaining continued investment in Nvidia, ASML, and new Micron position. Expects volatility but remains committed to AI thesis despite circular financing concerns around some players. |
Artificial Intelligence Data Centers Compute Infrastructure GPUs |
Trade PolicyManager notes 2025 saw global trade order rewritten through executive orders and tweets. Expects Supreme Court ruling on Trump tariff legality could invalidate IEEPA-imposed tariffs, though similar tariffs would likely be reimposed under other legal frameworks. Views tariffs as potential central topic for early 2026 but prefers they fade as investment concern. |
Tariffs Trade IEEPA Supreme Court | |
RatesFederal Reserve continued easing cycle with Fed Funds rate reaching parity with 2-year bond at 3.5%. Manager believes within 25-50 basis points of neutral rate. Disagrees with Trump's advocacy for several hundred basis point cuts, arguing this would steepen yield curve rather than reduce rates across all durations uniformly. |
Federal Reserve Interest Rates Monetary Policy Yield Curve | |
Enterprise SoftwareManager consolidated enterprise software exposure into platform companies ServiceNow and Salesforce while eliminating Adobe. Views platforms as better positioned than best-of-breed apps against AI disintermediation threats. Expects platform companies to deliver accelerating performance as AI solutions gain critical mass across enterprise. |
SaaS Platforms AI Integration Disintermediation | |
| 2025 Q3 |
Credit StressDefault activity in the loan index increased modestly with the par-weighted U.S. loan default rate finishing at approximately 3.49%. Several positions within Automobiles underperformed after facing increased financial and liquidity challenges. The fund maintains vigilance around credit quality while targeting high carry opportunities. |
Default Liquidity Credit Quality Automobiles Financial Stress |
AIAI optimism continued to fuel market gains, though concerns about sustainability and monetization emerged. The fund has been vigilant within certain AI disruption themes that have been prominent in the loan market and reduced exposure to Software and Services due to structural shifts from AI adoption. |
AI Disruption Software Technology Monetization Structural Shifts | |
| 2025 Q2 |
Credit StressDefault activity in the loan index increased modestly with the par-weighted U.S. loan default rate finishing at approximately 3.49%. Several positions within Automobiles underperformed after facing increased financial and liquidity challenges. The fund maintains vigilance around credit quality while positioning for potential stress scenarios. |
Default Liquidity Credit Distressed Coverage |
AIAI optimism continued to fuel market gains, though concerns about sustainability and monetization emerged. The fund has been vigilant within certain AI disruption themes that have been prominent in the loan market and reduced exposure to Software and Services due to structural shifts from AI adoption. |
Disruption Software Technology Monetization Structural | |
| 2025 Q1 |
Credit StressThe fund operates in the leveraged loan market where credit fundamentals have improved following the rate-hiking cycle, with CCC loans comprising only 7% of the index compared to 13% during peak-COVID levels. Default activity declined in Q1 with the par-weighted U.S. loan default rate at approximately 3.9%. |
Credit Defaults Fundamentals Spreads Quality |
Risk AppetiteThe fund has modestly reduced headline risk amid higher market volatility, moving from long risk positioning to neutral rating exposure. Management reduced CCC-rated positions in favor of higher-rated BBs for liquidity protection against potential redemption risk. |
Risk Volatility Positioning Liquidity Quality | |
RatesBank loans remain attractive with starting yields above 9%, providing increased cushion to offset potential spread widening. The floating-rate nature of loans benefits from the current rate environment following the Fed's hiking cycle. |
Yields Rates Carry Spreads Income | |
| 2024 Q3 |
RatesThe Fed implemented a 50 basis point cut in policy rates with expectations for further cuts in 2024. Despite falling rates, the fund remains constructive on bank loans as the current pace of easing may be too aggressive and a walk back could benefit floating rate instruments. |
Interest Rates Fed Policy Rate Cuts Monetary Policy Floating Rate |
Credit StressDefault activity modestly increased with the par-weighted loan default rate rising to 3.70% by quarter end. The fund remains wary of the lowest tier of risk given high volume of liability management exercises from issuers and sponsors. |
Default Rates Credit Risk Liability Management Recovery Rates Credit Quality | |
| 2024 Q2 |
RatesThe fund continues to focus on carry opportunities as yields remain elevated above 9%. Higher rates have benefited bank loans, and the manager expects elevated short-term rates to continue providing higher carry. However, they believe current Fed easing expectations priced into futures markets are too aggressive. |
Interest Rates Carry Fed Policy Yield Duration |
Credit StressThe fund remains wary of the lowest tier of risk given high volume of liability management exercises from issuers and lenders which are expected to meaningfully weigh on recoveries. They are much more selective in CCC positions due to higher levels of dispersion within the rating tier. |
Credit Risk Recovery Rates Liability Management CCC Ratings Default Risk |
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