Quick Take: Lord Abbett All Value Fund/A (LDFVX), a multi-cap portfolio, is designed to be a core product generating returns across the market capitalization spectrum. Bob Fetch is one of the fund’s six managers along with Howard Hansen. The team follows a classic value strategy, investing in underpriced stocks poised to gain because of a catalyst.
The fund maintains a large-cap bias, although it seeks value opportunities across all market capitalizations. The multi-cap emphasis, along with a generally diversified approach, has resulted in below average volatility. The portfolio’s three-year standard deviation compares favorably with that of the S&P 500/Barra Value Index, 14.37% versus 18.09%.
The wide ranging approach has opened up opportunities that a single market cap emphasis might not permit, the managers point out. For example, because large-cap stocks in health care are generally in pharmaceuticals, Hansen notes a large-cap approach would have missed non-pharma opportunities in the small- and mid-cap areas.
Fetch says the approach is key to the fund’s long-term performance. For the five-year period through last month, the portfolio rose 5.6%, on average, versus a 0.5% gain for the S&P 500 Barra Value Index. For the one-year period through May, the fund was up 20.7%, compared with a 20.5% gain for the index.
The Full Interview:
S&P: What is your investment philosophy?
FETCH: We look for undervalued opportunities that result from mispricings in the market. Then we research the fundamentals of these stocks to identify catalysts that will draw investor interest. As an all-value fund, we look for opportunities across all segments of the market.
S&P: Why do you consider stocks across all market-cap segments?
HANSEN: We believe it gives us greater flexibility in terms of industries. In health care for example, pharmaceuticals are the predominant in large-cap stocks, but there are other areas of health care in small- and mid-cap stocks.
FETCH: We feel we have a high-quality fishing pool. This product was meant to appeal to a wide range of investors — it wasn’t meant to hit home runs with large bets on mid- and small companies.
S&P: What is the fund’s allocation in terms of market capitalizations?
FETCH: As of June 14, stocks with market caps greater than $9.5 billion were 63% of the portfolio, stocks with market caps between $5 billion and $9.5 billion were 11%, stocks with market caps between $2 billion and $5 billion were 13%, and stocks under $2 billion were 12%.
Generally, most of the fund is in large-cap stocks but we’ve owned many small- and mid-cap stocks due to a huge valuation gap in those issues in 2000.
S&P: How do you decide which market-cap areas to focus on?