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This presentation has been prepared exclusively for use by analysts, institutional investors and their consultants, registered investment advisors, broker-dealers, and sponsors of plans with a minimum of 100 participants. It is not intended for, and should not be used with, small plan sponsors, plan participants, or the public in written or oral form or for any other purpose.
THE CREDIT SPREAD PUZZLE AND THE SHORT
CREDIT ANOMALY
Copyright © 2019 by Lord, Abbett & Co. LLC. All rights reserved.
Lord, Abbett & Co. LLC
Lord Abbett Distributor LLC
90 Hudson Street, Jersey City, NJ 07302-3973
APRIL 2019
CFA Society Jacksonville
Joseph M. Graham, CFA
Investment Strategist
1
DURATION EXPOSURE COULD MEAN POOR RETURNS IN RISING RATES
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18
Duration (Years)
Yield to Maturity (%)
5.9 Years
3.28%
BLOOMBERG BARCLAYS U.S. AGGREGATE BOND INDEX: DURATION & YIELD (AS OF 12/31/2018)
Source: Bloomberg Barclays. Duration as represented by modified adjusted duration in years. Yield as represented by yield to maturity. Yield to maturity is the rate of return anticipated on a bond if held until it matures. Duration is a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Bps represents a basis point. One basis point equals 0.01%. Performance quoted above is historical. Past Performance is not a reliable indicator or guarantee of future results. The historical data are for illustrative purposes only, do not represent the performance of any specific portfolio managed by Lord Abbett or any particular investment, and are not intended to predict or depict future results. Investors may experience different results. Due to market volatility, the market may not perform in a similar manner in the future. Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment.
Hypothetical Returns for 5.9-Year Duration Fixed Income in Rising Rates
Rate Increase No Change +50bps +100bps +150bps +200bps
Price Return 0.00% -2.94% -5.87% -8.81% -11.74%
Yield 3.28% 3.28% 3.28% 3.28% 3.28%
Total Return 3.28% 0.34% -2.59% -5.53% -8.46%
2
DURATION RISK DOMINATES OTHER RISKS IN THE AGGREGATE INDEX
78.2
71.8
0.4
0.3
0.1
0.0
-0.5
-1.2
-5.5
Curve
Total
Spread Gov-Related
Swap Spreads
Idiosyncratic
Credit default
Spread Securitized
Volatility
Spread Credit and EMG
BARCLAYS AGGREGATE: SOURCES OF VARIATION IN RETURNS (AS OF 12/31/2018)
Source: Barclays POINT, Lord Abbett *Bloomberg Barclays US Aggregate Index versus cash. Past performance is not a reliable indicator or guarantee of future results. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment. Indexes are unmanaged, do not reflect the deduction of fees and expenses, and are not available for direct investment.
3
TERM PREMIUM AT HISTORICAL LOWS
US TREASURY TERM PREMIUM (AS OF 12/31/2018)
Source: Federal Reserve Bank of New York. As represented by ACMTP10. Past performance is not a reliable indicator or guarantee of future results. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment. Indexes are unmanaged, do not reflect the deduction of fees and expenses, and are not available for direct investment.
Investors are not currently being compensated for taking duration risk
-1
0
1
2
3
4
5
6
1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018
10-Year Term Premium Average
4
STOCK BOND CORRELATIONS
Core Bond Complement
Source: Stock-Bond Correlations, Macroeconomic Regimes and Monetary Policy https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3075816 Stock-bond correlation based on the NYSE-AMEX-NASDAQ value-weighted returns including dividends from the CRSP Stock File Indexes and the returns on 10-year U.S. government bonds. Past performance is not a reliable indicator or guarantee of future results. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment. Indexes are unmanaged, do not reflect the deduction of fees and expenses, and are not available for direct investment.
US STOCK-BOND VERSUS US MONETARY POLICY GAP
5
5
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18
Corr
ela
tion
Source: Bloomberg Barclays.
Past performance is not a reliable indicator or guarantee of future results. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment. Indexes are unmanaged, do not reflect the deduction of fees and expenses and are not available for direct investment.
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13
Corr
ela
tion
Fed announces scale back on bond purchases
as part of quantitative easing program
Wage Inflation surprises to the Upside
ROLLING ONE-MONTH CORRELATIONS OF THE BLOOMBERG BARCLAYS AGGREGATE BOND
INDEX AND THE S&P 500 INDEX
STOCK BOND CORRELATIONS
SHORT DURATION CREDIT
7
SHORT MATURITY CREDIT: CONSISTENT EXCESS RETURNS
Short Maturity Credit
Source: Bloomberg Barclays, Bloomberg, and Morningstar, Inc. For illustrative purposes only. Past performance is not a reliable indicator or guarantee of future results. The value of an investment in fixed-income securities will change as interest rates fluctuate and in response to market movements. As interest rates fall, the prices of debt securities tend to rise. As rates rise, prices tend to fall. Treasuries are debt securities issued by the U.S. government and secured by its full faith and credit. Income from Treasury securities is exempt from state and local taxes. 1Bloomberg Barclays 1-3 Year Government Index. 2ICE BofAML 1-3 Year Corporate Index. 3Bloomberg Barclays 1-3.5 Year CMBS Index. 4ICE BofAML ABS Fixed Rate 0-3 Year Index. 5Bloomberg Barclays 1-3 Year High Yield Index. Rolling five-year returns as of 12/31/2018. Beginning dates for the rolling five-year return series are the inception dates of the respective indexes. Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment.
Short maturity, credit-sensitive sectors have consistently generated higher
returns than short maturity Treasuries
SHORT-TERM BONDS RELATIVE TO TREASURIES1
(AS OF 12/31/2018)
96% 95% 92% 96%
Short Maturity
Investment-Grade Corporates2
Outperformed in
Short Maturity
Investment-Grade CMBS3
Outperformed in
Short Maturity
Investment-Grade ABS4
Outperformed in
Short Maturity
High Yield Bonds5
Outperformed in
Of Rolling Five-Year Periods
(01/01/1976-12/31/2018)
Of Rolling Five-Year Periods
(01/01/1997-12/31/2018)
Rolling Five-Year Periods
(01/01/1997-12/31/2018)
Of Rolling Five-Year Periods
(08/01/1988-12/31/2018)
8
8
Source: Barclay’s POINT, Lord Abbett.
Based on the Bloomberg Barclays U.S. Aggregate Bond Index. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.
Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
BB
B >
10 Y
ears
BB
B 9
-10 Y
ears
BB
B 8
-9 Y
ears
BB
B 7
-8 Y
ears
BB
B 6
-7 Y
ears
BB
B 5
-6 Y
ears
BB
B 4
-5 Y
ears
BB
B 3
-4 Y
ears
BB
B 2
-3 Y
ears
BB
B 1
-2 Y
ears
BB
B 0
-1 Y
ears
A >
10 Y
ears
A 9
-10 Y
ears
A 8
-9 Y
ears
A 7
-8 Y
ears
A 6
-7 Y
ears
A 5
-6 Y
ears
A 4
-5 Y
ears
A 3
-4 Y
ears
A 2
-3 Y
ears
A 1
-2 Y
ears
A 0
-1 Y
ears
AA
> 1
0 Y
ears
AA
9-1
0 Y
ears
AA
8-9
Years
AA
7-8
Years
AA
6-7
Years
AA
5-6
Years
AA
4-5
Years
AA
3-4
Years
AA
2-3
Years
AA
1-2
Years
AA
0-1
Years
AA
A 5
-6 Y
ears
AA
A 4
-5 Y
ears
AA
A 3
-4 Y
ears
AA
A 2
-3 Y
ears
AA
A 1
-2 Y
ears
AA
A 0
-1 Y
ears
BBB Credit Rating A Credit Rating AA Credit Rating AAA Credit Rating
SHARPE RATIOS FOR CORE FIXED INCOME BY QUALITY AND EFFECTIVE DURATION (01/01/1998 - 12/31/2018)
PERSISTENT MISPRICING OF RISK
THE CREDIT SPREAD PUZZLE
10
10
0.00%
0.05%
0.10%
0.15%
0.20%
0.25%
Year 1 Year 2 Year 3 Year 4 Year 5
Aaa Aa A Baa
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
Year 1 Year 2 Year 3 Year 4 Year 5
Aaa Aa A Baa
Source: Moody’s and Lord Abbett. As of 12/31/2017. Data most recent available. *Based on average default rates and senior unsecured bond recoveries measured on issuer-weighted basis. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.
Average Cumulative Credit Loss Rates
By Letter Rating, 1983-2017*
THE HISTORY OF LOSS RATES
Average Annual Credit Loss Rates
By Letter Rating, 1983-2017*
11
11
Source: Moody’s and Lord Abbett. As of 12/31/2017. Data most recent available. *Based on average default rates and senior unsecured bond recoveries measured on issuer-weighted basis. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.
0.00%
0.05%
0.10%
0.15%
0.20%
0.25%
Year 1 Year 2 Year 3 Year 4 Year 5
perc
ent
Aaa Aa A Baa
0
50
100
150
200
250
Year 1 Year 2 Year 3 Year 4 Year 5
bps
Aaa OAS Aa OAS
A OAS Baa OAS
AVERAGE ANNUAL CREDIT LOSS RATES BY LETTER RATING (1983 – 2017*)
DEFAULT TERM SLOPE HAS GENERALLY BEEN STEEPER THAN OAS
12
12
0
50
100
150
200
250
Aaa Aa A Baa
bps
5 Year OAS Losses 5 Years Out
0
50
100
150
200
250
Aaa Aa A Baa
bps
1 Year OAS Losses 1 Year Out
Source: Moody’s and Lord Abbett. As of 12/31/2017. Data most recent available. Yield spread data covers 2000-2017. Losses cover 1998-2017. Loss data based on following a cohort of bonds for 1 and 5 years. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.
AMONG INVESTMENT-GRADE CREDITS, YIELD SPREADS MORE THAN
COMPENSATE FOR LOSSES, 1998-2017*
13
13
Source: Moody’s and Bloomberg. As of 12/31/2017. Data most recent available. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
Baa Losses A Losses Aa Losses Aaa Losses
Baa OAS A OAS Aa OAS Aaa OAS
ANNUAL CREDIT LOSS RATES AND YIELD SPREADS BY LETTER RATING,
1996-2017*
14
14
Source: Moody’s. As of 12/31/2017. Data most recent available. *Last cohort formed on 1/1/2013.WR is withdrawn rating (became unrated or was called). For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.
From\To Aaa Aa A Baa Ba B Caa Ca-C WR Default
Aaa 87.71% 7.94% 0.58% 0.07% 0.02% 0.00% 0.00% 0.00% 3.67% 0.00%
Aa 0.82% 85.15% 8.51% 0.42% 0.06% 0.04% 0.02% 0.00% 4.95% 0.02%
A 0.05% 2.46% 86.78% 5.37% 0.48% 0.11% 0.04% 0.01% 4.64% 0.05%
Baa 0.03% 0.14% 4.12% 85.72% 3.79% 0.69% 0.15% 0.02% 5.17% 0.17%
From\To Aaa Aa A Baa Ba B Caa Ca-C WR Default
Aaa 53.36% 23.51% 4.99% 0.64% 0.31% 0.03% 0.05% 0.00% 17.04% 0.07%
Aa 2.20% 45.70% 23.68% 4.01% 0.81% 0.26% 0.12% 0.03% 22.94% 0.26%
A 0.19% 7.33% 51.38% 14.64% 2.47% 0.80% 0.16% 0.02% 22.35% 0.67%
Baa 0.16% 1.04% 12.33% 49.33% 7.96% 2.55% 0.59% 0.09% 24.50% 1.46%
AVERAGE FIVE-YEAR LETTER RATING MIGRATION RATES (1970-2017*)
AVERAGE ONE-YEAR LETTER RATING MIGRATION RATES (1970 – 2017*)
MIGRATION RATES HAVE NOT FULLY EXPLAINED THE PREMIUM
15
15
Source: Moody’s and Lord Abbett. As of 12/31/2017. Data most recent available. Yield spread data covers 2000-2017. Losses cover 1998-2017. Loss data based on following a cohort of bonds for 1 and 5 years. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.
Taxes
Liquidity premium
Systematic risk premium
139
4
-
20
40
60
80
100
120
140
1 Year OAS Losses 1 Year Out
bps
1 YEAR ‘A’ RATED CREDIT OAS VERSUS LOSSES
LARGE SPREAD IN CORPORATE YIELDS IS DUE TO A COMBINATION OF
FACTORS
THE DUAL CREDIT SPREAD PUZZLE
17
17
4
131
47
0
50
100
150
200
250
bps
A
Realized Excess Return
Expected Excess Return
Losses
14
196
109
0
50
100
150
200
250
bps
BBB
Realized Excess Return
Expected Excess Return
Losses
Source: Moody’s, Barclays, and Lord Abbett. Data is from 1996 to 2017. Past performance is not a reliable indicator or guarantee of future results. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.
EX ANTE VS EX POST – DUAL CREDIT SPREAD PUZZLES
18
18
Source: BofA Merrill Lynch Global Research. As of 06/30/2018. Data most recent available. Past performance is not a reliable indicator or guarantee of future results. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.
0.54%
0.74%
1.06%
1.23%
1.61%
0.00% 0.50% 1.00% 1.50% 2.00%
A-rated, sell when downgraded to BBB
A-rated, sell when downgraded to HY
A-rated, buy and hold
BBB-rated, sell when downgraded to HY
BBB-rated, buy and hold
Average annualized excess return, 10-year bonds
BUY-AND-HOLD HAS OUTPERFORMED ACROSS RATINGS
EX ANTE VS EX POST – DUAL CREDIT SPREAD PUZZLES
19
19
Source: S&P Global Ratings. Data most recent available. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.
SECURITIZED PRODUCTS PROVIDE DIVERSIFICATION POTENTIAL
U.S. CMBS ONE-YEAR DEFAULT RATES
(1986-2016)
U.S. ABS ONE-YEAR DEFAULT RATES
(1986-2016)
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
%
AAA AA A BBB
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
%
AAA AA A BBB
20
Source: eVestment. Past performance is not a reliable indicator or guarantee of future results. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.
EX ANTE VS EX POST – DUAL CREDIT SPREAD PUZZLES
PERCENTAGE OF ACTIVE MANAGERS THAT OUTPERFORMED THEIR MEDIAN PASSIVE
PEERS (AS OF 09/30/2018)
93%
80%
88%
90%
86%
94%
85%
94%
82%
95%
50%
60%
70%
80%
90%
100%
eVestment US Interm Duration Fixed Income eVestment US Short Duration Fixed Income
1 Yr 3 Yrs 5 Yrs 7 Yrs 10 Yrs
21
Source: S&P Dow Jones Indices LLC, CRSP. As of 03/31/2018. Data most recent available. Past performance is not a reliable indicator or guarantee of future results. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.
PERFORMANCE OVER TWO NON-OVERLAPPING THREE-YEAR PERIODS
1st Quartile 4th Quartile
1st Quartile 41.86% 9.30%
4th Quartile 9.30% 34.88%
INVESTMENT-GRADE INTERMEDIATE FUNDS
1st Quartile 4th Quartile
1st Quartile 38.89% 5.56%
4th Quartile 11.11% 50.00%
INVESTMENT-GRADE SHORT FUNDS
22
22
72%
83%
95%
91%
96%
100%
86%
97%
100%
70%
75%
80%
85%
90%
95%
100%
105%
110%
Rolling 6 months Rolling 12 months Rolling 24 months
Bloomberg Barclays Aggregate Bond Index
ICE BofAML U.S. Corps 1-3 Year Index
Short Duration Multisector Blend*
RETURN OF PRINCIPAL: HISTORICAL LIKELIHOOD FOR SHORT-TERM
CORPORATE BONDS AND BLENDED SHORT CREDIT
Source: Bloomberg and Lord Abbett. *Blended Allocation includes 30% ICE BofAMLUS Corps 1-3 Year Index, 30% BbgBarcCMBS 1 -3.5Year Index, 15% ICE BofAMLABS Fixed Rate 0-3 Year Index, 15% BbgBarcHY 1-3 Index, 10% BBgBarcUS Govt/Credit 1-3 Year Index. Past performance is not a reliable indicator or guarantee of future results. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment. **Gross of fees.
Annualized Return Standard Deviation
3.64% 3.23%
2.92% 2.71%
3.42% 2.73%
PERCENTAGE OF TIME PERIODS WITH POSITIVE RETURNS (ROLLING RETURNS: 01/01/2008 – 12/31/2018)
23
23
Source: Bloomberg and Lord Abbett. *Blended Allocation includes 30% ICE BofAMLUS Corps 1-3 Year Index, 30% BbgBarcCMBS 1 -3.5Year Index, 15% ICE BofAMLABS Fixed Rate 0-3 Year Index, 15% BbgBarcHY 1-3 Index, 10% BBgBarcUS Govt/Credit 1-3 Year Index. Past performance is not a reliable indicator or guarantee of future results. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.
MULTISECTOR SHORT DURATION COMPLEMENTS A CORE BOND
ALLOCATION
RISK/RETURN (12/31/2008 – 12/31/2018)
Barclays Aggregate Bond Index
Short Duration Multisector Blend*
50/50 Blend
70/30 Blend
30/70 Blend
3.0%
3.2%
3.3%
3.5%
3.6%
3.8%
3.9%
4.1%
4.2%
4.4%
4.5%
1.0% 1.5% 2.0% 2.5% 3.0%
Retu
rn
Risk
24
BIOGRAPHIES
Joseph M. Graham, CFA
Investment Strategist
Joseph Graham leads the efforts of Lord Abbett’s Investment Strategists. In addition, Mr. Graham is responsible for providing
the portfolio management teams with investment insight and relevant market information for the firm’s fixed income strategies
and Calibrated equity strategies. In this role, he communicates with institutional clients and prospects regarding current portfolio
positioning and the firm’s market outlook. Mr. Graham also collaborates with the consultant relations, product development, and
relationship management teams as appropriate.
Mr. Graham joined Lord Abbett in 2015. Prior to joining the firm, he was a Founder and CIO at HudsonView Capital
Management and Route 3 Capital; Vice President and Analyst at Millennium Partners; Analyst and Associate Portfolio Manager
at LibertyView Capital Management; and Investment Banker at Morgan Keegan. He has been in the financial services industry
since 1999.
Mr. Graham earned a BS in finance and philosophy from Washington University and an MBA from the Wharton School of
Business at the University of Pennsylvania. He is also a holder of the CFA® (Chartered Financial Analyst) designation.
Samantha Scher
Director, Institutional Investor Services
Samantha Scher is responsible for working with institutional investors across a range of segments, including corporate, public,
insurance, health care, endowments and foundations. In this role, she provides the professional investor with market
perspectives, new investment ideas, in-depth portfolio reviews, and access to the full breadth of Lord Abbett’s resources.
Ms. Scher began her career at Lord Abbett in 2013 as an Institutional Sales Director. Prior to joining Lord Abbett, she served as
a Director in the Global Client Group at BlackRock, where she worked with U.S. tax-exempt institutional investors across
asset classes and investment approaches. She has been in the financial services industry since 2002.
Ms. Scher earned a BA summa cum laude in economics and biological basis of behavior from the University of Pennsylvania.
25
25
This presentation may contain assumptions that are “forward-looking statements,” which are based on certain assumptions of future events. Actual events are difficult to predict and may differ from those assumed. There can be no assurance that forward-looking statements will materialize or that actual returns or results will not be materially different from those described here. A Few Words about Risk Bonds are affected by interest rate movements. Bond prices and, likewise, a bond fund’s share price, generally move in the opposite direction of interest rates. As the prices of bonds in a fund adjust to a rise in interest rates, a fund’s share price may decline. In addition, bonds are subject to call, credit, liquidity, interest rate, and general market risks. Investors should be aware of the special risks involved with investments in high-yield bonds. High-yield bonds invest in lower-rated, higher-yielding instruments, which are subject to increased risk of default and can potentially result in loss of principal. Higher yielding, lower-rated corporate bonds entail a greater degree of credit risk than investment-grade securities. Adverse conditions may affect the issuer’s ability to pay interest and principal on the securities. Lower-rated bonds may carry greater risks than higher-rated bonds. Mortgage-backed securities are susceptible to prepayment. Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment. The information provided is not directed at any investor or category of investors and is provided solely as general information about Lord Abbett's products and services and to otherwise provide general investment education. None of the information provided should be regarded as a suggestion to engage in or refrain from any investment-related course of action as neither Lord Abbett nor its affiliates are undertaking to provide impartial investment advice, act as an impartial adviser, or give advice in a fiduciary capacity. If you are an individual retirement investor, contact your financial advisor or other fiduciary about whether any given investment idea, strategy, product or service may be appropriate for your circumstances. The views and opinions expressed are as of the date of publication and subject to change based on subsequent developments and may not reflect the views of the firm as a whole. This material is not intended to be legal or tax advice and is not to be relied upon as a forecast, or research or investment advice regarding a particular investment or the markets in general, nor is it intended to predict or depict performance of any investment. It should not be assumed that investments in the securities and/or sectors described were or will be profitable. This document is prepared based on information Lord Abbett deems reliable; however, Lord Abbett does not warrant the accuracy or completeness of the information. Unless expressly stated, this document has not otherwise been registered with, or approved by any regulatory authority in any jurisdiction. Do not duplicate or reproduce. The information presented in these materials is believed to be materially correct as at the date hereof (or such earlier date as referenced herein) and is subject to change without notice. No representation or warranty (express or implied) is made as to the accuracy or completeness of any of this information. Nothing set out in these materials is or shall be relied upon as a promise or representation as to the past or future. The credit quality of the securities in a portfolio is assigned by a nationally recognized statistical rating organization (NRSRO), such as Standard & Poor’s, Moody’s, or Fitch, as an indication of an issuer’s creditworthiness. Ratings range from ‘AAA’ (highest) to ‘D’ (lowest). Bonds rated ‘BBB’ or above are considered investment grade. Credit ratings ‘BB’ and below are lower-rated securities (junk bonds). High-yielding, non-investment-grade bonds (junk bonds) involve higher risks than investment grade bonds. Adverse conditions may affect the issuer’s ability to pay interest and principal on these securities. ICE BofAML Index Information: Source ICE Data Indices, LLC (“ICE”), used with permission. ICE PERMITS USE OF THE ICE BofAML INDICES AND RELATED DATA ON AN "AS IS" BASIS, MAKES NO WARRANTIES REGARDING SAME, DOES NOT GUARANTEE THE SUITABILITY, QUALITY, ACCURACY, TIMELINESS, AND/OR COMPLETENESS OF THE ICE BofAML INDICES OR ANY DATA INCLUDED IN, RELATED TO, OR DERIVED THEREFROM, ASSUMES NO LIABILITY IN CONNECTION WITH THE USE OF THE FOREGOING, AND DOES NOT SPONSOR, ENDORSE, OR RECOMMEND LORD ABBETT, OR ANY OF ITS PRODUCTS OR SERVICES.
IMPORTANT PERFORMANCE AND OTHER INFORMATION