English Lord

Lord Abbett Funds: A Deeper Look at the Performance

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English Lord

On a few occasions, we have been asked by prospective clients about Lord Abbett funds. Like American Funds, they have been around since the Great Depression and are fully dedicated to active management. As of 12/31/2013, they had $137 billion1 of assets under management spread over mutual funds, separate accounts, and other investment vehicles.

We have taken a deeper look at the performance of several other mutual fund companies and have come to one universal conclusion: they have failed to deliver on the value proposition they profess, which is to reliably outperform a risk comparable benchmark. You can review our past analysis by clicking any of the links below:


We analyzed the fifteen Lord Abbett mutual funds that have a billion or more in assets. We compared their calendar year returns to their Morningstar analyst-assigned benchmark and tested the differences for statistical significance using Student’s t-test. Eleven of the fifteen funds had negative average excess returns (alpha), so there was really not much to test. Of the four that had positive average alpha, the variability of that alpha was so high as to render the alpha statistically insignificant (attributable to luck rather than skill at a 95% confidence level). The average number of years of similar returns required to achieve statistically significant alpha among the four was 81 years. The charts below provide the details, and they do not reflect front-end loads that would have been paid for Class A shares (5.75% for equity funds and 2.25% for bond funds).

As with the other active fund families that we have analyzed, there is nothing special about Lord Abbett, even though its name certainly imparts connotations of grandeur and nobility. It almost feels like a classic case of snob appeal. Naturally, we are confident that none of our readers will fall for it.

Here is a calculator to determine the t-stat. Don't trust an alpha or average return without one.
The Figure below shows the formula to calculate the number of years needed for a t-stat of 2. We first determine the excess return over a benchmark (the alpha) then determine the regularity of the excess returns by calculating the standard deviation of those returns. Based on these two numbers, we can then calculate how many years we need (sample size) to support the manager's claim of skill.

1http://en.wikipedia.org/wiki/Lord_Abbett (accessed on 6/20/2014)