This report provides a comprehensive overview of the Lord Abbett High Yield Fund's performance during the third quarter of 2025, detailing its returns, strategic allocations, and market context. It aims to offer insights into the factors driving the fund's success relative to its benchmark and within the broader fixed-income landscape.
Unlocking Value: Navigating High Yields with Strategic Acumen
Q3 2025 Performance Highlights
In the third quarter of 2025, the Lord Abbett High Yield Fund delivered a robust return of +2.82%. This performance metric reflects the net asset value of Class I shares, with all distributions reinvested, demonstrating the fund's capacity to generate positive returns for its investors during this period. The fund's successful quarter underscores its effective investment strategies and management.
Outperforming the Benchmark
During the same three-month interval ending September 30, 2025, the fund's designated benchmark, the ICE BofA U.S. High Yield Constrained Index*, registered a return of +2.40%. The Lord Abbett High Yield Fund's ability to surpass its benchmark by 42 basis points highlights its active management benefits and successful security selection within the high-yield market segment.
Strategic Risk Allocation as a Key Driver
A significant factor contributing to the fund's superior relative performance was its calculated risk positioning. This involved a deliberate overweight allocation to credit instruments that were "down-in-quality," meaning those with lower credit ratings but potentially higher yield opportunities. Concurrently, the fund maintained an underweight position in "higher-rated tiers" of the market. This strategic tilt allowed the fund to capitalize on specific market inefficiencies and generate alpha.
Fixed Income Market Dynamics
The fixed-income market experienced various shifts during the quarter. Key indicators such as the 2 Year U.S. Treasury Yield moved from 3.71% at the end of June 2025 to 3.61% by September 30, 2025, while the 10 Year U.S. Treasury Yield saw a slight decrease from 4.23% to 4.15%. These movements impacted the overall yield curve and influenced investment decisions within the high-yield space, suggesting a nuanced environment for credit selection. The 2-10 U.S. Treasury Yield Spread, an important gauge of market sentiment and future economic expectations, remained at 52 basis points, indicating a stable yet potentially watchful outlook for bond investors.
