Navigating Dynamic Markets: Lord Abbett Affiliated Fund's Q2 2025 Performance and Strategic Outlook

The second quarter of 2025 presented a complex and evolving landscape of economic signals and market dynamics, challenging investors to adapt with agility and foresight. The Lord Abbett Affiliated Fund navigated these conditions with a disciplined and focused strategy, aiming to deliver consistent performance while prudently managing inherent market risks.

This comprehensive commentary offers an in-depth examination of our fund's performance during the quarter, elucidates the key market drivers that shaped our decisions, and outlines our strategic positioning as we move into the latter half of the year.

The global economic narrative throughout Q2 2025 was characterized by persistent, albeit moderating, inflationary pressures.

This compelled central banks worldwide to maintain a cautious and data-dependent stance on potential interest rate adjustments, influencing both equity and fixed income markets. Geopolitical tensions continued to cast a significant shadow, contributing to volatility in commodity prices and creating disruptions across various supply chains.

Domestically, economic growth demonstrated pockets of resilience, particularly in innovative technology and services sectors, while other segments of the economy contended with headwinds stemming from tighter financial conditions and evolving consumer behaviors. Equity markets exhibited selective strength, heavily favoring companies with robust earnings, strong balance sheets, and clear, sustainable competitive advantages.

Concurrently, fixed income markets experienced a degree of volatility as participants continually recalibrated their expectations for future interest rate trajectories.

During Q2 2025, the Lord Abbett Affiliated Fund delivered a competitive and resilient return, a testament to the efficacy of our disciplined and research-driven investment process.

Our performance was predominantly bolstered by strong stock selection, particularly within the dynamic technology and robust healthcare sectors. This was complemented by judicious allocation in high-quality fixed income instruments that demonstrated remarkable resilience amidst fluctuating yield environments.

While certain more speculative areas of the broader market faced corrections, our unwavering emphasis on rigorous fundamental analysis and valuation discipline proved instrumental in mitigating potential downside risks and effectively capturing emerging opportunities.

Our equity holdings continued to prioritize companies exhibiting sustainable competitive advantages, fortified balance sheets, and compelling long-term growth prospects, even in the prevailing higher-rate economic environment.

We maintained a strategic overweight position in innovative technology firms poised to benefit from powerful secular growth trends, alongside prudent defensive allocations in stable consumer staples and essential utilities. Within the fixed income sleeve of the portfolio, we emphasized investment-grade corporate bonds and select government securities, meticulously managing duration exposure to protect against interest rate sensitivity while actively seeking attractive, risk-adjusted yields.

Our active management approach afforded us the flexibility to make agile adjustments, capitalize on short-term market dislocations, and enhance overall portfolio resilience.

A pivotal theme underpinning our investment strategy for the quarter was the continued divergence in corporate performance, with advancements in AI-driven innovation and accelerating global decarbonization efforts emerging as significant tailwinds for select, forward-looking companies.

We proactively sought exposure to firms positioned at the forefront of these transformative trends. Conversely, we maintained a cautious posture on sectors highly sensitive to discretionary consumer spending, recognizing the ongoing pressures on household budgets. Our in-depth research also illuminated attractive opportunities within infrastructure-related industries, which are benefiting significantly from substantial global investment pushes and government initiatives.

As we look ahead to the second half of 2025, we anticipate that market volatility will likely persist, influenced by the evolving inflation narrative, potential shifts in global monetary policy, and the upcoming political election cycles in key economies.

Our overarching strategy remains firmly centered on identifying high-quality assets that possess the inherent ability to perform robustly across a diverse range of economic scenarios. We will continue to monitor geopolitical developments with vigilance and maintain a flexible and adaptive approach to our portfolio construction.

We firmly believe that a diversified, actively managed strategy, keenly focused on fundamental value and sustainable growth, is optimally positioned to navigate the anticipated complexities of the coming quarters and deliver long-term value to our investors.

The Lord Abbett Affiliated Fund remains steadfast in its core objective of achieving long-term capital appreciation and consistent income generation for its investors.

We extend our sincere gratitude to our investors for their continued trust and confidence, and we assure them of our diligent and dedicated efforts to manage the portfolio responsibly and judiciously in pursuit of these paramount goals.