Correspondence 0000930413-23-001287 from LORD ABBETT TRUST I (CIK 0001139819)
LORD ABBETT TRUST I (CIK 0001139819)
Date: April 21, 2023 · CIK: 0001139819 · Accession: 0000930413-23-001287
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File numbers found in text: 333-60304, 811-10371
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LORD ABBETT TRUST I
90 Hudson Street
Jersey City, NJ 07302
April 21, 2023
VIA EDGAR
Mr. Scott Lee
U.S. Securities and Exchange Commission
Division of Investment Management
100 F Street, NE
Washington, D.C. 20549
Re: Lord Abbett Trust I (the “Trust”)
File Nos. 333-60304 and 811-10371
Dear Mr. Lee:
Reference is made to
Post-Effective Amendment No. 55 to the Trust’s Registration Statement on Form N-1A (the “Registration Statement”)
filed on February 2, 2023 with the U.S. Securities and Exchange Commission (the “Commission”) via EDGAR pursuant to
Rule 485(a) under the Securities Act of 1933, as amended.1
This letter responds
to comments you provided during a telephone call on March 17, 2023 at approximately 3:00 p.m. with Victoria Zozulya and Patrick
Ma of Lord, Abbett & Co. LLC (“Lord Abbett”), the investment adviser to the Trust, and Pamela Chen and Ellen
Liew of Kirkland & Ellis LLP, counsel to Lord Abbett, regarding the Registration Statement. Your comments with respect
to Lord Abbett Investment Grade Floating Rate Fund (the “Fund”), and the Trust’s responses thereto, are summarized
below. A Post-Effective Amendment to the Registration Statement will be filed for the Fund and will reflect changes made in response
to your comments. Capitalized terms used but not defined herein have the meanings given to them in the Registration Statement.
Part A – General
1. Please respond
to all comments in a letter filed as correspondence via EDGAR at least five business days before the next filing for the Fund that
contains the Fund’s Prospectus and SAI. We remind you that the Fund and its management are responsible for the accuracy and
adequacy of the disclosure in the Registration Statement notwithstanding any review or comment by the Commission, and that the
Commission may have additional comments on the Registration Statement. Please note that comments made with respect to one part
of the Registration Statement also apply to other parts of the Registration Statement with similar disclosure.
1 Accession No. 0000930413-23-000269.
Response: Our
responses to all comments are included in this letter, which is being filed as correspondence via EDGAR. We acknowledge that the
Fund and its management are responsible for the accuracy and adequacy of the disclosure in the Registration Statement notwithstanding
any review or comment by the Commission, and that the Commission may have additional comments on the Registration Statement. Any
changes made to one part of the Registration Statement in response to staff comments have been applied to all other parts of the
Registration Statement as applicable with similar disclosure.
Part B – Prospectus
2. With respect to
the “Fees and Expenses” section in the Fund Summary, please confirm that Lord Abbett may not recoup any waived fees
and reimbursement expenses under the agreement. Similarly, please confirm that Lord Abbett Distributor LLC may not recoup any waived
fees for Class F shares.
Response: The
Expense Limitation Agreement between the Fund, Lord Abbett, and Lord Abbett Distributor does not contain recoupment provisions.
Thus, Lord Abbett and Lord Abbett Distributor may not recoup any expenses reimbursed under the Expense Limitation Agreement.
3. The first paragraph
under “Principal Investment Strategies” in the Fund Summary states: “Under normal conditions, the Fund will pursue
its investment objective by investing at least 80% of its net assets, plus the amount of any borrowings for investment purposes
in floating or adjustable rate instruments and derivatives and other instruments that effectively enable the Fund to achieve a
floating rate of income.” Please clarify the nature of the other instruments.
Response: The
Fund notes that the disclosure in the third paragraph under “Principal Investment Strategies” describes the other instruments
that effectively enable the Fund to achieve a floating rate of income. These instruments include fixed-rate loans or debt with
respect to which the Fund has entered into derivative instruments to effectively convert the fixed-rate interest payments into
floating or adjustable rate interest payments and money market investment companies.
4. Please confirm
supplementally that the Fund values derivatives on a mark-to-market basis.
Response: The
Fund confirms that when determining its net asset value, the Fund’s derivatives will be valued on a mark-to-market basis.
5. The first paragraph
under “Principal Investment Strategies” in the Fund Summary states: “Investment grade debt securities are tied
economically to securities that are rated within the four highest grades (at the time of purchase) assigned by an independent rating
agency such as Moody’s Investors Service, Inc. (Aaa, Aa, A, Baa), S&P Global Ratings (AAA, AA, A, BBB), or
Fitch Ratings (AAA, AA, A, BBB), or are unrated but determined by Lord Abbett to be of comparable quality.” Please supplementally
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explain how the Fund will handle potential downgrading of products within its portfolio and how Lord Abbett will review such securities
on a continuous basis.
Response: The
Fund may continue to hold a security if its rating is downgraded below one of the four highest grades. The Fund’s portfolio
managers will review the overall suitability, including the ratings, of each investment in the Fund’s portfolio on a continuous
basis to ensure consistency with the Fund’s principal investment strategies. The Fund also notes that the last two paragraphs
of the “Principal Investment Strategies” section in the Fund Summary further discusses how the Fund’s portfolio
managers will decide which securities to buy, hold or sell.
6. In the same sentence,
there is mention to an “independent rating agency.” “Independent rating agency” is not a regulated status
at the Commission. Please refer to them as credit rating agencies or nationally recognized statistical rating organizations (NRSROs).
Response: The
requested change has been made. The sentence will be revised to read as follows: “Investment grade debt securities are tied
economically to securities that are rated within the four highest grades (at the time of purchase) assigned by a nationally recognized
statistical rating organization such as Moody’s Investors Service, Inc. (Aaa, Aa, A, Baa), S&P Global Ratings (AAA, AA,
A, BBB), or Fitch Ratings (AAA, AA, A, BBB), or are unrated but determined by Lord Abbett to be of comparable quality.”
7. In the second
paragraph under “Principal Investment Strategies” in the Fund Summary, it states “The floating or adjustable
rate instruments in which the Fund may invest include, but are not limited to…” This disclosure is followed by a list
of instruments in bullet points. Please describe the list of principal investments with specificity and disclose the list of principal
investments.
Response: In
considering whether to modify the current disclosure, we reviewed the Commission guidance set forth in Commission Release IC-23064
(Feb. 10, 1998) (the “Adopting Release”), which amended Form N-1A. The Adopting Release noted that, prior to the N-1A
amendments:
“disclosure of fund investments…generally
consists of descriptions of the types of securities in which a fund may invest, [but in] the Commission’s view, disclosing
information about all of the securities in which a fund might invest does not help a typical fund investor…[and] adds substantial
length and complexity to fund prospectuses…. The Commission has concluded that prospectus disclosure would be more useful…if
it emphasized the principal investment strategies of a fund and the principal risks of investing in the fund, rather than the characteristics
and risks of each type of instrument in which the fund may invest.”
The Adopting Release
also provides that “Funds should limit disclosure in prospectuses generally to information that is necessary for an average
or typical investor to make an investment decision. Detailed or
highly technical discussions . . . dilute the effect of necessary prospectus disclosure and should be placed in the SAI.”
(Emphasis added.) We also note that
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the Commission cited its proposing release with approval, stating: “The Commission proposed
to shift the focus of disclosure about how a fund intends to achieve its investment objectives away from the current practice of
listing all types of securities in which a fund may invest to a discussion of the fund’s overall portfolio management.”
In addition, General Instruction C.1(a) to Form N-1A and Rule 421(b) under the Securities Act provide that mutual fund prospectuses
should use “concise, straightforward, and easy to understand language.”
We believe changing
market conditions and innovations in the investment industry make it virtually impossible to identify with certainty every potential
type of floating or adjustable rate instrument in which the Fund might invest. In our view, providing an example of the types of
floating or adjustable rate instrument in which the Fund may invest preceded by the word “including” signals to investors
that the Fund also may invest in other instrument types that are the functional equivalent of the named floating or adjustable
rate instrument. The use of the term “including” does not, however, give the Fund an unfettered ability to use floating
or adjustable rate instruments that are not listed and that do not have substantially similar investment characteristics, risk
profiles, and structural features as those listed. Accordingly, we believe the current disclosure provides investors with reasonable
predictability about the types of floating or adjustable rate instruments in which the Fund may invest.
For the reasons discussed
above, we believe the current disclosure is consistent with the Adopting Release, satisfies the requirements of Form N-1A, and
provides needed investment flexibility to the Fund. In light of the foregoing, we elect to retain the current disclosure.
8. In the third paragraph
under “Principal Investment Strategies” in the Fund Summary, it states “The other instruments that effectively
enable the Fund to achieve a floating rate of income may include, but are not limited to…” This is followed by a bullet
point that states, “fixed rate loans or debt with respect to which the Fund has entered into derivative instruments to effectively
convert the fixed-rate interest payments into floating or adjustable rate interest payments.” This activity appears to include
swaps contracts. Please confirm whether the Fund will invest in swap contracts, and if so, please make appropriate disclosures
here and ensure corresponding risk disclosure.
Response: The
Fund currently intends to invest in swaps. The Fund will include the following disclosure in the Prospectus:
Swaps: The Fund may enter into
interest rate, equity index, credit, currency, and total return swap agreements, swaptions (options on swaps), credit default swaps,
and similar transactions. The Fund may enter into these swap transactions for hedging purposes, in an attempt to obtain a particular
return when it is considered desirable to do so; to manage portfolio duration; as a substitute for holding the underlying asset
on which the derivative instrument is based; to effectively convert the fixed-rate interest payments of a debt security held by
the Fund into floating or adjustable rate interest payments; or for cash management purposes. For example, the Fund may enter into
interest rate swaps in which it pays a fixed-rate of interest in exchange
for payments based on variable interest rates. An OTC swap transaction involves an agreement between two parties to exchange different
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cash flows based on a specified or “notional” amount. The cash flows exchanged in a specific transaction may be, among
other things, payments that are the equivalent of interest on a principal amount, payments that would compensate the purchaser
for losses on a defaulted security or basket of securities, or payments reflecting the performance of one or more specified currencies,
securities or indices. The Fund may enter into OTC swap transactions with counterparties that generally are banks, securities dealers
or their respective affiliates. Certain types of swaps, such as interest rate swaps, may be cleared through clearing houses.
9. Please clarify
how the fixed rate loans or debt with respect to which the Fund has entered into derivative instruments are counted for purposes
of the Fund’s 80% policy.
Response: The
Fund confirms that derivatives that effectively enable the Fund to achieve a floating rate of income will be counted for purposes
of the Fund’s 80% policy. The Fund also confirms that any such derivatives will be marked-to-market for these purposes.
10. The proceeding
bullet-point under the same paragraph states that “money market investment companies” is another type of instrument
that can effectively enable the Fund to achieve a floating rate of income. Please confirm that this is a principal strategy and
if so, please include corresponding risk disclosures.
Response: The
reference to money market investment companies is intended to clarify the instrument types the Fund may utilize to effectively
enable it to achieve a floating rate of income. The Fund’s Statement of Additional Information contains applicable risk factors
regarding investments in investment companies.
11. Paragraph 4 of
“Principal Investment Strategies” in the Fund Summary states: “The Fund seeks to manage interest rate risk through
its management of the average effective duration of the securities it holds in its portfolio.” Please clarify this sentence
in plain terms and consider stating what the average duration is.
Response: The
requested change will be made and the sentence will read as follows: “The Fund seeks to manage interest rate risk through
its management of the average duration of the securities in its portfolio.” The Fund notes that the following explanation
of duration is included under “More Information about the Fund – Principal Investment Strategies”: “The
duration of a security takes into account the pattern of all expected payments of interest and principal on the security over time,
including how these payments are affected by changes in interest rates. The longer a portfolio’s duration, the more sensitive
it is to interest rate risk. The shorter a portfolio’s duration, the less sensitive it is to interest rate risk.” The
Fund does not have any duration restrictions and may invest in securities of any duration.
12. The
disclosure under paragraph 7 of “Principal Investment Strategies” in the Fund Summary starting with the sentence,
“The Fund will not invest more than 25% of its total assets in any industry,” is more appropriate for the
Statement of Additional Information (the “SAI”).
Please consider moving this disclosure from the Prospectus and into the SAI.
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Response: The
disclosure will be removed in the Fund Summary and retained in the Prospectus.
13. Paragraph 8 of
“Principal Investment Strategies” in the Fund Summary states: “The Fund may invest in derivative instruments.”
Please revise this statement to be more affirmative.
Response: The
requested change will be made and will read as follows: “The Fund invests in derivative instruments.”
14. Globally, avoid
the use of “may” and use more definitive language such as “will” as appropriate.
Response: For
the reasons set forth in the response to comment 7, the Fund believes the current disclosure is consistent with the Adopting Release,
satisfies the requirements of Form N-1A, and provides needed investment flexibility to the Fund. Accordingly, the Fund elects to
retain the current language.
15. The last sentence
in Paragraph 8 of “Principal Investment Strategies” in the Fund Summary states, in part, “to effectively convert
the fixed-rate interest payments of a debt security held by the Fund into floating or adjustable rate interest payments; or