SEC Company Response from abrdn Funds (CIK 0001413594) — Aug 16, 2021
abrdn Funds (CIK 0001413594)
Date: Aug. 16, 2021 · CIK: 0001413594 · Accession: 0001104659-21-106287
AI Filing Summary & Sentiment
File numbers found in text: 333-146680, 811-22132
Referenced dates: November 23, 2020
Letter
VIA EDGAR Division of Investment Management Securities and Exchange Commission Aberdeen Funds (the “Registrant”) Post-Effective Amendment No. 105 to the Registration Statement Filed on May 28, 2021 Securities Act File No. 333-146680; Investment Company Act File No. 811-22132
Re:
Dear Ms. Dubey:
This letter responds to comments on the above-referenced Post-Effective Amendment filed pursuant to Rule 485(a) with respect to Aberdeen International Sustainable Leaders Fund, Aberdeen Global Equity Impact Fund and Aberdeen Global High Income Fund that the staff (the “Staff”) of the Securities and Exchange Commission (the “SEC”) provided in a telephone conversation with Brooke Clark and Louis Rosenbaum of Dechert LLP on July 14, 2021.
For your convenience, the substance of those comments has been restated below. The Registrant’s response to each comment is set out under the restated comment. Defined terms, unless otherwise defined herein, have the meanings given to them in the Registration Statement.
PROSPECTUS
Comment No. 1: In the fees and expenses table for each Fund, please add a dividing line below Annual Fund Operating Expenses.
Response: The Registrant will revise the fee table accordingly.
Comment No. 2: Please revise footnote 3 to the fees and expenses table for each Fund because “Other Expenses” cannot be restated for new funds.
Response: The Registrant plans to update the fee table to reflect the Predecessor Funds’ expenses. The Registrant will include the following footnote for each fund:
It is anticipated that the Fund will acquire all of the assets and liabilities of a corresponding fund of the same name (the “Predecessor Fund”), a series of Aberdeen Investment Funds, in connection with a reorganization that is expected to close in the fourth quarter of 2021. The Predecessor Fund operated as a series of Aberdeen Investment Funds prior to the closing of the reorganization. Accordingly, “Other Expenses” have been restated to reflect estimated expenses expected to be incurred by the Fund for the current fiscal year. Total Annual Fund Operating Expenses and Total Annual Fund Operating Expenses After Fee Limitations/Expense Reimbursements have also been restated to reflect current estimated expenses and do not correlate to the ratios of net and total expenses to average net assets provided in the Financial Highlights, which reflect the operating expenses of the Predecessor Fund.
Comment No. 3: In the “Principal Strategies” of International Sustainable Leaders Fund and Global Equity Impact Fund, disclose how each Fund will approach relevant ESG proxy issues for portfolio holdings or, alternatively, supplementally explain why such disclosure is not required.
Response: The Registrant votes proxies consistent with its proxy voting policy, which delegates voting responsibility to the Adviser and Sub-adviser, as applicable. The Adviser and Sub-adviser have adopted proxy voting policies and procedures, which have been reviewed and approved by the Registrant’s Board, to ensure the proper and timely voting of the proxies on behalf of the Funds. A summary of the Adviser’s and Sub-adviser’s proxy voting policies and procedures are included as Appendix C to the Statement of Additional Information, in accordance with Item 17(f) of Form N-1A. Accordingly, the Registrant believes that the existing level of disclosure is appropriate.
Comment No. 4: Please clarify what “sustainability” means in the following sentence: “In pursuing the Fund’s investment strategies, the Adviser employs a fundamental, bottom-up equity investment process, which is based on first-hand research and disciplined company evaluation and which takes into consideration the sustainability of the business in its broadest sense and the company’s ESG performance.” Page 1 notes that sustainable leaders are demonstrated through “their management of environmental, social and governance (“ESG”) risks and opportunities in accordance with the Adviser’s criteria.”
Response: In the aforementioned sentence, “sustainability” means the management of ESG risks and opportunities.
Comment No. 5: On page 2, please define “MSCI data.” Please also consider disclosing the corresponding principal risks of International Sustainable Leaders Fund’s use of MSCI data given that ESG data provided by third-party providers can vary significantly.
Response: The Registrant will modify the sentence to read: “Based on MSCI business involvement screening research, the Fund will not invest in companies that have: . . .” The binary exclusions enumerated in the bullet points that follow this introductory sentence are MSCI screens. Whether or not a company passes such screens is based on information about each company as analyzed by MSCI.
As noted in response to comments from the Staff in our correspondence dated November 23, 2020, relating to Post-Effective Amendment No. 100 to the Trust’s Registration Statement filed on September 24, 2020, the Adviser primarily relies on third-party providers (such as MSCI) in connection with applying binary exclusions to determine which companies to exclude on the front-end of the Adviser’s investment process. The Adviser may consider third-party data providers’ ratings of individual companies as part of the portfolio management team’s process for evaluating companies for investment; however, the Adviser primarily relies on first-hand on-the-ground research of each company to determine such company’s ESG quality rating, which is a rating developed and assigned by the Adviser, not a third-party data provider. In addition to its substantive research and analysis of each company, the Adviser has its own proprietary quantitative-based house score which may consider third party ratings as one of its inputs. The quantitative-based house score is generated by a proprietary quantitative model created by the Adviser. The house score may inform part of the portfolio management team’s investment decisions but does not drive any decision whether to buy or sell a stock. Because the Adviser’s reliance on third-party data providers’ ratings is relatively limited, it does not believe that it forms part of the Fund’s principal strategies or principal risks, outside of the binary exclusions mentioned above and the existing disclosure in the Fund’s “Principal Risks” under “Sustainable Investing Risk.”
The Registrant notes that the Fund’s “Sustainable Investing Risk” disclosure includes the following:
In evaluating an issuer, the Adviser utilizes information and data obtained through voluntary or third-party reporting that may be incomplete, inaccurate or unavailable, which could cause the Adviser to incorrectly assess an issuer’s business practices with respect to the environment, social responsibility and corporate governance.
Comment No. 6: On page 2, please disclose what is meant by “an industry tie to controversial weapons.”
Response: Based on MSCI’s methodology document, this screen excludes “companies that have any ties to cluster munitions, landmines, biological / chemical weapons, depleted uranium weapons, blinding laser
weapons, incendiary weapons, and/or non-detectable fragments.” Further, “any tie” means involvement at all levels, as determined by MSCI, “including companies that provide support systems and services, as well as those with indirect ties to weapons production through ownership.” “Any tie” also includes “direct involvement of producers and operators.”
The Registrant will update the disclosure on page 2 to read:
· an industry tie to (including companies that provide support systems and services, as well as those with direct (i.e., owners and producers) and indirect (i.e., parents and subsidiaries) involvement in) controversial weapons (cluster munitions, landmines, biological / chemical weapons, depleted uranium weapons, blinding laser weapons, incendiary weapons, and/or non-detectable fragments);
Comment No. 7: On page 2, please disclose what is meant by “unconventional oil and gas.” If applicable, please use the term “fracking.”
Response: Based on MSCI’s methodology, the “unconventional oil and gas” means “oil sands, oil shale (kerogen-rich deposits), shale gas, shale oil, coal seam gas, and coal bed methane. Excludes all types of conventional oil and gas productions.”
The Registrant will update the aforementioned bullet on page 2 to read:
· a revenue contribution of 10% or more from the extraction of unconventional oil and gas (including oil sands, oil shale (kerogen-rich deposits), shale gas, shale oil, coal seam gas, and coal bed methane and excluding conventional oil and gas productions); or
Comment No. 8: Please disclose whether ESG criteria applies to all investments made by International Sustainable Leaders Fund and Global Equity Impact Fund or to 80% of each Fund’s investments. Please also disclose, if accurate, that an investment could be made in an issuer that scores poorly on ESG criteria if the issuer scores highly on non-ESG quality factors considered.
Response: International Sustainable Leaders Fund’s ESG criteria will apply with respect to at least 80% of its assets under the Fund’s name test policy. Although the Fund does not intend, under normal circumstances, to invest in companies that are not considered sustainable leaders in accordance with the Adviser’s criteria, the Registrant respectfully notes that funds with 80% investment policies are generally not required to disclose whether such fund’s investment strategy applies to 100% of the fund’s assets and does not believe that sustainable strategy funds should be subject to a different standard. The Registrant notes that if it had a principal investment strategy to invest in companies that do not meet its sustainability criteria, it would disclose this fact as required by Item 4 of Form N-1A. The Registrant believes that the Fund’s principal investment strategies are clearly disclosed in accordance with Form N-1A and the Fund’s name policy. Accordingly, the Registrant has not revised the International Sustainable Leaders Fund’s disclosure.
Similarly, although that is not explicitly stated, the Global Equity Impact Fund intends to invest, under normal circumstances, substantially all of its assets in accordance with its impact strategy. The Registrant notes that if it had a principal investment strategy to invest in companies that do not meet its impact criteria, it would disclose this fact as required by Item 4 of Form N-1A. The Registrant believes that the Fund’s principal investment strategies are clearly disclosed in accordance with Form N-1A. Accordingly, the Registrant has not revised the Global Equity Impact Fund’s disclosure, except to clarify in response to the Staff’s Comment No. 17 further below that only those companies delivering positive outcomes for the environment or society will be selected for investment.
With respect to the second half of the Staff’s comment noted above, the International Sustainable Leaders Fund’s “Principal Strategies” state: “Companies eligible for investment by the Fund must be rated 3 or better by the Adviser on both the overall quality rating and ESG-quality rating (emphasis added).” As a result, it would not be
accurate to say that an investment could be made in an issuer that scores poorly on ESG criteria if the issuer scores highly on non-ESG quality factors.
Comment No. 9: Please revise International Sustainable Leaders Fund’s 80% policy to reflect the term “sustainable leaders” in the Fund’s name and include a definition of “sustainable leaders.”
Response: Rule 35d-1 requires a fund to adopt an 80% test to the extent its name suggests a focus in a particular type of investment or investments or in a particular industry or group of industries. In this case, the use of the word “leaders” reflects the Fund’s principal investment strategies rather than any particular type of investment. As a result, the Registrant believes the Fund’s existing disclosure is appropriate.
Comment No. 10: Please revise the following sentence to list all equity securities in which International Sustainable Leaders Fund will principally invest: “Equity securities include, but are not limited to, common stock, preferred stock and depositary receipts.”
Response: The Fund’s disclosure includes a list of different types of equity securities for illustrative purposes. The current disclosure includes the types of equity securities that the Fund expects will be principal investments. For clarity, the Registrant will move the aforementioned sentence up, immediately following its 80% policy statement.
Comment No. 11: If a Fund’s investments will be focused in a single country or only a few countries in a particular geographic region at launch, please revise “Foreign Securities Risk” for each applicable Fund to disclose specific risks of that location.
Response: The Registrant does not expect the Funds’ investments to be focused in a single country or only a few countries at launch. Accordingly, the Registrant has not revised the Funds’ disclosure.
Comment No. 12: If a Fund’s investments will be focused in a specific economic sector at launch, please revise “Sector Risk” for each applicable Fund to disclose specific risks of that sector.
Response: The Registrant does not expect the International Sustainable Leader Fund’s investments to be focused in a specific economic sector at launch. Accordingly, the Registrant has not revised the Funds’ disclosure.
The Global Equity Impact Fund is anticipated to be heavily exposed to companies in the industrials sector. As a result, the Registrant will revise the Fund’s “Principal Strategies” to state: “The Fund may invest in securities of any market sector and may hold a significant amount of securities of companies, from time to time, within a single sector. The Fund currently anticipates that it will have significant exposure to the industrials sector.”
In addition, the Fund will add the following risk disclosure under “Sector Risk” in “Principal Risks”:
Industrials Sector Risk. The value of securities issued by companies in the industrials sector may be adversely af
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CORRESP 1 filename1.htm August 16, 2021 VIA EDGAR Ms. Anu Dubey Division of Investment Management Securities and Exchange Commission 100 F Street, N.E. Washington, DC 20549 Re: Aberdeen Funds (the “Registrant”) Post-Effective Amendment No. 105 to the Registration Statement Filed on May 28, 2021 Securities Act File No. 333-146680; Investment Company Act File No. 811-22132 Dear Ms. Dubey: This letter responds to comments on the above-referenced Post-Effective Amendment filed pursuant to Rule 485(a) with respect to Aberdeen International Sustainable Leaders Fund, Aberdeen Global Equity Impact Fund and Aberdeen Global High Income Fund that the staff (the “Staff”) of the Securities and Exchange Commission (the “SEC”) provided in a telephone conversation with Brooke Clark and Louis Rosenbaum of Dechert LLP on July 14, 2021. For your convenience, the substance of those comments has been restated below. The Registrant’s response to each comment is set out under the restated comment. Defined terms, unless otherwise defined herein, have the meanings given to them in the Registration Statement. PROSPECTUS Comment No. 1: In the fees and expenses table for each Fund, please add a dividing line below Annual Fund Operating Expenses. Response: The Registrant will revise the fee table accordingly. Comment No. 2: Please revise footnote 3 to the fees and expenses table for each Fund because “Other Expenses” cannot be restated for new funds. Response: The Registrant plans to update the fee table to reflect the Predecessor Funds’ expenses. The Registrant will include the following footnote for each fund: It is anticipated that the Fund will acquire all of the assets and liabilities of a corresponding fund of the same name (the “Predecessor Fund”), a series of Aberdeen Investment Funds, in connection with a reorganization that is expected to close in the fourth quarter of 2021. The Predecessor Fund operated as a series of Aberdeen Investment Funds prior to the closing of the reorganization. Accordingly, “Other Expenses” have been restated to reflect estimated expenses expected to be incurred by the Fund for the current fiscal year. Total Annual Fund Operating Expenses and Total Annual Fund Operating Expenses After Fee Limitations/Expense Reimbursements have also been restated to reflect current estimated expenses and do not correlate to the ratios of net and total expenses to average net assets provided in the Financial Highlights, which reflect the operating expenses of the Predecessor Fund. Comment No. 3: In the “Principal Strategies” of International Sustainable Leaders Fund and Global Equity Impact Fund, disclose how each Fund will approach relevant ESG proxy issues for portfolio holdings or, alternatively, supplementally explain why such disclosure is not required. Response: The Registrant votes proxies consistent with its proxy voting policy, which delegates voting responsibility to the Adviser and Sub-adviser, as applicable. The Adviser and Sub-adviser have adopted proxy voting policies and procedures, which have been reviewed and approved by the Registrant’s Board, to ensure the proper and timely voting of the proxies on behalf of the Funds. A summary of the Adviser’s and Sub-adviser’s proxy voting policies and procedures are included as Appendix C to the Statement of Additional Information, in accordance with Item 17(f) of Form N-1A. Accordingly, the Registrant believes that the existing level of disclosure is appropriate. Comment No. 4: Please clarify what “sustainability” means in the following sentence: “In pursuing the Fund’s investment strategies, the Adviser employs a fundamental, bottom-up equity investment process, which is based on first-hand research and disciplined company evaluation and which takes into consideration the sustainability of the business in its broadest sense and the company’s ESG performance.” Page 1 notes that sustainable leaders are demonstrated through “their management of environmental, social and governance (“ESG”) risks and opportunities in accordance with the Adviser’s criteria.” Response: In the aforementioned sentence, “sustainability” means the management of ESG risks and opportunities. Comment No. 5: On page 2, please define “MSCI data.” Please also consider disclosing the corresponding principal risks of International Sustainable Leaders Fund’s use of MSCI data given that ESG data provided by third-party providers can vary significantly. Response: The Registrant will modify the sentence to read: “Based on MSCI business involvement screening research, the Fund will not invest in companies that have: . . .” The binary exclusions enumerated in the bullet points that follow this introductory sentence are MSCI screens. Whether or not a company passes such screens is based on information about each company as analyzed by MSCI. As noted in response to comments from the Staff in our correspondence dated November 23, 2020, relating to Post-Effective Amendment No. 100 to the Trust’s Registration Statement filed on September 24, 2020, the Adviser primarily relies on third-party providers (such as MSCI) in connection with applying binary exclusions to determine which companies to exclude on the front-end of the Adviser’s investment process. The Adviser may consider third-party data providers’ ratings of individual companies as part of the portfolio management team’s process for evaluating companies for investment; however, the Adviser primarily relies on first-hand on-the-ground research of each company to determine such company’s ESG quality rating, which is a rating developed and assigned by the Adviser, not a third-party data provider. In addition to its substantive research and analysis of each company, the Adviser has its own proprietary quantitative-based house score which may consider third party ratings as one of its inputs. The quantitative-based house score is generated by a proprietary quantitative model created by the Adviser. The house score may inform part of the portfolio management team’s investment decisions but does not drive any decision whether to buy or sell a stock. Because the Adviser’s reliance on third-party data providers’ ratings is relatively limited, it does not believe that it forms part of the Fund’s principal strategies or principal risks, outside of the binary exclusions mentioned above and the existing disclosure in the Fund’s “Principal Risks” under “Sustainable Investing Risk.” The Registrant notes that the Fund’s “Sustainable Investing Risk” disclosure includes the following: In evaluating an issuer, the Adviser utilizes information and data obtained through voluntary or third-party reporting that may be incomplete, inaccurate or unavailable, which could cause the Adviser to incorrectly assess an issuer’s business practices with respect to the environment, social responsibility and corporate governance. Comment No. 6: On page 2, please disclose what is meant by “an industry tie to controversial weapons.” Response: Based on MSCI’s methodology document, this screen excludes “companies that have any ties to cluster munitions, landmines, biological / chemical weapons, depleted uranium weapons, blinding laser weapons, incendiary weapons, and/or non-detectable fragments.” Further, “any tie” means involvement at all levels, as determined by MSCI, “including companies that provide support systems and services, as well as those with indirect ties to weapons production through ownership.” “Any tie” also includes “direct involvement of producers and operators.” The Registrant will update the disclosure on page 2 to read: · an industry tie to (including companies that provide support systems and services, as well as those with direct (i.e., owners and producers) and indirect (i.e., parents and subsidiaries) involvement in) controversial weapons (cluster munitions, landmines, biological / chemical weapons, depleted uranium weapons, blinding laser weapons, incendiary weapons, and/or non-detectable fragments); Comment No. 7: On page 2, please disclose what is meant by “unconventional oil and gas.” If applicable, please use the term “fracking.” Response: Based on MSCI’s methodology, the “unconventional oil and gas” means “oil sands, oil shale (kerogen-rich deposits), shale gas, shale oil, coal seam gas, and coal bed methane. Excludes all types of conventional oil and gas productions.” The Registrant will update the aforementioned bullet on page 2 to read: · a revenue contribution of 10% or more from the extraction of unconventional oil and gas (including oil sands, oil shale (kerogen-rich deposits), shale gas, shale oil, coal seam gas, and coal bed methane and excluding conventional oil and gas productions); or Comment No. 8: Please disclose whether ESG criteria applies to all investments made by International Sustainable Leaders Fund and Global Equity Impact Fund or to 80% of each Fund’s investments. Please also disclose, if accurate, that an investment could be made in an issuer that scores poorly on ESG criteria if the issuer scores highly on non-ESG quality factors considered. Response: International Sustainable Leaders Fund’s ESG criteria will apply with respect to at least 80% of its assets under the Fund’s name test policy. Although the Fund does not intend, under normal circumstances, to invest in companies that are not considered sustainable leaders in accordance with the Adviser’s criteria, the Registrant respectfully notes that funds with 80% investment policies are generally not required to disclose whether such fund’s investment strategy applies to 100% of the fund’s assets and does not believe that sustainable strategy funds should be subject to a different standard. The Registrant notes that if it had a principal investment strategy to invest in companies that do not meet its sustainability criteria, it would disclose this fact as required by Item 4 of Form N-1A. The Registrant believes that the Fund’s principal investment strategies are clearly disclosed in accordance with Form N-1A and the Fund’s name policy. Accordingly, the Registrant has not revised the International Sustainable Leaders Fund’s disclosure. Similarly, although that is not explicitly stated, the Global Equity Impact Fund intends to invest, under normal circumstances, substantially all of its assets in accordance with its impact strategy. The Registrant notes that if it had a principal investment strategy to invest in companies that do not meet its impact criteria, it would disclose this fact as required by Item 4 of Form N-1A. The Registrant believes that the Fund’s principal investment strategies are clearly disclosed in accordance with Form N-1A. Accordingly, the Registrant has not revised the Global Equity Impact Fund’s disclosure, except to clarify in response to the Staff’s Comment No. 17 further below that only those companies delivering positive outcomes for the environment or society will be selected for investment. With respect to the second half of the Staff’s comment noted above, the International Sustainable Leaders Fund’s “Principal Strategies” state: “Companies eligible for investment by the Fund must be rated 3 or better by the Adviser on both the overall quality rating and ESG-quality rating (emphasis added).” As a result, it would not be accurate to say that an investment could be made in an issuer that scores poorly on ESG criteria if the issuer scores highly on non-ESG quality factors. Comment No. 9: Please revise International Sustainable Leaders Fund’s 80% policy to reflect the term “sustainable leaders” in the Fund’s name and include a definition of “sustainable leaders.” Response: Rule 35d-1 requires a fund to adopt an 80% test to the extent its name suggests a focus in a particular type of investment or investments or in a particular industry or group of industries. In this case, the use of the word “leaders” reflects the Fund’s principal investment strategies rather than any particular type of investment. As a result, the Registrant believes the Fund’s existing disclosure is appropriate. Comment No. 10: Please revise the following sentence to list all equity securities in which International Sustainable Leaders Fund will principally invest: “Equity securities include, but are not limited to, common stock, preferred stock and depositary receipts.” Response: The Fund’s disclosure includes a list of different types of equity securities for illustrative purposes. The current disclosure includes the types of equity securities that the Fund expects will be principal investments. For clarity, the Registrant will move the aforementioned sentence up, immediately following its 80% policy statement. Comment No. 11: If a Fund’s investments will be focused in a single country or only a few countries in a particular geographic region at launch, please revise “Foreign Securities Risk” for each applicable Fund to disclose specific risks of that location. Response: The Registrant does not expect the Funds’ investments to be focused in a single country or only a few countries at launch. Accordingly, the Registrant has not revised the Funds’ disclosure. Comment No. 12: If a Fund’s investments will be focused in a specific economic sector at launch, please revise “Sector Risk” for each applicable Fund to disclose specific risks of that sector. Response: The Registrant does not expect the International Sustainable Leader Fund’s investments to be focused in a specific economic sector at launch. Accordingly, the Registrant has not revised the Funds’ disclosure. The Global Equity Impact Fund is anticipated to be heavily exposed to companies in the industrials sector. As a result, the Registrant will revise the Fund’s “Principal Strategies” to state: “The Fund may invest in securities of any market sector and may hold a significant amount of securities of companies, from time to time, within a single sector. The Fund currently anticipates that it will have significant exposure to the industrials sector.” In addition, the Fund will add the following risk disclosure under “Sector Risk” in “Principal Risks”: Industrials Sector Risk. The value of securities issued by companies in the industrials sector may be adversely af