abrdn Funds: Summary Prospectus
abrdn Focused U.S. Small Cap Active ETF (AFSC)
Principal U.S. Listing Exchange: The Nasdaq Stock Market® ("Nasdaq")
October 29, 2024
Before you invest, you may want to review the Fund's Prospectus, which contains more information about the Fund and its risks. You can find the Fund's Prospectus, Statement of Additional Information, shareholder reports and other information about the Fund online at https://www.abrdn.com/en-us/us/investor/fund-centre#literature. You can also get this information at no cost by e-mailing a request to Investor.Services.US@abrdn.com, calling (866) 667-9231 or asking your financial advisor. The Fund's Prospectus and Statement of Additional Information, both dated October 29, 2024, and the independent registered public accounting firm's report and financial statements in the abrdn Focused U.S. Small Cap Equity Fund's (the "Predecessor Fund") annual report, dated October 31, 2023, as well as the unaudited financial statements contained in the Predecessor Fund's semi-annual report dated April 30, 2024, are incorporated by reference into this summary prospectus.
Objective
The abrdn Focused U.S. Small Cap Active ETF (the "Focused U.S. Small Cap Active ETF" or the "Fund") seeks long-term capital appreciation.
Fees and Expenses of the Fund
The following table describes the fees and expenses you may pay if you buy, hold and sell shares of the Fund ("Shares"). You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and example below.
|
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) |
|||||||
|
Management Fees |
0.65 |
% |
|||||
|
Distribution Fees |
None |
||||||
|
Other Expenses(1) |
1.47 |
% |
|||||
|
Total Annual Fund Operating Expenses |
2.12 |
% |
|||||
|
Less: Amount of Fee Limitations/Expense Reimbursements(2) |
1.47 |
% |
|||||
|
Total Annual Fund Operating Expenses After Fee Limitations/Expense Reimbursements |
0.65 |
% |
|||||
(1) "Other Expenses" have been estimated to reflect expenses expected to be incurred by the Fund for the current fiscal year.
(2) abrdn Funds (the "Trust") and abrdn Inc. (the "Adviser") have entered into a written contract limiting operating expenses to 0.65% for the Fund. This contractual limitation may not be terminated before February 28, 2027 without the approval of the Independent Trustees of the Board. This limit excludes certain expenses, including any taxes, interest, brokerage fees, Acquired Fund Fees and Expenses, and extraordinary expenses, if any. The Trust is authorized to reimburse the Adviser for management fees previously limited and/or for expenses previously paid by the Adviser, provided, however, that any reimbursements must be paid at a date not more than three years after the date when the Adviser limited the fees or reimbursed the expenses and the reimbursements do not cause the Fund to exceed the lesser of the applicable expense limitation in the contract at the time the fees were limited or expenses are paid or the applicable expense limitation in effect at the time the expenses are being recouped by the Adviser.
Example
This Example is intended to help you compare the cost of investing in the Focused U.S. Small Cap Active ETF with the cost of investing in other funds.
The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same (taking into account the contractual fee limitation until its expiration,
which impacts the 1- and 3-Year figures listed below). Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| 1 Year |
3 Years |
5 Years |
10 Years |
||||||||||||
| $ |
66 |
$ |
370 |
$ |
859 |
$ |
2,209 |
||||||||
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund's performance. During the most recent fiscal year of abrdn Focused U.S. Small Cap Equity Fund (the "Predecessor Fund"), the Predecessor Fund's portfolio turnover rate was 16.83% of the average value of its portfolio.
Principal Strategies
As a non-fundamental policy, under normal circumstances, the Focused U.S. Small Cap Active ETF invests at least 80% of the value of its net assets, plus any borrowings for investment purposes, in equity securities issued by U.S. small-cap companies. The Fund will be managed pursuant to a "focused" strategy whereby the Fund's investment adviser will typically invest the Fund's assets in a small number of issuers. Generally, the Fund expects to hold approximately 35 to 45 issuers.
For purposes of the Fund's 80% policy, a company is considered to be a U.S. company if Fund management determines that the company meets one or more of the following criteria:
• the company is organized under the laws of, or has its principal office in the United States;
• the company has its principal securities trading market in the United States; and/or
• the company derives the majority of its annual revenue or earnings or assets from goods produced, sales made or services performed in the United States.
The Fund considers small-cap companies to be companies that have market capitalizations similar to those of companies include in the Russell 2000® Index at the time of investment. The range of the Russell 2000® Index was $11.38 million to $15.86 billion as of September 30, 2024.
Some companies may outgrow the definition of a small company after the Fund has purchased their securities or may no longer fall within the range of a reconstituted index. These companies continue to be considered small for purposes of the Fund's minimum 80% allocation to small company equities. While the Fund may sell a security if its market capitalization exceeds the definition of small-cap company, it is not required to sell solely because of that fact.
Equity securities include, but are not limited to, common stock, preferred stock and depositary receipts.
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.
The Fund may invest in securities denominated in U.S. Dollars and the currencies of any foreign countries in which it is permitted to invest. The Fund typically has full currency exposure to those markets in which it invests. The Fund may also invest in non-U.S. companies.
In seeking to achieve the Fund's investment objective, the Adviser invests in quality companies and is an active, engaged owner. The Adviser then evaluates every company against its own quality criteria and builds conviction using a team-based approach and peer review process. The quality assessment covers five key factors: 1) the durability of the business model, 2) the attractiveness of the industry, 3) the strength of financials, 4) the capability of management, and 5) the most material environmental, social and governance ("ESG") factors impacting a company. As ESG information is just
one investment consideration, ESG considerations generally are not solely determinative in any investment decision made by the Adviser. Through fundamental research, supported by a global research presence, the Adviser seeks to identify companies whose quality and future prospects are not yet fully recognized by the market.
Principal Risks
The Focused U.S. Small Cap Active ETF cannot guarantee that it will achieve its investment objective.
As with any fund, the value of the Fund's investments – and therefore, the value of Fund Shares – may fluctuate. The following is a list of the principal risks of investing in the Fund (in alphabetical order after the first seven risks).
Market Risk – Deteriorating market conditions might cause a general weakness in the market that reduces the prices, or yield, of securities in those markets in which the Fund invests.
Issuer Risk – The value of a security may decline for reasons directly related to the issuer, such as management performance, financial leverage and reduced demand for the issuer's goods or services.
Equity Securities Risk – The stock or other security of a company may not perform as well as expected, and may decrease in value, because of factors related to the company (such as poorer than expected earnings or certain management decisions), to the industry in which the company is engaged (such as a reduction in the demand for products or services in a particular industry), or to the market as a whole (such as periods of market volatility or instability, or general and prolonged periods of economic decline).
Active Management Risk – The Fund is subject to the risk that the Adviser may make poor security selections. The Adviser and its portfolio managers apply their own investment techniques and risk analyses in making investment decisions for the Fund and there can be no guarantee that these decisions will achieve the desired results for the Fund. In addition, the Adviser may select securities that underperform the relevant market or other funds with similar investment objectives and strategies.
Focus Risk – Funds that invest a greater proportion of their assets in the securities of a smaller number of issuers will be subject to greater volatility with respect to their investments than funds that invest in a larger number of securities.
Small-Cap Securities Risk – Securities of smaller companies are usually less stable in price and less liquid than those of larger, more established companies. Therefore, they generally involve greater risk. Small-cap companies may have limited product lines or markets, be less financially secure than larger companies, or depend on a small number of key personnel. If adverse developments occur, such as due to management changes or product failure, a Fund's investment in a small-cap company may lose substantial value.
Market Trading Risk – There can be no assurance as to the price at which, or volume in which, it may at any time be possible to buy or sell Shares in the public trading market. Although the Shares are listed for trading on Nasdaq, there can be no assurance that an active trading market for such Shares will develop or be maintained. Although it is expected that the market price of the Shares will approximate the Fund's NAV when purchased and sold in the secondary market, the Fund faces numerous market trading risks, including the potential lack of an active market for Shares, disruptions in the securities markets in which the Fund invests, periods of high market volatility and disruptions in the creation/redemption process. Any of these may lead to times when the market price of the Shares is more than the NAV intra-day (premium) or less than the NAV intra-day (discount).
Authorized Participants Risk – The Fund has entered into Authorized Participant AP agreements with only a limited number of institutions. Should these APs cease to act as such or, for any reason, be unable to create or redeem Shares and new APs are not appointed in their place, Shares may trade at a discount to the Fund's NAV and possibly face delisting.
Cybersecurity Risk – Cybersecurity incidents may allow an unauthorized party to gain access to Fund assets, customer data (including private shareholder information), or proprietary information, or cause the Fund, the Adviser and/or its service providers (including, but not limited to, Fund accountants, custodians, sub-custodians, transfer agents and financial intermediaries) to suffer data breaches, data corruption or lose operational functionality.
Depositary Receipts Risk – Investments in depositary receipts may entail the special risks of investing in foreign securities, including currency exchange fluctuations, government regulations, and the potential for political and economic instability.
ESG Integration Risk – To the extent ESG factors are used to evaluate investments, the consideration of such factors may adversely affect a Fund's performance. Not every ESG factor may be identified or evaluated for every investment. ESG characteristics are not the only factors considered and, as a result, the issuers in which a Fund invests may not be issuers with favorable ESG characteristics or high ESG ratings. The application of ESG factors may result in a Fund performing differently than its benchmark index and other funds in its peer group that do not consider ESG factors or consider different ESG factors.
Foreign Currency Exposure Risk – The value of foreign currencies relative to the U.S. Dollar fluctuates in response to market, economic, political, regulatory, geopolitical or other conditions. A decline in the value of a foreign currency versus the U.S. Dollar reduces the value in U.S. Dollars of investments denominated in that foreign currency. This risk may impact the Fund more greatly to the extent the Fund does not hedge its currency risk, or hedging techniques used by the Adviser are unsuccessful.
Foreign Securities Risk – Foreign countries in which the Fund may invest may have markets that are less liquid, less regulated and more volatile than U.S. markets. The value of the Fund's investments may decline because of factors such as unfavorable or unsuccessful government actions, reduction of government or central bank support and political or financial instability. To the extent the Fund focuses its investments in a single country or only a few countries in a particular geographic region, economic, political, regulatory or other conditions affecting such country or region may have a greater impact on Fund performance relative to a more geographically diversified fund.
Liquidity Risk – Generally, only APs may redeem Shares. Investors other than APs wishing to realize their Shares will generally need to rely on secondary trading in the public trading market. There can be no assurance as to the price at which, or volume in which, it may at any time be possible to realize Shares in the public trading market. Although the Shares are listed for trading on Nasdaq, there can be no assurance that an active trading market for such shares will develop or be maintained.
Preferred Shares Risk – Preferred shares in which the Fund may invest are sensitive to interest rate changes, and are also subject to equity risk, which is the risk that stock prices will fall over short or extended periods of time. The rights of preferred shares on the distribution of a company's assets in the event of a liquidation are generally subordinate to the rights associated with a company's debt securities.
Sector Risk – To the extent that the Fund has a significant portion of its assets invested in securities of companies conducting business in a broadly related group of industries within an economic sector, the Fund may be more vulnerable to unfavorable developments in that economic sector than funds that invest more broadly.
Industrials Sector Risk. The value of securities issued by companies in the industrials sector may be adversely affected by supply and demand related to their specific products or services and industrials sector products in general. The products of manufacturing companies may face obsolescence due to rapid technological developments and frequent new product introduction. Government regulations, world events, economic conditions and exchange rates may adversely affect the performance of companies in the industrials sector. Companies in the industrials sector may be adversely affected by liability for environmental damage and product liability claims. The industrials sector may also be adversely affected by changes or trends in commodity prices, which may be influenced by unpredictable factors. Companies in the industrials sector, particularly aerospace and defense companies, may also be adversely affected by government spending policies because companies involved in this sector rely to a significant extent on government demand for their products and services.
Valuation Risk – The price that the Fund could receive upon the sale of any particular portfolio investment may differ from the Fund's valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation methodology or a price provided by an independent pricing service. As a result, the price received upon the sale of an investment may be less than the value ascribed by the Fund, and the Fund could realize a greater than
expected loss or lesser than expected gain upon the sale of the investment. The Fund's ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third-party service providers.
If the value of the Fund's investments decreases, you may lose money.
For additional information regarding the above identified risks, see "Additional Information about Investments, Investment Techniques and Risks" in the prospectus.
Performance
The bar chart and table below can help you evaluate potential risks of the Focused U.S. Small Cap Active ETF. It is currently contemplated that before the Fund commences operations, all of the assets of another investment company advised by abrdn Inc., the Predecessor Fund, will be transferred to the Fund in a tax-free reorganization. It is currently contemplated that the reorganization, which does not require the approval of shareholders of the Fund or the Predecessor Fund, will occur on or around February 14, 2025. The Fund has the same investment objective and strategies as those of the Predecessor Fund.
The bar chart shows how the performance of the Fund's Shares (represented by the performance of the Predecessor Fund's Institutional Class Shares) has varied from year to year. The table compares the Fund's average annual total returns (represented by the performance of the Predecessor Fund's Institutional Class Shares) to the returns of the Russell 3000® Index, a broad-based securities index, and the Russell 2000® Index. Effective February 29, 2024, in anticipation of new regulatory requirements, the Predecessor Fund's broad-based securities market index changed from the Russell 2500® Index to the Russell 3000® Index in the Predecessor Fund's total return table. Also effective February 29, 2024, the Russell 2000® Index became the Predecessor Fund's secondary benchmark to reflect the change in the Predecessor Fund's investment strategy. Pursuant to federal rules and regulations, the Russell 2500® Index will continue to be shown for twelve months following its removal as the Predecessor Fund's primary benchmark. Performance for the Fund's Shares has not been adjusted to reflect the Fund's Shares' lower expenses than those of the Predecessor Fund's Institutional Class Shares. Performance for the Predecessor Fund is based on the NAV per share of the Predecessor Fund shares rather than on market-determined prices. Remember, however, that past performance (before and after taxes) is not necessarily indicative of how the Fund will perform in the future. For updated performance information, please visit https://www.abrdn.com/us/literature or call 866-667-9231.
Annual Total Returns – Institutional Class Shares
(Years Ended Dec. 31)
Calendar Year-to-Date Total Return as of September 30, 2024: 13.70%
Highest Return: 18.45% – 2nd quarter 2020
Lowest Return: -18.83% – 2nd quarter 2022
After-tax returns are shown in the following table for Institutional Class Shares. After-tax returns are calculated using the historical highest individual federal marginal income tax rates in effect and do not reflect the impact of state and local taxes. Your actual after-tax return depends on your personal tax situation and may differ from what is shown here.
After-tax returns are not relevant to investors in tax-deferred arrangements, such as individual retirement accounts, 401(k) plans or certain other employer-sponsored retirement plans.
Average Annual Total Returns as of December 31, 2023
|
1 Year |
5 years |
10 years |
|||||||||||||
|
Institutional Class Shares – Before Taxes |
10.00 |
% |
12.41 |
% |
7.36 |
% |
|||||||||
|
Institutional Class Shares – After Taxes on Distributions |
10.00 |
% |
9.74 |
% |
4.28 |
% |
|||||||||
|
Institutional Class Shares – After Taxes on Distributions and Sales of Shares(1) |
5.92 |
% |
9.48 |
% |
5.08 |
% |
|||||||||
|
Russell 3000® Index (reflects no deduction for fees, expenses or taxes) |
25.96 |
% |
15.16 |
% |
11.48 |
% |
|||||||||
|
Russell 2000® Index (reflects no deduction for fees, expenses or taxes) |
16.93 |
% |
9.97 |
% |
7.16 |
% |
|||||||||
|
Russell 2500® Index (reflects no deduction for fees, expenses or taxes) |
17.42 |
% |
11.67 |
% |
8.36 |
% |
|||||||||
(1) Under certain circumstances, the addition of the tax benefits from capital losses resulting from redemptions may cause the returns after taxes on distributions and sales of shares to be greater than the returns after taxes on distributions or the returns before taxes.
Investment Adviser
abrdn Inc. serves as the Focused U.S. Small Cap Active ETF's investment adviser.
Portfolio Managers
The Fund is managed using a team-based approach, with the following team members being jointly and primarily responsible for the day-to-day management of the Fund:
|
Name |
Title |
Served on the Fund Since |
|||||||||
|
Christopher Colarik |
Head of U.S. Smaller Companies |
2024 |
|||||||||
|
Scott Eun |
Senior Investment Director |
2024 |
|||||||||
|
Awais Khan, CFA® |
Head of ETF Portfolio Management and Capital Markets |
2024 |
|||||||||
Messrs. Colarik and Eun also were the Predecessor Fund's portfolio managers since 2023 and 2024, respectively.
Purchase and Sale of Fund Shares
The Fund is an exchange-traded fund ("ETF"). Individual Shares may only be purchased and sold in the secondary market through a broker-dealer. Shares are listed for trading on a national securities exchange, such as the Nasdaq. The price of Shares is based on market price, and because ETF Shares trade at market prices rather than NAV, shares may trade at a price greater than NAV (premium) or less than NAV (discount). An investor may incur costs attributable to the difference between the highest price a buyer is willing to pay to purchase shares of the Fund (bid) and the lowest price a seller is willing to accept for shares of the Fund (ask) when buying or selling shares in the secondary market (the "bid-ask spread"). Recent information, including information about the Fund's NAV, market price, premiums and discounts, and bid-ask spreads, is included on the Fund's website at www.abrdn.com/usa/etf.
Tax Information
The Fund intends to make distributions that may be taxed as ordinary income or capital gains.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase Shares through a broker-dealer or other financial intermediary (such as a bank) (an "Intermediary"), the Adviser or its affiliates may pay Intermediaries for certain activities related to the Fund, including participation in activities that are designed to make Intermediaries more knowledgeable about exchange-traded products, including the Fund, or for other activities, such as marketing, educational training or other initiatives related to the sale or promotion of Shares. These payments may create a conflict of interest by influencing the Intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit the Intermediary's website for more information.