SCHEDULE: First Trust Entities Disclose 10.29% Stake in abrdn Fund

First Trust Portfolios L.P., First Trust Advisors L.P., and The Charger Corporation jointly reported a 10.29% beneficial ownership stake in abrdn Emerging Markets ex China Fund Inc.

Summary

• First Trust Portfolios L.P., First Trust Advisors L.P., and The Charger Corporation have jointly filed an Amendment No. 1 to Schedule 13G, disclosing their beneficial ownership in abrdn Emerging Markets ex China Fund Inc.
• The reporting group collectively beneficially owns 4,179,037 shares of Common stock, representing 10.29% of the class.
• The shares are held primarily through unit investment trusts sponsored by First Trust Portfolios L.P. and other registered investment companies, pooled investment vehicles, and/or separately managed accounts where First Trust Advisors L.P. serves as investment advisor.
• The reporting persons explicitly disclaim beneficial ownership of these shares, stating they were acquired and are held in the ordinary course of business and not for the purpose of changing or influencing control of the issuer.
• Voting power for the shares held in unit investment trusts rests with the trustee, generally mirroring the voting proportion of other owners, while the reporting persons hold shared dispositive power over all 4,179,037 shares.

Sentiment

Score: 5

Explanation: The filing is a factual, regulatory disclosure of ownership and does not inherently convey positive or negative sentiment regarding the issuer's performance or prospects. It is neutral in tone and content.

Positives

• A significant institutional investor group, First Trust, holds a substantial 10.29% stake in the abrdn Emerging Markets ex China Fund Inc., indicating a notable investment in the fund.
• The filing provides transparency regarding the ownership structure and the passive nature of the investment, clarifying that the shares are held in the ordinary course of business.

Negatives

• The reporting persons explicitly disclaim beneficial ownership and sole voting power, suggesting a passive investment approach without intent to influence the issuer's control or strategic direction.
• The investment does not imply active management engagement or strategic support from the First Trust entities for abrdn Emerging Markets ex China Fund Inc.'s operations.

Risks

• The reporting persons disclaim beneficial ownership of the shares, meaning they do not intend to exert control or influence over the issuer, which could limit potential shareholder activism or strategic guidance from a large investor.
• The shares held in unit investment trusts are voted by the trustee, generally in proportion to other owners, which means the reporting persons do not directly control the voting of these significant holdings.

Future Outlook

The filing is a disclosure of current ownership and does not contain forward-looking statements or guidance regarding the issuer's future performance or strategic outlook.

Management Comments

• "By signing below I certify that, to the best of my knowledge and belief, the securities referred to above were acquired and are held in the ordinary course of business and were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of the issuer of the securities and were not acquired and are not held in connection with or as a participant in any transaction having that purpose or effect, other than activities solely in connection with a nomination under §§ 240.14a-11."

Industry Context

This filing reflects a significant institutional investment in an emerging markets fund, a common strategy for diversified portfolios. The 'ex China' focus aligns with a growing trend among investors seeking exposure to emerging markets while managing specific geopolitical or economic risks associated with China.

Comparison to Industry Standards

• The 10.29% stake held by First Trust entities is a substantial position for an institutional investor in a publicly traded fund, often placing them among the largest shareholders.
• The structure of holding shares through unit investment trusts and disclaiming beneficial ownership is a standard practice for certain types of investment vehicles, particularly those focused on passive or index-tracking strategies, aligning with the operational models of firms like First Trust.
• The 'ex China' mandate of the abrdn fund is a specific investment strategy that has gained traction, differentiating it from broader emerging market funds that include significant Chinese exposure. This aligns with a trend seen in offerings from major asset managers like BlackRock and Vanguard, who also offer ex-China or focused emerging market ETFs/funds.

Related Party Transactions

• The Charger Corporation is the General Partner of both First Trust Portfolios L.P. and First Trust Advisors L.P., establishing a control relationship among the reporting entities.
• First Trust Portfolios L.P. acts as sponsor of certain unit investment trusts which hold shares of the issuer.
• First Trust Advisors L.P., an affiliate of First Trust Portfolios L.P., acts as portfolio supervisor of the unit investment trusts sponsored by First Trust Portfolios L.P.

Stakeholder Impact

• Shareholders: The disclosure of a significant 10.29% stake by a major institutional investor group provides transparency regarding the fund's ownership structure. However, the passive nature of the investment means no active influence on management is expected.
• Management: The fund's management can note the significant institutional holding, but the disclaimer of control intent suggests no immediate pressure or strategic input from this particular shareholder group.

Next Steps

• The reporting persons will continue to hold the shares in the ordinary course of business, consistent with their stated passive investment intent.

Key Dates

Keywords

abrdn Emerging Markets ex China Fund Inc., First Trust Portfolios L.P., First Trust Advisors L.P., The Charger Corporation, Schedule 13G, Beneficial Ownership, Institutional Investor, Emerging Markets, Investment Fund, Passive Investment