Schwab Readies Six Fundamental Index ETFs
June 19th, 2013 at 10:16am by John Spence
Charles Schwab (NYSE: SCHW) has filed to launch a new family of ETFs tied to indices that weight companies by fundamental factors rather than traditional market-cap approaches.
Ignites.com reports the financial-services giant on Monday re-filed a preliminary prospectus for six funds: Schwab Fundamental U.S. All Company ETF, Schwab Fundamental U.S. Large Company ETF, Schwab Fundamental U.S. Small Company ETF, Schwab Fundamental International Large Company ETF, Schwab Fundamental International Small Company ETF and Schwab Fundamental Emerging Markets Large Company ETF. Schwab originally filed the preliminary prospectus in March. The ETFs are expected to launch sometime this year.
“Schwab is one of a number of firms that are tapping advisor demand for products somewhere between market-cap index and true active management,” reports Jackie Noblett for Ignites. These ETFs are also known as alternative beta index products.
“I don’t believe it’s a niche strategy at all. The academic research and institutional commitment shows these are very viable strategies for clients,” said Tony Davidow, VP for alternative beta and asset allocation strategist in Schwab’s Center for Financial Research, in the Ignites story.
Davidow joined Schwab earlier this year from Guggenheim Investments, where he provided research for the company’s alternative beta lineup, according to the report.
Schwab currently manages eight domestic equity ETFs, three international equity ETFs and four fixed-income ETFs. The firm’s total ETF assets under management stand at $12.5 billion, according to XTF.
Elsewhere in the business, Invesco PowerShares manages several ETFs tied to fundamentally weighted indices designed by Research Affiliates chairman and founder Robert Arnott. [ETFs Embrace Fundamental and Alternative Indices]
WisdomTree Investments also oversees ETFs that weight companies by fundamental factors such as earnings and dividends, rather than by market cap.
The six ETFs that Schwab has filed to launch will track fundamental benchmarks that carry the Russell name. [Schwab Files Six ETFs Based on Fundamental Russell Indices]
However, investors “wouldn’t necessarily know from the ‘Russell Fundamental’ brand name that the indexes are created by Rob Arnott’s Research Affiliates,” IndexUniverse reports. “The Russell indexes use RAFI fundamental screens and are based on an agreement between Russell and Arnott’s Research Affiliates.”
Story updated to correct Schwab executive name and timing of filing of preliminary prospectus. Also corrects index information.
The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.