ETF Trends
ETF Trends

It has almost been eight years since its launch, but the Schwab International Equity ETF (NYSEArca:SCHF) has finally broken into the $10 billion in assets club.

The Schwab international Equity ETF, which launched in November 2009, has now accumulated $10.4 billion in assets under management. It is also the cheapest international ETF on the block with a 0.06% expense ratio.

“Of late, Schwab has seen particular investor interest in its international fund offerings as the U.S. market rally shows signs of fatigue and investors move to increase their international exposure,” Omar Aguilar, Chief Investment Officer for Equities at Charles Schwab Investment Management, said in a note.

International stocks are beginning to outpace U.S. equities after years of underperforming our domestic markets. Year-to-date, SCHF increased 14.1% while the S&P 500 gained 8.8%.

Many are also looking to foreign markets where valuations are much more attractive relative to U.S. equities. For example, SCHF shows a 15.0 price-to-earnings and a 1.6 price-to-book. In contrast, the S&P 500 is trading at a 19.9 P/E and a 2.8 P/B.

Further supporting the shift toward international markets, many investors have pointed to the improving macroeconomic conditions and rising corporate earnings in foreign markets.

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The Schwab International Equity ETF tries to reflect the performance of the FTSE Developed ex US Index, which is comprised of large and mid-cap stocks of developed countries outside the U.S.

“Its portfolio reflects the composition of the foreign developed equity market, effectively diversifies company-specific risk, and promotes low turnover,” Morningstar analyst Matthew Diamond said in a research note.

The fund includes exposure to over 1,100 stocks from foreign developed markets, including South Korea and Canada, and leans toward large multinational companies with a large global footprint. Nevertheless, the ETF’s portfolio is heavy on Japan and U.K. exposure, which account for a little over one-third of holdings.

For more information on international markets, visit our global ETFs category.