As of July 16, Charles Schwab Corp. (NYSE: SCHW) is the fifth-largest U.S. issuer of exchange traded funds with $145.71 billion in assets under management. It didn't get that way by offering a lot of funds.
Schwab offers just 22 ETFs, spanning equities and fixed income, but that number is poised to swell to 25 as the issuer looks to tap into surging demand for bond funds. According to a recent filing with the Securities and Exchange Commission, Schwab plans to launch new ETFs with exposure to corporate bonds and U.S. government debt.
Schwab's “asset management arm is planning to start three new products focused on corporate bonds and Treasuries, almost doubling the number of debt exchange-traded funds it offers, regulatory filings show,” reports Bloomberg.
Why It's Important
Current Schwab bond ETFs include the Schwab U.S. Aggregate Bond ETF (NYSE: SCHZ), Schwab U.S. TIPS ETF (NYSE: SCHP), Schwab Short-Term U.S. Treasury ETF (NYSE: SCHO) and the Schwab Intermediate-Term U.S. Treasury ETF (NYSE: SCHR).
While those four funds are cost-effective and popular with investors, only SCHZ, and only in modest fashion, features exposure to any other than U.S. government debt. With demand for bond ETFs hitting record highs, Schwab is looking to fill some of its fixed income ETF voids with the Schwab Short-Term Corporate Bond ETF (SCHJ) and the Schwab Intermediate-Term Corporate Bond ETF (SCHI).
The other new bond ETF planned by Schwab is the Schwab Long-Term U.S. Treasury ETF (SCHQ). Competitors such as iShares, Vanguard, State Street and Invesco feature extensive bond ETF lineups including municipal bond funds, international debt offerings and more.
If Schwab's precedent is a guide, the new ETFs will likely be among the least expensive in their respective categories, enabling the rookie funds to challenge established rivals out of the gate. The filing didn't mention plans for high-yield debt or municipal bond ETFs, which Schwab currently does not offer.
“The decision marks a shift for Charles Schwab Investment Management, which has largely ridden its equity-fund offerings to become the fifth-largest ETF issuer in the U.S.More than 84% of the $146 billion in Schwab ETFs is invested in stocks,” according to Bloomberg.
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