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Charles Schwab plans to launch a new actively managed fixed income exchange-traded fund as the asset management industry places greater emphasis on packaging active strategies into ETF formats.
The Schwab Core Bond ETF is the firm's third active ETF. The Core Bond ETF aims to provide total returns while generating income through investments in U.S. fixed income securities, including corporate, municipal and government bonds, according to the company's filing with the Securities and Exchange Commission. Schwab plans to make the funds available on January 13, 2025, but a company spokesperson declined to comment beyond the application.
Schwab is one of the largest wealth management and brokerage firms in the United States, with approximately $10 trillion in assets distributed roughly evenly between retail investors and independent financial advisors.
| ticker | safety | last | change | change % |
|---|---|---|---|---|
| saev | Schwab Strategic TR Schwab Ariel ESG ETF | October 27th | +0.28 |
+1.04% |
| Scouse | Schwab Strategic TR Ultra Short-Term Income ETF | September 25th | +0.00 |
+0.00% |
Schwab launched two other active ETFs, the Schwab Ariel ESG ETF and Schwab UltraShort Income, in November 2021 and August 2024, respectively. The company's asset management division launched its first ETF in 2009 and manages more than $1 trillion in assets.
The launch of the company's Core Bond ETF could be timely, as long-term rock bottom interest rates have made bonds a more attractive part of investor portfolios. The new fund comes as the asset management industry grapples with adapting to tectonic shifts that are reshaping its business. Fund fees have been steadily declining, putting pressure on asset management companies' profitability. Investors also now prefer passive strategies over active strategies and ETFs over mutual funds.
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While active strategies have generally suffered outflows in recent years, active ETFs have been a bright spot and a lifeline for some asset managers. So far this year, active mutual funds have suffered more than $300 billion in outflows, while active ETFs have seen more than $190 billion in outflows, according to a new report from research firm Cerulli Associates based on Morningstar data. Increasing inflow. Passive ETFs continue to outperform active ETFs, with nearly $500 billion in inflows.
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And overall, the number of active ETFs created this year could surpass the 2023 record of 352, Morningstar reports. Other big asset managers, including BlackRock, Pimco and Vanguard, also launched active bond ETFs that year and in early 2024. The asset manager debuted 328 ETFs this year, of which 126 were stocks and 73 were bonds. Some of the companies with the most releases include Innovator, PGIM, and First Trust.
Schwab isn't the only company active in the ETF sector. Vanguard, for example, has launched several new actively managed bond ETFs over the past few years as part of a broader effort to expand its active fund lineup.
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In August, the asset manager announced plans to add two active municipal bond ETFs: Vanguard Core Tax-Exempt Bonds and Vanguard Short-Term Tax-Exempt Bonds. Like other Vanguard funds, the ETF has a low expense ratio of 0.12%.
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Email Andrew Welsh at andrew.welsch@barrons.com.
