ETF Watch: Schwab’s 1st New Filing Since 2014

July 17, 2017

On Friday, Charles Schwab made its first filing for a new ETF since 2013. The Schwab 1000 Index ETF appears to take direct aim at the $18.6 billion iShares Russell 1000 ETF (IWB).

The Schwab ETF will be the first to track an in-house index, in this case, the Schwab 1000 Index, which includes the largest 1,000 U.S.-listed stocks and weights them by market capitalization. Presumably, Schwab will come in with a price point below the 0.15% charged by IWB, in keeping with its reputation for rock-bottom pricing.

Certainly, using an in-house index will contribute to Schwab’s ability to keep prices low on this fund.

Judicious Strategy

Schwab has been nothing if not judicious in its launch strategy. The firm launched its first ETF in 2009 and its most recent launch was in 2013. It has a lineup of only 21 funds, but it nonetheless ranks as the fifth-largest ETF issuer, with $79 billion in assets under management. Its smallest fund has more than $265 million in assets.

Not only does the firm enter the ETF business with a huge built-in customer base via its various financial services businesses—including a trading platform where customers trade Schwab ETFs for free—it has also priced its funds aggressively, undercutting even Vanguard. And like Vanguard, it has never closed an ETF.

The most recent filing suggests that after building up a fairly complete family that includes core plain-vanilla equity and fixed-income funds as well as a smart-beta family, Schwab is now looking to take on competing funds one by one.

Further Cost Slashing?

It should be noted that Vanguard offers the Vanguard Russell 1000 ETF (VONE), which, despite costing just 0.12%, has just $702.8 million in assets. And State Street Global Advisors has the $148.7 million SPDR Russell 1000 ETF (ONEK), which charges just 0.10%. It looks like Schwab will have to slash costs even more.

The filing did not include a ticker or expense ratio, but it indicated the fund will list on the NYSE Arca.

Contact Heather Bell at [email protected].

 

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