Schwab Drafts Plans For REIT ETF

September 24, 2010

Schwab appears to be gunning for Vanguard’s VNQ with plans for a REIT ETF of its own.

Charles Schwab, the San Francisco-based discount broker that began offering its own exchange-traded funds last November, today filed paperwork with the Securities and Exchange Commission to launch its first ETF to tap into the
real estate market.

The Schwab U.S. REIT ETF will track the float-adjusted market-capitalization-weighted Dow Jones U.S. Select REIT index, and invest in real estate companies that own and operate commercial as well as residential properties across the country, the filing said.

Despite real estate’s rocky road in the past few years, REIT ETFs appear to be popular, as investors position themselves for a recovery in the sector. Schwab’s strategy would compete with low-cost provider Vanguard’s REIT ETF (NYSEArca: VNQ). VNQ has been around since 2004. It has a 0.13 percent expense ratio and $6 billion in assets.

Other, more costly, competitors include the SPDR Dow Jones REIT (NYSEArca: RWR) and the iShares Dow Jones U.S. Real Estate (NYSEArca: IYR), both of which have assets that exceed $1.3 billion, and $2.9 billion, respectively.

Schwab’s entrance into the world of ETFs has been impressive in terms of how quickly its new funds have gathered about $1.5 billion in assets.

Much of that has to do with the firm’s strategic commitment to low costs for investors. It cemented that reputation in spring by undercutting all its competitors, a move we wrote about here in a piece titled Schwab Declares Price War With ETF Fee Cuts.

Schwab didn’t disclose a ticker or an expense ratio in the filing.


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