Schwab’s First Active Bond ETF takes on JPST, MINT

Schwab Asset Management, the fifth-largest ETF provider, is filling a gap in its lineup with the Schwab Ultra-Short Income ETF (SCUS) that is slated to begin trading Aug. 13.

At 14 basis points, SCUS won’t be the cheapest in the category, but it comes in below the two hottest competitors; the $25 billion JPMorgan Ultra-Short Income ETF (JPST) charges 18 basis points, and the $12 billion Pimco Enhanced Short Maturity Active ETF (MINT) charges 35 basis points.

“The active short-term category has taken in $9 billion this year and Schwab is clearly going after this money,” said Eric Balchunas, senior ETF analyst at Bloomberg Intelligence.

“I think Schwab is looking at the leaders and thinking ‘we can beat those guys,’” he added.

A Schwab didn't immediately respond to a request for comment. A press release announcing the launch said SCUS will compete for a share of exchange-traded funds offering cash proxies.

Schwab’s first actively managed fixed income ETF will invest in investment grade, short-term U.S. dollar denominated debt securities with a duration of less than one year.

Paul Schatz, president of Heritage Capital in Woodbridge, Conn., shunned SCUS as a “race to the bottom on expenses” and “just another entry into an already crowded field.”

In addition to the popular JPST and MINT, Schatz cited the $577 million SPDR SSGA Ultra Short Term Bond ETF (ULST), which charges 20 basis points, the $2.2 billion Janus Henderson Short Duration Income ETF (VNLA), which charges 23 basis points, and the passively-managed $34 billion Vanguard Short Term Corporate Bond ETF (VCSH), at 4 basis points.

“I’m guessing they want to fill out their own suite and direct customers as well as their inhouse passive models to their own ETFs,” Schatz added. “I don’t think there is anything new or groundbreaking about this ETF.”

Balchunas of Bloomberg also sees SCUS as a late-to-the-game move to nibble market share from where money is moving on its brokerage platform.

“What’s unique is that Schwab is usually trying to be the cheapest,” he said. “They’re in the mix, pricewise, but 14 basis points would have been the cheapest five years ago.”