Charles Schwab, the long time discount broker that made its initial foray into the ETF market late last year, is expand its ETF product line with the addition of two new funds: the Schwab Emerging Markets Equity ETF (SCHE) and the Schwab International Small-Cap Equity ETF (SCHC). These new ETFs join Schwab’s International Equity ETF (SCHF), along with four existing products focusing on domestic markets.
The goal of SCHC is to track the FTSE Developed Small Cap ex-US Liquid index, a benchmark that focuses on small capitalization companies outside of the U.S. that are in the bottom 10% of market capitalization but with a minimum free float capitalization of $150 million. As of last year, the index contained 1,820 stocks in 23 developed markets. SCHE seeks to track the FTSE All Emerging Index, which is composed of large and medium sized companies in 20 different emerging markets and currently includes about 740 stocks.
Schwab’s entry into the ETF world came in November of last year with the launch of four funds: the Schwab U.S. Broad Market ETF (SCHB, tracking the Dow Jones U.S. Broad Stock Market Index), the Schwab U.S. Large Cap ETF (SCHX, tracking the Dow Jones U.S. Large-Cap Total Stock Market Index), Schwab U.S. Small Cap ETF (SCHA, tracking the Dow Jones U.S. Small-Cap Total Stock Market Index), and Schwab International Equity ETF (SCHF, tracking the FTSE Developed ex-US Index). Schwab later launched large cap value (SCHV) and growth (SCHG) ETFs.
Thanks in part to its widely-known brand and existing base of customers, Schwab has seen a great deal of early success with its ETF products. The company finished 2009 with almost $350 million in assets, an impressive haul for less than two full months of operations. In addition to an aggressive marketing campaign, Schwab has attracted investors by — no surprise here — low costs. Two of the domestic ETFs charge just 0.08%, the lowest in the industry. In addition, there are currently no trading fees for all Schwab ETFs that are bought or sold in Schwab accounts.
SCHF and SCHE will both charge an expense ratio of 0.35%, the highest in Schwab’s product line but competitive with existing products from competing issuers.
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Disclosure: No positions at time of writing.
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