Schwab Rolls Out Ultra Short Fixed Income Fund

According to Schwab Asset Management, the release of SCUS marks their first actively managed fixed income ETF to head to markets. Despite being an actively managed fund, SCUS operates with a lower net expense ratio of 0.14%.

For SCUS, the fund aims to provide investors with current income that is consistent with capital preservation. Additionally, SCUS seeks to maintain liquidity while doing so.

To achieve its investment goals, SCUS allocates assets toward short-term investment grade securities. The prospectus notes that eligible securities are U.S. dollar denominated. However they may be issued by either U.S. or foreign issuers.

The fund can invest in a wide variety of fixed income options, as long as they fit the credit and duration constraints. This includes corporate bonds, muni bonds, promissory notes, and bank notes, among other options.

As a fund that focuses on short-duration assets, SCUS aims to attain an effective portfolio duration of one year or less. By doing so, the fund can help mitigate risk from shifting interest rates.

The fund prospectus adds that SCUS will concentrate a portion of its investments toward the financials sector. Due to the fund not replicating any specific index’s performance, SCUS may encounter more portfolio turnover than a traditional indexing strategy.

“Demand for fixed income ETFs has been on fire this year, and it’s great to see Schwab round out its bond ETF suite with shorter-duration instruments,” adds Kirsten Chang, Senior Industry Analyst at VettaFi. “Despite looming rate cuts, advisors are still showing plenty of interest in these shorter-term maturity products to take advantage of their cash-like qualities.”

Now available on the NYSE Arca, SCUS joins an extensive library of ETFs utilizing Schwab’s investment strategies. One of Schwab’s largest funds, the Schwab US Dividend Equity ETF (SCHD B+), has over $57 billion in assets under management.

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