Fixed Income Investors Get a Boost with Schwab’s New Active Bond ETF
As investors increasingly seek professional management to navigate market uncertainty, Schwab Asset Management is set to launch its second active bond ETF next month, offering a lower-cost option for fixed income exposure. This move comes as actively managed bond exchange-traded funds continue to gain traction, with market share increasing in recent years.
A Growing Appetite for Active Management
The demand for actively managed strategies is on the rise, driven by investors seeking expert guidance in uncertain markets. Schwab’s new ETF will join a rapidly expanding active ETF marketplace, particularly in fixed income where active strategies have gained significant ground.
A Lower-Cost Option for Core Bond Exposure
The Schwab Core Bond ETF (SCCR), expected to begin trading on February 5, will charge an expense ratio of 0.16%, significantly lower than competing actively managed core bond funds and ETFs. This reduced cost structure has the potential to make a meaningful difference in terms of net yield and total return.
A Diversified Portfolio for Investors
The ETF will invest in a diversified portfolio comprising corporate bonds, taxable municipal bonds, and U.S. Treasury securities, providing investors with access to Schwab’s portfolio management team’s expertise. The fund will target high-quality bonds across multiple sectors, investing in investment-grade securities rated BBB- or higher by ratings agencies at the time of purchase.
Experienced Management Team
The fund will be managed by John Majoros and Brian Luedtke, senior portfolio managers with a proven track record. They previously supported Schwab’s Wasmer Schroeder Core Bond strategy, which launched in January 2008.
Building on Schwab’s Active ETF Expansion
Schwab’s latest offering builds on its active ETF expansion, following the successful launch of the Schwab Ultra-Short Income ETF (SCUS) in August 2024. As of September 2024, Schwab Asset Management oversaw approximately $1.3 trillion in discretionary assets and $40.7 billion in non-discretionary assets.
Flexibility for Advisors
The ETF wrapper provides additional flexibility for advisors, allowing them to meet the needs of certain client accounts that may fall below the SMA’s account minimum. With 31 ETFs and total assets under management of $374 billion, Schwab Asset Management continues to expand its offerings to meet the evolving needs of investors.
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