Schwab Asset Management is bulking up its fixed income ETF lineup with plans to offer an actively managed bond strategy, the Schwab Core Bond ETF.
According to a filing with the Securities and Exchange Commission, the new ETF, which does not yet have a ticker symbol, will be available to investors starting in January.
This represents just the third active ETF for Schwab, which lists 31 total ETFs that combine for $375 billion. The new active Core Bond ETF will seek to provide total return while generating income through U.S. debt securities, including corporate bonds, municipal bonds, and Treasuries, according to the SEC filing.
“Investors have shown an appetite for active bond strategies all year, and Schwab has responded to that demand with ETFs, which is a formula that has worked well for other fund providers throughout 2024.,” said Ryan Jackson, senior manager research analyst at Morningstar.
Jackson added that Schwab is tapping a potentially rich vein of opportunity by building out a presence in the active bond ETF category.
“Active ETFs have enjoyed a tremendous year of flows, and that is especially true when it comes to bond funds,” he said. “About 36% of bond ETF flows streamed into active products for the year to date through October, compared with 24% for active stock ETFs.”
Later this month, Schwab is slated to roll out the Schwab Mortgage-Backed Securities ETF (SMBS) that will track the Bloomberg US MBS Float Adjusted Total Return Index with an expense ratio of 0.03%.
Schwab did not respond to a request for comment for this story.
While the expense ratio is not included in the SEC filing, Nate Geraci, president of the ETF Store, said the trend is veering toward lower fees for active management, and that’s what he is expecting from Schwab.
“What’s remarkable is that players like Vanguard and Schwab are now entering the space with rock-bottom fees, and investors are getting active management from highly respected issuers at basically the cost of index funds,” he said. “The narrative has always been that it’s much easier to generate alpha in fixed income compared to equities, and with an uncertain rate environment moving forward, it makes sense that investors and advisors might want an active manager helping to navigate the bond market.”
