Schwab follows rivals with fee cuts on $13bn in bond ETFs
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Charles Schwab has reduced the fees on five fixed-income ETFs from 5 basis points to 4, a recent regulatory filing showed.
The expense reductions follow fee cuts that Vanguard and State Street have also made to similar ETFs. Schwab’s fee cuts place five of its ETFs on par with similar Vanguard products.
The largest ETF affected is the $9bn Schwab Short-Term US Treasury ETF, followed by the $3.4bn Schwab Intermediate-Term US Treasury ETF. The other funds with trimmed expenses are the $690m Schwab 1-5 Year Corporate Bond ETF, the $339m Schwab 5-10 Year Corporate Bond ETF and the $101m Schwab Long-Term US Treasury ETF. All of the ETFs seek to track indices.
The ETFs attracted $2.2bn in net inflows over the 12 months ended November 30, according to Morningstar Direct.
“The lowering of five of Schwab’s fixed-income ETFs has been in the works for quite some time,” Schwab said. “Reaching greater scale and realised cost savings continues to help our efforts to drive value for clients.”
Schwab’s full ETF line attracted $40.8bn in net inflows in the 12 months ended November 30. The ETFs had $262bn in combined assets as of November 30, up from $189bn a year earlier, Morningstar Direct data show.
Vanguard had cut fees on 17 funds, including nine fixed-income ETFs. Fees dropped 1 basis point on each of the ETFs, bringing their expense ratios to 4bp across the board. Vanguard’s ETF line had $1.9tn in assets as of November 30, according to Morningstar Direct.
State Street Global Advisors also shaved fees by 1bp on two SPDR fixed-income ETFs in June, bringing the expense ratio to 3bp on both funds. The manager’s ETF line had $1tn in total assets as of November 30, according to Morningstar Direct.
“Schwab has a smaller fixed-income ETF presence than larger peers BlackRock, Vanguard and State Street Global Advisors . . . as they were late to offer a broader suite,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA. “Schwab has had success being a low-cost provider of index-based strategies, so when Vanguard and State Street lowered fees it was inevitable that Schwab would seek to match them.”
Schwab now has the scale, brand recognition and placements on brokerage platforms to keep pace with larger competitors in the asset management space, Rosenbluth said.
“In light of prevailing bond yields and intensifying fee competition in this corner of the market, charging a bp more in fees versus the competition could be a non-starter, so I am not at all surprised to see Schwab make these cuts following SSGA and Vanguard’s recent moves,” said Ben Johnson, Morningstar’s director of global ETF research.
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