Schwab Cements Status As An ETF Player

The Charles Schwab Corp SCHW did not enter the exchange-traded funds business until late 2009, a relatively late entry, but the company is making up for lost time. Home to $50.4 billion in ETF assets under management as of July 21, Schwab is now the fifth-largest U.S. ETF sponsor.

Late To The Party, But No Problem

Year-to-date flows indicate Schwab is competing quite well with larger rivals, such as BlackRock, Inc. BLK's iShares and Vanguard, the two largest U.S. ETF issuers.

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Schwab, “a long-time provider of brokerage services and mutual funds, has emerged as one of the faster growing ETF providers in 2016. Aided by $7.69 billion of net inflows year to date through July 15, the firm has risen up the ranks and pulled closer to BlackRock iShares and Vanguard Group. Schwab, which has among the lowest expense ratios in the industry, has benefited from growing use of ETFs among retail investors and financial advisors,” said S&P Capital IQ in a note out Wednesday.

High Ratings

The research firm has a five-star rating, its highest, on shares of Schwab. Although it has surged more than 19 percent in just the past month, the stock is down more than 12 percent year-to-date.

A big reason advisors and investors are embracing Schwab ETFs is fees, as in Schwab has some of the lowest fees in the ETF universe. In some cases, Schwab ETFs sport lower fees than Vanguard equivalents, an impressive feat when considering Vanguard is often thought as the low cost leader in the fund world.

“Schwab U S Large Cap ETF SCHX and Schwab U S Broad Market ETF SCHB are the firm's two largest ETFs and each have a 0.03 percent expense ratio. SCHB gathered $681.5 million of new assets year to date through July 15, while SCHX had $569.6 million of net inflows,” said S&P Capital IQ.

The research firm rates both of those ETFs Overweight.

Schwab's ETF lineup is also benefiting from increased flows to fixed income ETFs this year. Overall, the issuer sponsors four bond ETFs.

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“With $994.3 million, Schwab Strategic Trust SCHZ gathered the second most net inflows thus far in 2016 among the firm's offerings. The $3.18 billion product, which holds investment-grade corporate bond and U.S. government securities, has a 0.05 percent expense ratio that is lower than comparable ETFs from iShares and Vanguard,” added S&P Capital IQ.