Schwab Asset Management is expanding its fixed income ETF lineup with plans to offer an actively managed bond strategy, the Schwab Core Bond ETF.
The new ETF, which does not yet have a ticker symbol, will be available to investors starting in January, according to a filing with the Securities and Exchange Commission.
This is just the third active ETF for Schwab, which includes a total of 31 ETFs worth a combined $375 billion. The new active Core Bond ETF will seek total returns while generating income from U.S. debt securities, including corporate bonds, municipal bonds and government bonds, the SEC filing said.
“Investors have shown interest in active bond strategies throughout the year, and Schwab has responded to that demand with ETFs, a formula that has worked well for other fund providers in 2024,” said Ryan Jackson, senior manager research analyst at Morningstar. .
Jackson added that Schwab is tapping into a potentially rich vein of opportunity by building a presence in the active bond ETF category.
“Active ETFs have had a great year of flows, and that’s especially true when it comes to bond funds,” he said. “About 36% of bond ETF flows flowed into active products this year through October, compared to 24% for active stock ETFs.”
Later this month, Schwab will roll out the Schwab Mortgage-Backed Securities ETF (SMBS), which 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 isn’t included in the SEC filing, Nate Geraci, president of the ETF Store, said the trend is toward lower fees for active management, and that’s what he expects from Schwab.
“Remarkably, players like Vanguard and Schwab are now entering the market with very low fees, and investors are getting active management from highly respected issuers at essentially the cost of index funds,” he said. “The story has always been that it is much easier to generate alpha in fixed income than in equities, and as the uncertain interest rate environment evolves going forward, it makes sense that investors and advisors need an active manager to help navigate in the bond market.”
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