Schwab Asset Management, the fifth-largest ETF provider, plans to launch its second active bond ETF next month, offering investors a lower-cost option for fixed income exposure amid growing demand for actively managed strategies.
The launch arrives as appetites grow for actively managed bond exchange-traded funds, which have seen increasing market share in recent years as investors seek professional management to navigate market uncertainty. The new fund joins a rapidly expanding active ETF marketplace, particularly in fixed income where active strategies have gained traction.
“Active core bonds are an ‘evergreen’ space and one the largest fixed income allocations for clients,” David Lafferty, director of product management and innovation at Schwab Asset Management, wrote in an email.
The Schwab Core Bond ETF (SCCR), expected to begin trading Feb. 5, will charge an expense ratio of 0.16%, according to the fund’s prospectus. This positions it well below competing actively managed core bond funds and ETFs that typically charge between 0.25% and 0.45%, potentially offering “a meaningful difference in terms of net yield and potential total return,” Lafferty noted.
The ETF will invest in a diversified portfolio including corporate bonds, taxable municipal bonds, and U.S. Treasury securities, according to the fund’s prospectus
“The Schwab Core Bond ETF provides investors with access to our portfolio management team’s expertise, along with the inherent features of an ETF,” Lafferty said in a press release announcing the fund.
The fund will be managed by John Majoros and Brian Luedtke, senior portfolio managers who previously supported Schwab’s Wasmer Schroeder Core Bond strategy that launched in January 2008, according to the release.
The fund will invest in investment-grade securities rated BBB- or higher by ratings agencies at the time of purchase, according to the prospectus, targeting high-quality bonds across multiple sectors.
Schwab’s latest offering builds on its active ETF expansion, following the August 2024 launch of the Schwab Ultra-Short Income ETF (SCUS), the firm’s first actively managed fixed income ETF.
As of September 2024, Schwab Asset Management oversaw approximately $1.3 trillion in discretionary assets and $40.7 billion in non-discretionary assets, according to the release. The firm currently manages 31 ETFs with total assets under management of $374 billion.
The firm’s latest ETF wrapper provides additional flexibility for advisors, Lafferty explained, noting that “ETFs can meet the needs of certain client accounts that would fall below the SMA’s account minimum.”
