Schwab to launch new active bond fund amid banner ETF Year

Charles Schwab plans to launch a new actively-managed fixed income exchange-traded fund, which comes as the asset management industry is placing greater emphasis on packaging active strategies in an ETF format.

The Schwab Core Bond ETF will be the company’s third active ETF. The Core Bond ETF seeks to provide total return while generating income through investing in U.S. debt securities, such as corporate bonds, municipal bonds, and Treasuries, according to the company’s filing with the Securities and Exchange Commission. Schwab intends to make the fund available Jan. 13, 2025. A company spokeswoman declined to comment beyond the filing.

Schwab is one of the nation’s largest wealth management and brokerage companies, with roughly $10 trillion in assets split about evenly between retail investors and independent financial advisors. 

Schwab launched two other active ETFs, Schwab Ariel ESG ETF and Schwab Ultra-Short Income, in November 2021 and August 2024, respectively. The company’s asset management unit launched its first ETF in 2009 and has more than $1 trillion assets under management.

The company’s launch of the Core Bond ETF could prove timely as fixed income has become a more attractive part of investor portfolios following years of rock-bottom interest rates. The new fund also comes as the asset management industry has been working to adjust to tectonic shifts that have been reshaping the business. Fund fees have steadily fallen, putting pressure on asset managers’ profitability. Investors have also come to prefer passive over active strategies, and ETFs over mutual funds. 

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Although active strategies have generally suffered outflows in recent years, active ETFs have been a bright spot and provided a lifeline for some asset managers. So far this year, active mutual funds have suffered more than $300 billion in outflows while active ETFs have picked up more than $190 billion in inflows, according to a new report from research firm Cerulli Associates, which relies on Morningstar data. Passive ETFs are still outpacing their active peers with nearly $500 billion of inflows.

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And overall, active ETF launches this year could exceed 2023’s record of 352, according to Morningstar. Other asset management giants, including BlackRock, Pimco, and Vanguard launched active fixed-income ETFs that year and in early 2024. Asset managers have debuted 328 ETFs this year, of which 126 were equity and 73 were fixed income. Firms with the most launches include Innovator, PGIM, and First Trust. 

Schwab isn’t the only company to get active in the ETF sector. For instance, Vanguard has launched several new actively managed fixed income ETFs in the past several years, part of a broader effort to grow its active fund lineup. 

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In August, the asset manager unveiled plans to add two active muni bond ETFs: Vanguard Core Tax-Exempt Bond and Vanguard Short Duration Tax-Exempt Bond. Like other Vanguard funds, the ETFs will have low expense ratios of 0.12%.

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Write to Andrew Welsch at andrew.welsch@barrons.com