August 8, 2013 / 5:01 PM / 6 years ago

Schwab to launch six ETFs based on Russell fundamental indexes

NEW YORK, Aug 8 (Reuters) - Charles Schwab Corp said on Thursday it plans to launch six new exchange-traded funds, which will begin trading next week, as the online brokerage looks to expand its offering of in-house managed ETFs.

The new funds, which are based on the Russell fundamental index series, bring Schwab’s proprietary ETF lineup to 21 total funds. Schwab first began offering in-house managed ETFs in late 2009 and in February unveiled a new commission-free platform to waive transaction fees on 105 ETFs offered by multiple providers.

The new ETFs will be available on the platform, called Schwab ETF OneSource, beginning Aug. 15.

The new ETFs differ from Schwab’s existing lineup of proprietary ETFs, as they are based on a fundamental indexing methodology.

Fundamental indexing weights holdings by objective factors, such as adjusted sales, operating cash flow and dividends plus buybacks, rather than taking a traditional market-cap approach, which weights securities based on market capitalization and gives emphasis to larger companies.

The fundamental indexing methodology was pioneered by Robert Arnott, founder of Research Affiliates LLC.

Marie Chandoha, president of Charles Schwab Investment Management, said on a call on Thursday that the new funds offer clients a way to get “broad industry exposure without potential overexposure to stocks.”

San Francisco-based Schwab, long a leader in selling mutual funds to investors, already has five mutual funds based on fundamental indexing. Those five funds, which launched in 2007, had $4.5 billion in total assets under management as of June 30.

The company hopes the new ETF lineup will attract more registered investment advisers.

ETFs, unlike mutual funds, are listed on exchanges and can be traded throughout the day. Mutual funds are valued once a day after the stock market closes.

Schwab began offering in-house managed ETFs in late 2009 to compete with industry leaders BlackRock Inc, Vanguard Group and State Street Corp, and now has more than $12 billion in ETF assets under management, making Schwab among the top 10 retail ETF providers.

The six new ETFs are: the Schwab Fundamental U.S. Broad Market Index ETF, which will trade under the ticker FNDB; the Schwab Fundamental U.S. Large Company ETF (FNDX); Schwab Fundamental U.S. Small Company ETF (FNDA); Schwab Fundamental International Large Company ETF (FNDF); Schwab Fundamental International Small Company ETF (FNDC); and the Schwab Fundamental Emerging Markets Large Company ETF (FNDE).

Invesco PowerShares and WisdomTree Investments also manage several ETFs tied to fundamentally weighted indexes.

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