The Schwab Ultra-Short Income ETF (SCUS) Begins Trading

Rhea-AI Summary

The Schwab Ultra-Short Income ETF (NYSE Arca: SCUS) has commenced trading, marking Schwab Asset Management's first actively managed fixed income ETF. With an expense ratio of 0.14%, SCUS is priced competitively below the industry average of 0.25%. The ETF aims to provide current income while preserving capital and maintaining liquidity.

SCUS invests in investment grade, short-term, U.S. dollar denominated debt securities from both U.S. and foreign issuers. The fund maintains a portfolio duration of one year or less, focusing on ultra-short-term investments. This new offering expands Schwab's ETF lineup, potentially appealing to investors seeking low-risk, income-generating options in the current market environment.

Positive

• Launch of Schwab's first actively managed fixed income ETF
• Competitive expense ratio of 0.14%, below industry average
• Focus on investment grade, short-term debt securities
• Portfolio duration of one year or less, offering lower interest rate risk

Negative

• None.

Insights

Financial Analyst

The launch of Schwab's Ultra-Short Income ETF (SCUS) marks a significant entry into the actively managed fixed income ETF space. With an expense ratio of 0.14%, SCUS undercuts the industry average by 44%, potentially attracting cost-conscious investors. This competitive pricing strategy could lead to rapid asset accumulation, benefiting Schwab's bottom line.

The ETF's focus on short-term, investment-grade debt with a portfolio duration of one year or less positions it as a low-risk option for investors seeking yield in a volatile market. This product launch is timely, given the current high-interest rate environment and economic uncertainties. It could serve as an attractive alternative to money market funds or short-term bond funds, potentially capturing market share from these segments.

For Schwab, this move diversifies their ETF offerings and strengthens their position in the rapidly growing ETF market. The success of SCUS could pave the way for more actively managed ETFs from Schwab, potentially reshaping their product lineup and revenue streams in the long term.

Market Research Analyst

The launch of SCUS reflects Schwab's strategic response to evolving investor preferences and market conditions. With rising interest rates and economic uncertainties, there's increased demand for low-risk, liquid investment options that offer better yields than traditional savings accounts. SCUS is well-positioned to capitalize on this trend.

The ETF's competitive pricing at 0.14% expense ratio is a classic Schwab move, leveraging their scale to undercut competitors. This approach has historically served Schwab well in attracting assets and market share. The active management component adds value, potentially justifying the slightly higher fee compared to some passive ultra-short bond ETFs.

SCUS's focus on capital preservation and liquidity, combined with current income, makes it an attractive option for both retail and institutional investors looking to park cash or manage short-term liquidity needs. This product launch could significantly boost Schwab's assets under management and reinforce its reputation as a low-cost, innovative investment provider.

WESTLAKE, Texas--(BUSINESS WIRE)-- Today, the Schwab Ultra-Short Income ETF (NYSE Arca: SCUS) begins trading. The ETF is the first actively managed fixed income ETF from Schwab Asset Management^®, the asset management arm of The Charles Schwab Corporation. With an expense ratio of 0.14%, the Schwab Ultra-Short Income ETF is priced below the industry average of 0.25%¹.

The goal of the Schwab Ultra-Short Income ETF is to seek current income consistent with capital preservation while maintaining liquidity. The ETF invests in investment grade, short-term, U.S. dollar denominated debt securities issued by U.S. and foreign issuers and will maintain a portfolio duration of one year or less.

About Schwab Asset Management

One of the industry’s largest and most experienced asset managers, Schwab Asset Management offers a focused lineup of competitively priced ETFs, mutual funds and separately managed account strategies designed to serve the central needs of most investors. By operating through clients’ eyes, and putting them at the center of our decisions, we aim to deliver exceptional experiences to investors and the financial professionals who serve them. As of June 30, 2024, Schwab Asset Management managed approximately $1.2 trillion on a discretionary basis and $38.3 billion on a non-discretionary basis.

More information is available at www.aboutschwab.com. Follow us on Twitter/X, Facebook, and LinkedIn.

About Charles Schwab

At Charles Schwab we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity.

More information is available at www.aboutschwab.com. Follow us on Twitter, Facebook, YouTube and LinkedIn.

Disclosures:

Investors should consider carefully information contained in the prospectus, or if available, the summary prospectus, including investment objectives, risks, charges and expenses. You can obtain a prospectus, or if available, a summary prospectus by visiting https://www.schwabassetmanagement.com/prospectus. Please read it carefully before investing.

Investment returns will fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost. Unlike mutual funds, shares of ETFs are not individually redeemable directly with the ETF. Shares of ETF are bought and sold at market price, which may be higher or lower than the net asset value (NAV).

Diversification and asset allocation strategies do not ensure a profit and do not protect against losses in declining markets.

Schwab Ultra-Short Income ETF is an actively managed exchange traded fund and therefore does not seek to replicate the performance of any specific index. The fund may have a higher degree of portfolio turnover than funds that seek to replicate the performance of an index.

Schwab Ultra-Short Income ETF is not a money market fund and does not seek to maintain a stable net asset value of $1.00 per share. The fund is not subject to the strict rules that govern the diversity, quality, maturity, liquidity and other features of securities that money market funds may purchase designed to enable money market funds to maintain a stable share price and to limit investment risk. Under normal circumstances, the fund’s investments may be more susceptible than a money market fund is to credit risk, interest rate risk, valuation risk and other risks relevant to the fund’s investments. The fund does not seek to maintain a stable net asset value of $1.00 per share. Therefore, the fund’s net asset value per share and market value will fluctuate, and these fluctuations may be significant on certain days. There can be no guarantee that the fund will generate higher returns than money market funds. In addition, the fund does not qualify for certain tax relief afforded to money market funds by the U.S. Treasury.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed-income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors.

An actively managed fund is subject to the risk that its investment adviser and/or subadviser will select investments or allocate assets in a manner that could cause the fund to underperform or otherwise not meet its investment objective.

The fund may invest in U.S.-registered, dollar-denominated bonds of non-U.S. corporations. The fund’s investments in bonds of non-U.S. issuers may involve certain risks that are greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; the imposition of economic sanctions or other government restrictions; differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may be heightened in connection with bonds issued by non-U.S. corporations and entities in emerging markets.

Schwab Asset Management^® is the dba name for Charles Schwab Investment Management, Inc., the investment adviser for Schwab Funds, Schwab ETFs, and separately managed account strategies. Schwab Funds are distributed by Charles Schwab & Co, Inc. (Schwab), Member SIPC. Schwab ETFs are distributed by SEI Investments Distribution Co. (SIDCO). Schwab Asset Management and Schwab are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation, and are not affiliated with SIDCO.

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¹ Source: Morningstar data as of June 30, 2024. Data universe is the actively managed ETFs in the Ultrashort Bond category.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240813339839/en/

Christine Underhill

Charles Schwab

415-961-3790

Source: The Charles Schwab Corporation

FAQ

What is the ticker symbol and expense ratio for the Schwab Ultra-Short Income ETF (SCUS)?

The Schwab Ultra-Short Income ETF trades under the ticker symbol SCUS on NYSE Arca. It has an expense ratio of 0.14%.

What is the investment objective of the Schwab Ultra-Short Income ETF (SCUS)?

SCUS aims to seek current income consistent with capital preservation while maintaining liquidity.

What types of securities does the Schwab Ultra-Short Income ETF (SCUS) invest in?

SCUS invests in investment grade, short-term, U.S. dollar denominated debt securities issued by U.S. and foreign issuers.

What is the portfolio duration of the Schwab Ultra-Short Income ETF (SCUS)?

The Schwab Ultra-Short Income ETF (SCUS) maintains a portfolio duration of one year or less.