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Charles Schwab has reduced fees on five fixed-income ETFs from 5 basis points to 4, a recent regulatory filing showed.
The spending cuts follow fee reductions that Vanguard and State Street have also made to similar ETFs. Schwab’s fee reductions put five of its ETFs on par with similar Vanguard products.
The largest ETF affected is the $ 9bn Schwab Short-Term US Treasury ETF, followed by the $ 3.4bn Schwab Intermediate-Term US Treasury ETF. The other funds with abbreviated expenses are the $ 690m Schwab 1-5 year corporate bond ETF, the $ 339m Schwab 5-10 year corporate bond ETF and the $ 101m Schwab Long-Term U.S. Treasury ETF. All ETFs seek to track indices.
The ETFs attracted $ 2.2 billion in net inflows over the 12 months ended Nov. 30, according to Morningstar Direct.
“The reduction of five of Schwab’s fixed-income ETFs has been in the works for some time,” Schwab said. “Achieving greater scale and realized cost savings continues to help our efforts to promote value for customers.”
Schwab’s full ETF line attracted $ 40.8 billion in net inflows in the 12 months ended November 30. The ETFs had $ 262 billion in combined assets on November 30, compared to $ 189 billion a year earlier, Morningstar Direct data shows.
Vanguard reduced fees on 17 funds, including nine fixed-income ETFs. Fees dropped by 1 basis point on each of the ETFs, bringing their spending ratios across the board to 4bp. Vanguard’s ETF line had $ 1.9 billion in assets on November 30, according to Morningstar Direct.
State Street Global Advisors also cut 1bp fees on two SPDR fixed-income ETFs in June, which brings the expenditure ratio on both funds to 3bp. The manager’s ETF line had $ 1 billion in total assets on November 30, according to Morningstar Direct.
“Schwab has a smaller fixed-income ETF presence than its larger counterparts BlackRock, Vanguard and State Street Global Advisors. . . as they were late in offering a broader suite, ”says Todd Rosenbluth, head of ETFs and mutual fund research at CFRA. “Schwab has been successful as a low-cost provider of index-based strategies, so when Vanguard and State Street reduced fees, it was inevitable that Schwab would try to fit them.”
Schwab now has the scale, brand recognition and placements on brokerage platforms to keep up with larger competitors in the asset management space, Rosenbluth said.
“Given the prevailing bond yields and increasing fee competition in this corner of the market, levying a bp more in fees against the competition may be a non-beginner, so I’m not at all surprised to see that Schwab is making these reductions following SSGA and Vanguard’s recent moves, ”said Ben Johnson, Morningstar’s director of global ETF research.
* Ignites is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at ignites.com.