Quiver Quantitative - Schwab Asset Management has announced its decision to reduce fees on two of its ETF's: the Schwab High-Yield Bond ETF (SCYB/a>) and the Schwab U.S. TIPS ETF (SCHP). These fees have been slashed to just 0.03%, a strategic move aimed at drawing more investors. This adjustment brings the fees for these specific ETFs in line with its other fixed income ETF products. Importantly, Schwab's recently launched high-yield bond ETF directly rivals offerings like the SPDR Portfolio High Yield Bond ETF (SPHY)
State Street (NYSE:STT), the entity behind SPDR ETFs, had previously decreased fees on ten of its SPDR ETFs, including the aforementioned high-yield bond product. Emphasizing the significance of this trend, David Botset, Managing Director of Equity Product Management and Innovation at Schwab, stated that for many investors, the expense ratio remains a paramount factor when selecting an ETF. However, there's an inherent ceiling to how much fees can be reduced, especially as the industry nears extremely low single-digit figures.
Schwab's intention isn't for these competitively priced ETFs to serve as mere loss leaders within the firm's broad asset management portfolio. Botset expressed confidence in achieving profitability through volume, effectively offsetting any potential losses incurred due to the reduced pricing model. This strategy is reflective of the larger industry trend where the reduced costs of U.S. equity ETFs are compensated for by the sheer scale of assets managed.
Offering a snapshot of Schwab's prowess in the ETF domain, the company currently has almost $300 billion of ETF assets under its management. This substantial figure forms part of the massive $920 billion total assets managed by Schwab Asset Management as a whole.
This article was originally published on Quiver Quantitative