Schwab Files To Offer Three US Treasury ETFs
April 21, 2010
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Charles Schwab, the discount broker that entered the exchange-traded fund market less than six months ago, filed with the Securities and Exchange Commission today to offer three U.S. Treasury ETFs, including one designed to protect investors from the ravages of inflation.
The funds include the Schwab U.S. TIPS ETF, the Schwab Short-Term U.S. Treasury ETF and the Schwab Intermediate-Term U.S. Treasury ETF, according to the filing. It didn’t provide trading symbols or annual management fees for any of the funds.
The move is the San Francisco-based firm’s first foray into the world of fixed-income ETFs, and adds to eight exchange-trade funds it has rolled out since November focused on equities. Its existing ETFs have gathered more than $1 billion in assets, and its ETF-based advisory platform used by Schwab advisers has grown to more than $500 million since its launch in January.
Schwab offers commission-free trades to its own clients who use its proprietary ETFs. With one exception, its existing ETFs are all priced at or below competing funds.
The New Funds
The TIPS ETF will track the Barclays Capital U.S. Treasury Inflation Protected Securities (TIPS) Index, according to the filing. The index includes all publicly issued U.S. Treasury inflation-protected securities that have at least one year remaining to maturity, are rated investment grade and have $250 million or more of outstanding face value.
While many analysts and strategists argue that the CPI understates inflation, TIPS are one of the only ways for bond investors to protect themselves against rising inflation. The single best-selling U.S. bond ETF last year was the iShares Barclays TIPS Bond Fund (NYSEArca: TIP). It pulled in $8.86 billion in 2009, and now has total assets exceeding $20 billion.
The Short-Term ETF will use the Barclays Capital
The index includes all publicly issued U.S. Treasury securities that have a remaining maturity of at least one year and less than three years, and must be investment grade and have $250 million or more of outstanding face value. All must also be dollar-denominated as well as fixed-rate and nonconvertible.
The Intermediate-Term ETF will be based on the Barclays Capital
The fund’s benchmark index includes all publicly issued U.S. Treasury securities that have a remaining maturity of at least three years and less than 10 years. They must also be investment grade and have $250 million or more of outstanding face value, the filing said.
Also, the securities in the index must be denominated in U.S. dollars and must be fixed-rate and nonconvertible. The index excludes state and local government series bonds and coupon issues that have been stripped from bonds. The index is market capitalization weighted and the securities in the index are updated on the last business day of each month.