Schwab Asset Management is launching an exchange-traded fund at a lower cost than comparable funds as
The Schwab Municipal Bond ETF has an expanse ratio of 0.03% and will start trading around Oct. 12.
"Like some of the other ETFs in the space, the fund offers broad exposure, high liquidity, investment-grade credit quality, and AMT-fee income, but does so with even more competitive pricing," said John Sturiale, head of Product Management and Innovation at Schwab Asset Management.
The launch helps Schwab to broaden its footprint in munis, allowing the firm to expand its line-up for investors who "favor the ETF vehicle and reach clients who are looking for broad muni exposure at a much lower price point."
With interest rates backing up recently, he said the company is meeting the growing demand for tax-free income.
In addition to the competitive pricing, the ETF "also generates some potential benefits by being launched into a higher yield, higher-coupon environment," he said.
The ETF, and its benchmark, are also designed to steer away from some of the sectors of the muni market that tend to have a more volatile credit profile, Sturiale noted.
After a record year for municipal exchange-traded funds in 2021, industry experts predict the growth will continue this year despite recent market volatility and outflows.
Muni ETFs have seen $4.37 billion of outflows since the week ending Aug. 3, per the Investment Company Institute, while Refinitiv Lipper reports $1.71 billion in outflows the same time period.
Retail investors, though, may be
Sturiale said Schwab takes a long-term view when it develops products for its clients.
"We're laser-focused on providing products that appeal to a broad cross-section of clients and their evolving needs/preferences over the long-term," he said. "The ups and downs of markets and flows are not a factor."
The Schwab Municipal Bond ETF is Schwab's eighth bond ETF and the 29th Schwab ETF, overall.
The Schwab Municipal Bond ETF's goal is "to track as closely as possible, before fees and expenses, the total return of the ICE AMT-Free Core U.S. National Municipal Index, which measures the performance of the U.S. AMT-free municipal bond market," according to Sturiale.
It seeks to provide income exempt from federal taxes and not subject to the federal AMT, he said.
The fund has a high-credit quality profile, investing only in investment-grade rated securities as part of a strategy that investors can use as a core component of their fixed income allocation, he said.
