Charles Schwab plans to launch a new actively managed exchange-traded fixed income fund, which comes as the asset management industry places increasing emphasis on packaging active strategies in an ETF format.

The Schwab Core Bond ETF will be the company’s third active ETF. The Core Bond ETF seeks total return while generating income by investing in U.S. debt securities, such as corporate bonds, municipal bonds and Treasury bonds, according to the company’s filing with the Securities and Exchange Commission. Schwab plans to make the fund available on January 13, 2025. A company spokeswoman declined to comment beyond the filing.

Schwab is one of the nation’s largest asset management and brokerage firms, with approximately $10 trillion in assets split roughly evenly between retail investors and independent financial advisors.

Schwab launched two other active ETFs, Schwab Ariel ESG ETF and Schwab Ultra-Short Income, in November 2021 and August 2024, respectively. The firm’s asset management unit launched its first ETF in 2009 and has more than $1 trillion in assets under management.

The company’s launch of the Core Bond ETF could come at the right time, as fixed income has become a more attractive part of investors’ portfolios after years of rock-bottom interest rates. The new fund also comes at a time when the asset management industry is adapting to the tectonic shifts that have reshaped the business. Fund costs have fallen steadily, putting pressure on the profitability of asset managers. Investors have also come to prefer passive strategies over active strategies, and ETFs over mutual funds.

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While active strategies have generally suffered outflows in recent years, active ETFs have been a bright spot and a lifeline for some asset managers. So far this year, active mutual funds have suffered more than $300 billion in outflows, while active ETFs have picked up more than $190 billion in inflows, according to a new report from research firm Cerulli Associates, based on data from Morningstar. Passive ETFs continue to outpace their active peers with inflows of nearly $500 billion.

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And overall, this year’s active ETF launches could surpass the 2023 record of 352, according to Morningstar. Other asset management giants, including BlackRock, Pimco and Vanguard, launched active fixed income ETFs that year and in early 2024. Asset managers have introduced 328 ETFs this year, of which 126 are equities and 73 are fixed income. Companies with the most launches include Innovator, PGIM and First Trust.

Schwab isn’t the only company getting into the ETF sector. Vanguard, for example, has launched several new actively managed fixed income ETFs in recent years, part of a broader effort to expand its active fund offerings.

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In August, the asset manager unveiled plans to add two active muni bond ETFs: Vanguard Core Tax-Exempt Bond and Vanguard Short Duration Tax-Exempt Bond. Like other Vanguard funds, the ETFs will have a low expense ratio of 0.12%.

Write to Andrew Welsch at [email protected]

Original article source: Schwab launches new active bond fund amid ETF Year banner