Schwab Reveals 8-bps Passive TDF With No Minimum
Schwab Target Index Funds are available to retirement plans of all sizes at 8 basis points with no minimums, and to individual investors at 13 basis points with just a $100 minimum.
Charles Schwab Investment Management announced the launch of Schwab Target Index Funds, described as a new series of index-based target date mutual funds constructed with low-cost Schwab ETFs as underlying investments.
Explaining the new product to PLANSPONSOR, Jake Gilliam, senior multi-asset class portfolio strategist at Charles Schwab Investment Management, suggested the new funds are the lowest-cost target date mutual funds available to employer-sponsored retirement plans, with an across-the-board expense ratio of just eight basis points (0.08%) and no minimum investment requirements regardless of plan size.
“Until now, receiving the most competitive pricing on target date funds could require a $100 million minimum investment or more from retirement plans,” he adds. “Outside of retirement plans, Schwab Target Index Funds are also among the lowest-cost target date mutual funds available to individual investors at 13 basis points (0.13%) with only a $100 minimum investment.”
According to Schwab, the new series includes funds with target retirement dates between 2010 and 2060 in five-year increments.
“Today marks an important day of democratization for employers, retirement plan participants and self-directed individual investors,” said Marie Chandoha, president and chief executive officer of Charles Schwab Investment Management. “With Schwab Target Index Funds, every retirement plan gets the same low price with no investment minimums. That means plan participants no longer have to pay for a more expensive target date fund just because they work at a smaller company.”
The underlying assets in Schwab Target Index Funds are primarily Schwab’s market-cap index ETFs, each of which has the lowest operating expenses in its respective Lipper category. “It is the result of this construction that allows CSIM to offer the new funds at such low prices,” Gilliam said, adding that the asset allocations in Schwab Target Index Funds are “generally about 5% more invested in equities compared with the market average at the beginning of the glide path, but moving to become about 5% more conservative near the retirement date.”
Schwab also offers TDFs as collective trust funds (CTFs), and makes them available exclusively to 401(k) plans and other qualified retirement plans through Charles Schwab Bank. Among them are Schwab Indexed Retirement Trust Funds (SIRT), which offer passive, index-based strategies. Effective November 1, 2016, plan sponsors also will be able to access the SIRT funds for eight basis points (0.08%) with no minimum investment required, which aligns with the pricing of the new mutual fund Schwab Target Index Funds.
More information is available at www.csimfunds.com.
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