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Rating:Schwab Branches Out Into Sector Funds Not Rated 3.0 Email Routing List Email & Route  Print Print
Monday, May 15, 2000

Schwab Branches Out Into Sector Funds

Reported by Jason Shank

Charles Schwab Investment Management (CSIM), the company's asset management unit, has grown by leaps and bounds since its beginnings in 1991, now ranking number 14 in assets under management in the US.
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The unit initially stuck to a simple strategy of introducing new index funds, and recently has been adding asset allocation funds as well -- the strategy, for the most part, keeps Schwab's OneSource affiliated advisors from grumbling too much about Schwab's funds competing with the funds that they sell.

The newest funds to be added to the San Francisco firm's fund family, which stray somewhat from the firm's strategy so far, are called the Schwab Focus Funds -- four sector funds concentrating on the some of most popular as well as volatile economic sectors: communications, financial services, health care, and technology.

A company spokesperson hesitated to call them actively managed funds, saying they were "closer to enhanced index funds." And a propietary computer screening process is used to narrow down the universe of funds within each sector and re-balance the portfolios, but the four funds are as close to actively managed as Schwab has come so far.

Jerry Chafkin, CSIM president and chief operating officer, said that Schwab had looked at the marketplace and talked to its customers, and that the new funds were what was being asked for. However, he cautioned that the new funds "are not considered a complete investment program."

Both the new Health Care and Communications funds will invest in only 50 companies in their chosen sectors , while the Financial Services and Technology Funds will each invest in approximately 100. Each will have an expense ratio of 0.89%, and a substantial redemption fee of 0.75% for shares redeemed within six months of purchase.

The four new funds will be co-managed by Geri Hom, who manages Schwab's five equity index funds, and Larry Mano, who is also responsible for the day-to-day management of the equity index funds and also co-manages the Institutional Select Funds. 

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