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Rating:Putting the Brakes on Volatility Not Rated 3.0 Email Routing List Email & Route  Print Print
Wednesday, August 07, 2002

Putting the Brakes on Volatility

by: Tony Pennino

Schwab is launching a new fund, the Schwab Hedged Equity Fund, a spokesperson at the firm. The fund will invest in both long and short positions in U.S. equities.

The fund also utilizes the Schwab Equity Ratings system. Equity Ratings assigns letter grades for stocks ranging from A to F, with A being the best and F being the worst. Fund managers will use Equity Ratings as well as other analytical tools at their disposal to pick the stocks for the fund. The Schwab Core Equity Fund, which was launched late last month, also makes use of that system.

Schwab is looking to target this new product to investors who may feel skittish about the recent volatility in the stock markets. The fund's managers are looking to buy stocks they perceive will outperform the market while shorting those equitiies they believe will underperform in the market. Stocks with an A or B rating will be bought, while those with a D or an F rating will be shorted.

"Many investors and independent advisors are interested in hedging strategies that extract value from stocks that are expected to under-perform the market; but access to traditional hedge funds carries a high price tag as well as substantial minimum investments," stated Jeff Lyons, executive vice president, Schwab Asset Management Products and Services. "We believe investors will be attracted to the convenience, familiarity and lower cost of a traditional mutual fund."

The fund is currently in a subscription phase, a period which will end on August 30, 2002. Starting on September 3, the fund will begin operations. The price of the fund during this current phase will be $10.

The fund will be managed by Robin Jackson, senior vice president of the firm's captial markets, and Elie Spiesel, vice president of electronic trading. Both executives joined Schwab in 2001 when the California Colossus acquired Bunker Capital Management

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