Charles Schwab plans to launch a new actively managed exchange-traded bond fund as the asset management industry places increasing emphasis on bundling active strategies in an ETF format.

The Schwab Core Bond ETF will be the company’s third active ETF. The Core Bond ETF aims to provide 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 intends to make the fund available on January 13, 2025. A company spokeswoman declined to comment beyond the filing.

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

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

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

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Although active strategies have generally suffered outflows in recent years, active ETFs have been a bright spot and a lifeline for some asset managers. Active mutual funds have seen outflows of more than $300 billion so far this year, while active ETFs have seen inflows of more than $190 billion, according to a new report from research firm Cerulli Associates based on Morningstar data. Passive ETFs are still outperforming their active competitors with inflows of nearly $500 billion.

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And overall, active ETF launches this year could surpass the record 352 set in 2023, Morningstar said. Other asset management giants, including BlackRock, Pimco and Vanguard, launched active fixed income ETFs this year and in early 2024. Asset managers have launched 328 ETFs this year, including 126 stocks and 73 fixed income ETFs. The companies with the most launches include Innovator, PGIM and First Trust.

Schwab is not the only company active in the ETF space. For example, Vanguard has launched several new actively managed fixed income ETFs in recent years, part of a broader effort to expand its offering of active funds.

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In August, the asset manager announced plans to add two active municipal bond ETFs: Vanguard Core Tax-Exempt Bond and Vanguard Short Duration Tax-Exempt Bond. Like other Vanguard funds, the ETFs will feature low expense ratios of 0.12%.

Write to Andrew Welsch at [email protected]

Original source of the article: Schwab is launching a new active bond fund in the middle of the ETF year