Charles Schwab Investment Management is planning its first actively managed ETF,which also will be its first fund based onenvironmental, social and governancecriteria.
The Schwab Ariel ESG ETF StrategicETF is being subadvised by ArielInvestments, which will provide expertise on ESG; the new fund also will notdisclose its actual holdings on a dailybasis, as traditional ETFs do.
In its latest SEC filing, CSIM joinsa growing list of asset managers withactively managed ETFs, includingsemi-transparent funds, and with ESG-focused funds.
The Schwab Ariel ESG ETF StrategicETF is the firm’s first foray into theESG space, though its platform providesaccess to those types of funds offered byother asset managers.
The new fund will invest primarily insmall- and mid-cap stocks that fall intothe range of the Russell 2500 index andmeet criteria set by Ariel Investments’ESG strategy. It will trade on the NYSE,according to a filing with the SEC.
The ETF will not disclose its actualholdings on a daily basis but insteadwill post a daily proxy portfolio, which“is designed to reflect the economicexposures and risk characteristics of thefund’s actual holdings,” including thepercentage weight of those holdings,according to the SEC filing. Actual holdings will be disclosed quarterly with a60-day lag via periodic regulatory filings.
As the subadvisor of the ETF, Ariel
Investments will be responsible for the
fund’s day-to-day portfolio management
services. To do so, it will use a disci-
plined bottom-up approach that picks
securities based on companies’ financial
performance, as well as their material
ESG risks and opportunities — includ-
ing risks at the company and industry
level — the filing says.
Ariel’s specialized ESG analyst teamalso works with companies to helpthem improve their ESG performance.In addition to the analyses of that specialized team, Ariel uses over 160 datapoints from public, third-party and proprietary sources that are part of its custom-built ESG research platform.
The planned ETF’s fees were not disclosed in the Schwab Ariel SEC filing.
ETF ADVISORBy Bernice Napach
Schwab Plans First Actively Managed ETF
Also, ETFs set new inflows record in first quarter 2021.
U.S. ETF Inflows Set New Recordin First Quarter
U.S.-listed ETF inflows are reaching record levels. Nearly $100 billionpoured into U.S. ETFs in March, pushingfirst quarter 2021 flows to a record $251billion, according to State Street GlobalAdvisors’ ETF Flash Flows report.
If this growth rate continues, ETFscould attract close to $1 trillion by year-end — or about $950 billion — whichwould be nearly double 2020’s record$505 billion of inflows, writes MatthewBartolini, head of SPDR AmericasResearch at State Street Global Advisors.
“That’s a big-time projection, andunlikely to occur … [but] even if ETFs wereable to amass the long-term five-year median monthly flows for the next nine months,the full year 2021 figures could net outaround $553 billion … [which] would make2021 a record flow year, surpassing 2020 byover $40 billion,” explained Bartolini.
First quarter ETF inflows were morethan four times the typical quarterlyaverage, he says.
Equity ETFs experienced much of the
demand for U.S. ETFs in March and in
the first quarter, with inflows of $89 bil-
lion and $210 billion, respectively. Fixed
income flows were $13 billion in March
and $44.2 billion in the first quarter,
even as close to two-thirds of bond ETFs
positive negative returns on the quarter
due to rising rates. Commodity ETFs
saw net outflows of $6.2 billion, with
over $4.5 billion withdrawn in March
alone, primarily from gold-related ETFs.
Among equity ETFs, U.S. stock ETFs
led with $127.7 billion in first quarter
inflows versus about $80 billion for non-
U.S. ETFs. Among fixed income ETFs,
aggregate bond ETFs — which include
government and corporate bonds and
mortgage-backed bonds — led the pack,
followed by inflation-protected bonds.
Large-cap and small-cap ETFs wereamong the most popular U.S. stock ETFsalong with value ETFs.
Bernice Napach can be reached at