Charles Schwab shaves fees on five core fixed income ETFs

Charles Schwab has trimmed the fees on five fixed income ETFs that provide core Treasury and corporate bond exposure.

While each ETF has had its expense ratio shaved by just one basis point, from 0.05% to 0.04%, the ETFs in question are relatively substantial in terms of assets under management.

The funds benefiting from reduced fees range in size from $100 million to $9 billion in assets under management. Collectively, they house $13.5bn.

Following the fee cuts, investors in the ETFs stand to save approximately $1.35m per year in annual management fees at current AUM levels.

Three of the ETFs target different segments of the US Treasury yield curve – they are the $9bn Schwab Short-Term US Treasury ETF (SCHO US), the $3.4bn Schwab Intermediate-Term US Treasury ETF (SCHR US), and the $100m Schwab Long-Term US Treasury ETF (SCHQ US).

The remaining two funds focus on USD-denominated investment-grade corporate bonds, also with specific remaining maturities – they are the $700m Schwab 1-5 Year Corporate Bond ETF (SCHJ US) and the $340m Schwab 5-10 Year Corporate Bond ETF (SCHI US).

The fee cuts follow less than one month after Vanguard trimmed the expense ratios on nine of its core fixed income ETFs. Among those products were five ETFs that provide near-identical exposures to the above Schwab funds and also had their expense ratios lowered to 0.04%.

Schwab’s quick response to Vanguard’s move highlights how, despite core portfolio ETFs already charging near-rock-bottom fees, competition remains fierce amongst low-cost ETF providers. With bond yields trading at historic lows, tiny differences in expense ratios continue to make significant impacts on performance.