SAN FRANCISCO, April 2 /PRNewswire-FirstCall/ -- With the introduction
today of three Fundamental Index(TM) mutual funds from Schwab Funds(R),
investors have a new alternative to traditional index funds. The Schwab
Fundamental US Large Company Index Fund, the Schwab Fundamental US
Small-Mid Company Index Fund, and the Schwab Fundamental International
Large Company Index Fund are based on the FTSE RAFI(TM) Index Series(1).
The new funds leverage the groundbreaking research of Robert D. Arnott and
his company, Research Affiliates, as well as FTSE Group's global indexing
expertise.
The Fundamental Index approach attempts to offset the risks of
overexposure to inflated or understated valuations of individual equities
that may occur in market capitalization-weighted indexing, subjecting an
investor to the extremes of market cycles. Unlike traditional market
capitalization weighted indexes, the FTSE RAFI Index Series selects and
weights stocks based on four fundamental financial measures that better
reflect underlying company strengths and potential for future performance:
sales, cash flow, book value and dividends. This different approach
provides the potential for higher investment returns with lower volatility.
"The Fundamental Index methodology is the most important innovation in
passive investing since indexing was popularized in the 1970s," said
Charles R. Schwab, chairman and CEO of The Charles Schwab Corporation.
"Investors who need broad exposure to markets and diversification within
their portfolios at a low cost are going to appreciate this new investment
tool and its potential to capture greater return with lower volatility. I
think we'll look back at this innovation as a watershed moment for the
mutual fund investor and for the $5 trillion index fund industry."
Robert D. Arnott first introduced his concepts of fundamentally-derived
indexes with the publication of his seminal research in 2005(2) in which he
analyzed 45 years' worth of U.S. and international market data comparing
results of capitalization-weighted versus fundamental indexing. His
research laid the groundwork for the FTSE RAFI Indexes.
"The Fundamental Index reflects a more rational view of a company's
success by looking at factors that are reliable signs of a company's
strength, such as sales and profits, rather than a narrow view focused
simply on how much the market thinks a company is worth," said Mr. Arnott.
"Historical analysis shows that the traditional cap-weighting approach
tends to overweight overvalued stocks and underweight undervalued stocks.
While conventional indexes mirror the composition of the broad stock
market, and so are drawn in by the fads, bubbles and crashes of the market,
the Fundamental Index(TM) mirrors the composition of the broad economy."
By testing the concept over the last one-, three-, five-, 10- and
15-year periods, Arnott found that the FTSE RAFI U.S. 1000 Index would have
outperformed both the Russell 1000(R) Index and the S&P 500(R) in all time
periods.
"We are pleased that FTSE's partnership with Schwab makes it possible
for investors to reap the benefits of the FTSE RAFI index for the first
time in a non-exchange-traded equity mutual fund," said Jerry Moskowitz,
president, FTSE Americas. "Now investors have access to the benefits of
indexing, but with the advantage of achieving potentially higher investment
returns."
Schwab's Fundamental Index funds are available through Schwab on a
no-load, no transaction fee basis in three share classes. The Investor
Shares have an expense ratio of 0.59 percent per year ($5.90/$1,000
invested) and a $2,500 minimum investment ($100 for custodial accounts,
$1,000 for retirement and educational accounts); Select Shares have
expenses of 0.44 percent and a $50,000 minimum. Because the funds were
designed with investment advisors in mind, Schwab Funds is also offering an
Institutional share class with expenses of 0.35 percent and a $500,000
minimum investment. Advisors may aggregate client funds to meet the
investment minimums for Select and Institutional Shares. The share class
expense ratios are guaranteed through February 27, 2009 (excluding
interest, taxes and certain non-routine expenses).
Jeff Mortimer, senior vice president and chief investment officer of
equities for Charles Schwab Investment Management, Inc., has overall
responsibility for the management of the Schwab Fundamental Index(TM)
Funds. He joined Schwab in 1997 after working for nine years in asset
allocation and manager selection. Larry Mano, managing director and
portfolio manager, and Tom Brown, portfolio manager, are responsible for
day-to-day co-management of the funds. More information is available at
http://www.schwabfunds.com/fundamentalindex/
About Charles Schwab Investment Management
Founded in 1991, Charles Schwab Investment Management, Inc., a
subsidiary of the Charles Schwab Corporation, is one of the nation's
largest asset management companies with $197 billion in assets under
management as of Feb. 28, 2007. It is among the country's largest money
market fund managers and is the third- largest provider of retail index
funds. In addition to managing Schwab proprietary funds, CSIM provides
oversight for the institutional-style, sub- advised Laudus Fund family.
CSIM also manages over $1.3 billion in separately managed accounts as of
Feb. 28, 2007. CSIM currently manages 69 mutual funds including 33 actively
managed funds and five separate account model portfolios.
About Charles Schwab
The Charles Schwab Corporation (SCHW) is a leading provider of
financial services, with more than 300 offices and 6.8 million client
brokerage accounts, more than one million corporate retirement plan
participants, 150,000 banking accounts, and $1.3 trillion in client assets.
Through its operating subsidiaries, the company provides a full range of
securities brokerage, banking, money management and financial advisory
services to individual investors and independent investment advisors. Its
broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC,
http://www.sipc.org), and affiliates offer a complete range of investment
services and products including an extensive selection of mutual funds;
financial planning and investment advice; retirement plan and equity
compensation plan services; referrals to independent fee-based investment
advisors; and custodial, operational and trading support for independent,
fee-based investment advisors through its Schwab Institutional division.
The Charles Schwab Bank, N.A. (member FDIC) provides banking and mortgage
services and products. CyberTrader(R), Inc. (member SIPC,
http://www.sipc.org) is an electronic trading technology and brokerage firm
providing services to highly active, online traders. More information is
available at http://www.schwab.com. (0407-6011)
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT
INDICATE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT WILL FLUCTUATE: THEREFORE, REDEMPTION OF SHARES MAY RESULT IN
LOSS OF PRINCIPAL.
INVESTORS SHOULD CONSIDER CAREFULLY INFORMATION CONTAINED IN THE MUTUAL
FUND PROSPECTUS, INCLUDING INVESTMENT OBJECTIVES, RISKS, CHARGES AND
EXPENSES. YOU CAN REQUEST A MUTUAL FUND PROSPECTUS BY CALLING SCHWAB AT
800-435-4000. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
THE SCHWAB FUNDAMENTAL INDEX FUNDS DO NOT YET HAVE PERFORMANCE.
PERFORMANCE OF THE FTSE RAFI INDEXES INCLUDE DATA THAT PREDATE THE
INCEPTION OF THESE INDEXES. THEREFORE, PERFORMANCE MEASUREMENTS FOR THE
INDEX PRIOR TO THE INCEPTION DATES ARE THE RESULTS OF BACK TESTED DATA AND
REPRESENT WHAT THE INDEX MIGHT HAVE ACHIEVED, BUT DOES NOT REFLECT THE
ACTUAL PERFORMANCE OF THE INDEX.
INDEX FIGURES DO NOT INCLUDE TRADING AND MANAGEMENT COSTS, WHICH WOULD
LOWER PERFORMANCE OF THE FUNDS. INDEXES ARE UNMANAGED, AND YOU CANNOT
INVEST IN THEM DIRECTLY. ALTHOUGH THE FUNDS SEEK TO DUPLICATE THE
METHODOLOGY AND PERFORMANCE OF THE FTSE(TM) RAFI(TM) INDEXES, EXPENSES
TAXES, TRADING COSTS AND ANY ADJUSTMENT TO THE INDEX METHODOLOGY WILL CAUSE
THE TWO TO HAVE DIFFERENT PERFORMANCE RESULTS.
The Fund is not in any way sponsored, endorsed, sold or promoted by
FTSE Limited ("FTSE") or by the London Stock Exchange Plc ("Exchange") or
by the Financial Times Limited ("FT") or by Research Affiliates LLC ("RA"),
and neither FTSE nor Exchange nor FT nor RA makes any warranty or
representation whatsoever, expressly or implicitly, as to the results to be
obtained from the use of the FTSE(TM) RAFI(TM) 1000 Index ("Index") and/or
the figure at which the said index stands at any particular time on any
particular day or otherwise. The Index is compiled and calculated by FTSE
in conjunction with RA; however, neither FTSE nor Exchange nor FT nor RA
shall be liable (whether in negligence or otherwise) to any person for any
error in the index, and neither FTSE nor the Exchange nor FT nor RA shall
be under any obligation to advise an person of any error therein. FTSE, Rob
Arnott and Research Affiliates are not affiliated with Charles Schwab & Co.
its subsidiaries and affiliates and parents. The Fundamental Index(TM) and
RAFI(TM) trade names and patent pending concept are the exclusive property
of Research Affiliates LLC and are used by Charles Schwab Investment
Management under license through FTSE(TM). Each Fund offers Select and
investor share classes with lower investment minimums.
(1) FTSE is an independent company jointly owned by The Financial Times
and the London Stock Exchange and is the global distributor of the
FTSE RAFI Indexes. It calculates over 100,000 indexes covering 98% of
the world's investable market capitalization. It is estimated that
$2.5 trillion of assets are under management globally using FTSE
indexes. RAFI is the Research Affiliates Fundamental Index.
(2) Financial Analysts Journal, March/April 2005
SOURCE Charles Schwab
 back to top
Related links:
http://www.schwab.com/
CONTACT:
Sondra Harris of Charles Schwab,
+1-415-636-3292, or sondra.harris@schwab.com; or Melissa Murphy
of SunStar PR, +1-703-894-1056, or mmurphy@isunstar.com, for
Charles Schwab
|
