Schwab Fundamental Intl Sm Co ETF earns a Morningstar Medalist Rating of Neutral with strength in areas such as People offset by weaker spots such as Process. The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy gets a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in yield exposure and momentum exposure compared with category peers. Low yield exposure is attributed to holding fewer stocks with high dividend or buyback yields -- instead, typically holding companies with a stronger focus on growth opposed to returning capital. And low momentum exposure is rooted in holding stocks that are not currently on a winning streak and instead holding those that managers believe are undervalued. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Schwab Fundamental Intl Sm Co ETF earns a Below Average Process Pillar rating. 

The process is bolstered by tracking an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. However, the rating is held back by the fund's mediocre long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. 

 This strategy tends to hold smaller, higher-growth companies compared with its average peer in the Foreign Small/Mid Value Morningstar Category. Looking at additional factor exposure, this strategy has consistently had less exposure to yield compared with its Morningstar Category peers during recent years. Its preference for stocks with lower yields may well lead to a growthier portfolio. However, growth stocks court additional risks if their forecasts do not come to fruition and are often more volatile than companies with stable dividends. In the latest month, the strategy was also less exposed to the Yield factor compared with Morningstar Category peers. This strategy has also demonstrated a bias towards lower-momentum stocks over its peers over the past years. Momentum tends to be a powerful force in asset markets, as stocks that have done well recently usually continue to do so in the short term. As top performers change, this can sometimes be hard to capture without higher trading costs. Similarly, in recent months, the strategy also had less exposure to the Momentum factor than peers. In addition, this strategy has exhibited a tilt toward higher-volatility stocks in these years, meaning companies that have a higher historical standard deviation of returns compared with peers. Such stocks tend to rise faster and fall harder than the broad market. High-volatility exposure contributes to stronger performance during bull markets, but often at the cost of losing more during downturns. In recent months, however, the strategy had less Volatility factor exposure over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in industrials and real estate relative to the category average by 4.5 and 3.6 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and energy, underweight the average by 5.3 and 3.3 percentage points of assets, respectively. The strategy owns 1,737 securities and its assets are more dispersed than peers in the category. In particular, 2.7% of the fund’s assets are concentrated in the top 10 fund holdings, as opposed to the typical peer's 13.6%.

Below Average

Process

Schwab Fundamental Intl Sm Co ETF benefits considerably from its team, earning it an Above Average People Pillar rating. There are two managers listed on the fund: Christopher Bliss, David Rios. Experience on the team is abundant, with 12 years of average portfolio management experience. Together, they manage a total of four strategies, with an asset-weighted average Morningstar Medalist Rating of Neutral. This means, in aggregate, the team falls short and will struggle to produce positive alpha relative to the category median.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Above Average

People

Under new but familiar leadership, Schwab Asset Management Solutions maintains its Above Average Parent Pillar rating. 

After the former Schwab CEO was named president of parent Charles Schwab Corporation in 2022, Omar Aguilar, a Schwab CIO since 2011, was promoted to CEO while retaining his CIO role. Under Aguilar's leadership, Schwab remains focused on core-oriented strategies: More than 95% of the firm's fund assets under management are in low-cost index products that are suitable for the biggest portions of investors' portfolios. Index-tracking remains are par with the best teams in the business.

Recent strategic initiatives show a desire to grow in an increasingly competitive landscape. Forays into direct indexing—which customizes separate accounts through tax-loss harvesting, values-based requests, or other client preferences—as well as some new launches, such as Schwab Municipal Bond ETF, fit the firm's strategic focus and are natural extensions of its capabilities. However, other recent launches in more-niche asset classes, including Schwab Crypto Thematic ETF, contrast previous refusals to enter trendy markets. 

Schwab benefits from its association with its parent's brokerage business. This arrangement and efficient operation allow funds to grow quickly and keep fees in line with larger competitors. Historically, Schwab has been quick to match competitor fee cuts and now sports a 0.09% asset-weighted average fee across its mutual funds and ETFs.

Parent

Schwab Fundamental International Small Co. Index ETF

FNDC tracks a fundamentally-selected and -weighted Russell index of small firms in developed ex-US markets based on adjusted sales, retained operational cash flow, and dividends/buybacks.

Making its debut on 08/13/2013, smart beta exchange traded fund Schwab Fundamental International Small Company Index ETF (FNDC) provides investors broad exposure to the Broad Developed World ETFs category of the market.

Is Schwab Fundamental International Small Company Index ETF (FNDC) a Strong ETF Right Now?

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WESTLAKE, Texas--(BUSINESS WIRE)--Schwab Asset Management®, the asset management arm of The Charles Schwab Corporation, today announced index and fund name changes for the Schwab Fundamental Index* ETF and mutual fund suite, effective on or about June 21, 2024. Shareholders in the ETFs and mutual funds do not need to take any action. The changes are part of Schwab Asset Management's continual review of its product set to refine and enhance its product line-up. A total of 12 Schwab Fundamental I.

Schwab Asset Management Announces Index and Fund Name Changes to Its Fundamental Index ETF and Mutual Fund Family

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Schwab International Small-Cap Equity ETF

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Although they've performed well for decades, international small caps have been out of favor for at least 10 years.

News for Schwab Fundamental International Small Co. Index ETF ETF (FNDC)