Schwab U.S. Large-Cap Growth ETF SCHG constructs a market-cap weighted portfolio of fast-growing U.S. large-cap stocks with a low fee. Despite being top-heavy, the fund broadly represents the large-growth opportunity set and comes with a fee advantage that should translate into sound peer-relative performance. It earns a Morningstar Medalist Rating of Silver.

The fund replicates the Dow Jones US Large-Cap Growth Total Stock Market Index, which selects faster-growing large-cap stocks and weights them by market cap. Its holdings tend to trade at higher multiples than the market, a reflection of their lofty long-term outlooks that’s also a source of risk. These firms may not live up to the expectations embedded in their higher valuations, which could hurt performance. 

U.S. large-cap stocks attract widespread attention and are easy to trade. Their prices quickly reflect new information, so market-cap weighting is sensible for this segment of the market. It harnesses the market’s collective wisdom of the relative value of each holding and should prove tough to beat.

The fund accurately mimics the contours of its average peer. Its sector allocations approximate the Morningstar Category average, except for a larger stake in technology stocks. Some of these tech giants performed poorly in 2022, bringing the fund’s average valuation down to a level that’s comparable to the average of its peers. Its growth tilt also aligns with that of its average peer, and it has consistently landed in the large-growth corner of the Morningstar Style Box.

The fund’s miniscule fee, broad representation of the available opportunity set, and low cash drag have provided it with a competitive edge over its peers. The fund outperformed the category average by 2.75 percentage points annualized over the past 10 years through April 2023.

Analyst Rating

Cheap, low-turnover exposure to large-growth stocks.

Associate Analyst

Mo'ath Almahasneh

Microsoft

Apple

NVIDIA

Amazon

Alphabet

Eli Lilly

Broadcom

Tesla

This market-cap weighted portfolio accurately represents the large-growth opportunity set, earning an Above Average Process Pillar rating.

Above Average

Process

Schwab has strengthened its equity index management team over the past few years, under the leadership of Chris Bliss. It earns an Above Average People Pillar rating.

Bliss leads Schwab's equity index team. Since joining Schwab from BlackRock in 2016, Bliss has strengthened the team by increasing specialization and automating more of the managers' workflow. This allows the managers to spend less time on routine tasks and helps them better identify and resolve issues that require their attention. Ferian Juwono, Sabya Sinha, Jeremy Brown, and Agnes Zau join Bliss as named managers on this fund. The named managers have support from associate managers who help the team prepare for index rebalances.

The team looks for ways to slightly improve returns by handling some corporate actions differently from the index. The managers can take advantage of those opportunities when they occur, under tight tracking-error constraints.

Schwab compensates its managers based on tracking error and compliance with risk management, which helps align their interests with investors'.

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 U.S. Large-Cap Growth ETF

SCHG tracks the Dow Jones U.S. Large-Cap Growth Total Stock Market Index, which selects growth stocks from 750 of the largest U.S. companies by market cap.

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