Sector ETFs Surge at Schwab

Sector ETFs have grown 49% at Charles Schwab over the past year—the firm’s fastest growing asset category, according to a 3Q ETF snapshot Schwab officials discussed on a conference call on Friday.

Beth Flynn, vice president of ETF platform management at Schwab, disclosed that ETF assets at Schwab have reached $146 billion, up 35% over the past year and slightly above the level of ETF industry growth of 34%, according to research firm Strategic Insight.

Much of Schwab’s strong Sector ETF inflows were driven by registered investment advisors who moved clients heavily into equity energy, real estate and global real state ETFs in the third quarter. Indeed, global real estate ETFs proved popular with Schwab retail investors as well, leading all Sector ETFs with 44% of third-quarter retail investor inflows at the end of the third quarter, and financial ETFs also saw strong asset growth. Only sector ETFs focused on consumer defensive and utilities did not see double-digit growth so far this year.

At the end of last month, Schwab reduced its annual expense ratios on its fleet of 15 ETFs in an effort to attract more assets. For example, the Schwab U.S. Large Cap ETF (SCHX) charges just 4 basis points compared to 10 and 9 basis points for the comparable ETFs at Vanguard and State Street’s SPDRs unit.

The company launched the first Schwab ETFs in November 2009 and was the first brokerage to introduce commission-free online trading of ETFs in client accounts. For the end of the third quarter, the San Francisco-based brokerage said it had 8.7 million active brokerage accounts and total client assets of $1.89 trillion.

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