Tuesday, March 10, 2009
Schwab Puts a Long Short Fund on Sale
News summary by MFWire's editors
The Schwab Hedged Equity Fund
just got cheaper. On Tuesday the San Francisco-based firm revealed a reduction in its expense ratios: from 200 basis points to 149 bps for Investor Shares and from 177 bps to 133 bps for Select Shares. Schwab made the change to the long/short fund on February 28.
"Schwab's commitment to giving investors the best array of mutual funds has led us to make this important change," stated Jeff Mortimer
, chief investment officer for Charles Schwab Investment Management. "We want to make this investment product more affordable to help our clients through the current tough period."
Company Press Release
SAN FRANCISCO, Mar 10, 2009 (BUSINESS WIRE) -- Charles Schwab Investment Management, the asset management arm of the Charles Schwab Corporation, announced an important change to one of its mutual fund offerings by lowering the expense ratio of the Schwab Hedged Equity Fund (SWHIX, SWHEX).
As part of the company's continued focus to provide investors with competitive mutual fund choices, the Hedged Equity Fund's cap on its net operating expense ratio for Investor Shares has been reduced to 1.49 percent from 2.0 percent. The cap on expenses for Select Shares of the fund was lowered to 1.33 percent from 1.77 percent.(1) The new expenses are significantly lower than the Morningstar Long/Short Fund category average, which is 2.16 percent.(2)
"Schwab's commitment to giving investors the best array of mutual funds has led us to make this important change," said Jeff Mortimer, chief investment officer for Charles Schwab Investment Management. "Specifically, in this extraordinary market environment our hedged equity fund strategy has worked as designed by providing downside protection that allowed us to outperform our benchmark with half the market risk.( 3) We want to make this investment product more affordable to help our clients through the current tough period."
The Schwab Hedged Equity Fund uses a "long/short" investment strategy. Fund managers use Schwab Equity Ratings to help in the fund's portfolio selection, taking long positions in stocks they believe will outperform the market and shorting lower-rated equities.
"Taken together, these higher- and lower-rated securities help drive performance, with the added benefit of lower portfolio volatility in a very volatile market," Mortimer said.
The new expense ratios for the Schwab Hedged Equity Fund took effect on February 28, 2009.
Performance data quoted represents past performance and does not indicate future results. Visit schwabfunds.com for month-end performance information. Current performance may be lower or higher. Investment value will fluctuate, and shares when redeemed, may be worth more or less than original cost.
Before investing, please read carefully and consider information contained in the prospectus, including investment objectives, risks, charges and expenses. Request a prospectus at schwabfunds.com or by calling 1-877-824-5615. Please read the prospectus carefully before investing.
The fund's long positions could decline in value at the same time that the value of the stocks sold short increase; thereby increasing the Fund's overall potential for loss. The fund's short sales may result in a loss if the price of the borrowed securities rise and it costs more to replace the borrowed securities.
(C)2009 Charles Schwab & Co., Inc.
Jeff Mortimer is Senior Vice President and Chief Investment Officer of Charles Schwab Investment Management, Inc (CSIM). He has overall responsibility for Schwab Funds and managed accounts. He joined CSIM in October 1997. Mortimer has more than 15 years experience in asset allocation analysis and mutual fund selection. He earned an MBA degree, with an emphasis in finance, from the University of Chicago Graduate School of Business in 1992.
Larry Mano is a Managing Director and Portfolio Manager of CSIM. Prior to joining CSIM in 1998, he was a vice president and principal at Wilshire Associates, Inc. Mano earned his Bachelor of Science in Business Administration with an emphasis in Investments and Finance at California State University, Long Beach.
Vivienne Hsu is a Managing Director and Portfolio Manager of CSIM. Hsu joined CSIM in August 2004 from American Century Investment in Mountain View, California, where she was vice president, portfolio manager and senior quantitative analyst. She holds an MBA degree from the Haas School of Business at the University of California, Berkeley.
Paul Alan Davis is a Managing Director and Portfolio Manager of CSIM. Paul Alan Davis is a member of the Schwab Funds(R) team responsible for approximately $12 billion in assets in mutual funds and managed accounts based on Schwab Equity Ratings(R). In addition, he conducts research and enhances quantitative strategies for Schwab Funds. Davis earned his Bachelor of Science degree in finance and his Master of Business Administration degree from California State University, Sacramento.
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 more than $235 billion in assets under management as of December 31, 2008. 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 currently manages 67 mutual funds.
About Charles Schwab
The Charles Schwab Corporation is a leading provider of financial services, with more than 300 offices and 7.4 million client brokerage accounts, 1.5 million corporate retirement plan participants, 468,000 banking accounts, and $1.1 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, 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 Advisor Services division. The Charles Schwab Bank (member FDIC) provides banking and mortgage services and products. More information is available at www.schwab.com. (0309-8026)
(1) Reduction is effective as of February 28, 2009. Schwab and the adviser have agreed to limit the net operating expenses (excluding interest, taxes and certain non-routine expenses and expenses for dividends and interest paid on securities sold short) of the Investor Shares and Select Shares to 1.49% and 1.33%, respectively, through 2/27/2011. The fund's dividend expenses are 0.39%.
(2 )Data as of 1/31/09.
(3 )Fund performance as of 12/31/08 for 1, 3 and 5 year periods was: -20.51%, -4.89% and 2.31% respectively. S&P 500 performance as of 12/31/08 for 1, 3 and 5 year periods was -36.99%, -8.35% and -2.18% respectively. Total return set forth reflects the waiver of a portion of the Fund's advisory or administrative fees for certain periods since the inception date. In such instances, and without the waiver of fees, total return would have been lower. The beta of the fund's Select Shares over the same 1, 3 and 5 year period was .50, .48, and .54 respectively. Beta is a measure of the volatility of a stock relative to the overall market. A beta of less than one indicates lower historical risk than the market; a beta of more than one indicates higher risk than the market.
Neil Anderson, Managing Editor
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