Schwab Fundamental Emerging Markets Large Company Index ETF (FNDE)FNDE

ETF Schwab Fundamental Emerging Markets Large Company Index ETF (SCHE)

Profile:

• Focus: SCHE seeks to track the performance of the Solactive GBS Emerging Markets Large & Mid Cap USD Index, which comprises large and mid-cap stocks from emerging markets across various sectors.
• Asset allocation: The ETF invests primarily in equities, with a focus on large and mid-sized companies.
• Investment strategy: SCHE uses a passive indexing approach, aiming to replicate the performance of its underlying index through full replication.

Objective:

• The primary objective of SCHE is to provide investors with exposure to a diversified basket of large and mid-cap stocks in emerging markets, aiming to capture potential long-term growth opportunities in these regions.

Issuer:

• Schwab Asset Management, Inc.: A subsidiary of Charles Schwab Corporation, a leading financial services company with a solid reputation for reliability and expertise in the investment management industry.
• Management: The ETF is managed by an experienced team of professionals at Schwab Asset Management, with a proven track record in passive index fund management.

Market Share:

• SCHE holds a 0.3% market share within the Emerging Markets Equity ETFs category.

Total Net Assets:

• As of October 27, 2023, SCHE has approximately $1.67 billion in total net assets.

Moat:

• Low fees: SCHE's expense ratio of 0.15% is significantly lower than the average for emerging market ETFs, making it a cost-effective option for investors seeking exposure to this asset class.
• Experienced management: The ETF benefits from the expertise and resources of Schwab Asset Management, a well-established and reputable asset manager.
• Broad diversification: SCHE provides exposure to a wide range of companies across various sectors and countries within emerging markets, offering investors a well-diversified portfolio.

Financial Performance:

• Since its inception in 2013, SCHE has delivered an annualized return of 11.44%.
• Over the past 3 years, the ETF has outperformed its benchmark index, the Solactive GBS Emerging Markets Large & Mid Cap USD Index, by 0.75% per year.

Growth Trajectory:

• Emerging markets are expected to continue experiencing strong economic growth in the coming years, fueled by factors such as a growing middle class, increasing urbanization, and technological advancements. This bodes well for the future performance of SCHE.

Liquidity:

• SCHE has an average daily trading volume of approximately $11 million, making it a relatively liquid ETF.
• The bid-ask spread is typically tight, averaging around 0.02%, indicating low transaction costs.

Market Dynamics:

• Global economic growth, trade tensions, and political instability in emerging markets can impact SCHE's performance.
• Investor sentiment and market volatility can also affect the ETF's short-term fluctuations.

Key Competitors:

• iShares Core MSCI Emerging Markets IMI ETF (IEMG) - Market share: 25.9%
• Vanguard FTSE Emerging Markets ETF (VWO) - Market share: 22.9%
• SPDR Portfolio Emerging Markets ETF (SPEM) - Market share: 7.1%

Expense Ratio:

• SCHE has an expense ratio of 0.15%, which is lower than the average expense ratio for emerging market ETFs.

Investment approach and strategy:

• Strategy: SCHE employs a passive management approach, aiming to track the performance of its underlying index by investing in the same constituents and in the same proportions as the index.
• Composition: The ETF primarily invests in equities of large and mid-cap companies from emerging markets across various sectors, including technology, financials, and consumer staples.

Key Points:

• Low-cost exposure to emerging markets: SCHE offers investors a cost-effective way to gain exposure to a diversified basket of large and mid-cap stocks in emerging markets.
• Experienced management and strong track record: The ETF benefits from the expertise and resources of Schwab Asset Management, with a proven track record in passive index fund management.
• Broad diversification: SCHE provides exposure to a wide range of companies across various sectors and countries within emerging markets, offering investors a well-diversified portfolio.

Risks:

• Volatility: Emerging markets can experience high levels of volatility due to factors such as political instability and economic uncertainty.
• Market risk: The ETF's performance is closely tied to the performance of the underlying emerging markets, which can be affected by global economic factors and investor sentiment.
• Currency risk: SCHE is exposed to currency risk as the underlying assets are denominated in various emerging market currencies.

Who Should Consider Investing:

• Investors seeking long-term growth potential in emerging markets.
• Investors who want a diversified exposure to a wide range of emerging market companies.
• Investors comfortable with the higher volatility associated with emerging markets.

Fundamental Rating Based on AI

Overall, based on an AI-based assessment of its financial health, market position, and future prospects, ETF Schwab Fundamental Emerging Markets Large Company Index ETF (SCHE) receives a 7.5 out of 10 rating.

Justification:

• Strengths: Low expense ratio, experienced management team, strong track record, and broad diversification.
• Weaknesses: Higher volatility compared to developed markets, exposure to emerging market risks, and potential competition from larger ETFs.
• Opportunities: Continued growth of emerging markets and potential for outperformance.
• Threats: Global economic slowdown, trade tensions, and political instability in emerging markets.

Conclusion:

SCHE is a solid option for investors seeking exposure to emerging markets. Its low fees, experienced management, and strong track record make it an attractive choice. However, investors should be comfortable with the higher volatility associated with emerging markets.

Disclaimer:

This analysis is for informational purposes only and should not be considered investment advice. It is essential to conduct your own research and due diligence before making any investment decisions.

Sources:

• Schwab Asset Management
• ETF Database
• Morningstar