Several of this year's top asset-gathering exchange traded funds are products focusing on developed market equities outside the U.S. Amid the rush to developed market ex-U.S. ETFs, another theme is becoming abundantly clear: Investors continue embracing low-fee ETFs.
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That includes the Schwab International Equity ETF (SCHF). SCHF, which will celebrate its eighth birthday in November, recently became the first ETF from the Charles Schwab Corporation (SCHW) to top the coveted $10 billion in assets under management mark. As of July 13, SCHF had over $10.7 billion in assets under management, according to issuer data.
SCHF also lays claim to another honor, that being it's the least expensive ex-U.S. developed markets ETF on the market today with an annual expense ratio of just 0.06 percent, or $6 on a $10,000 investment. Schwab clients realize additional savings with SCHF because the ETF can be traded commission-free on the firm's ETF OneSource Platform.
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SCHF tracks the FTSE Developed ex-U.S. Index and holds nearly 1,300 stocks. Portfolio turnover in the ETF is just over 5 percent. The Schwab ETF competes with funds that track the widely followed MSCI Index, but there are differences between the FTSE Developed ex-U.S. Index and the MSCI EAFE Index.
Notably, SCHF features exposure to Canadian stocks, a trait not found in the MSCI benchmark. SCHF allocates 7.6 percent of its weight to Canadian stocks, making that country the ETF's sixth-largest geographic allocation. Japan and the U.K. are SCHF's two largest country allocations, combining for 37.5 percent of the fund's weight.
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SCHF holds some mid-cap stocks, but its lineup is primarily large-cap and the ETF is considered foreign large blend by Morningstar.
One of the primary reasons why investors have been flocking to ex-U.S. developed markets ETFs this year is that those markets are sporting equity valuations that look attractive relative to U.S. stocks. SCHF obliges on that front.
SCHF makes good on delivering compelling equity valuations. SCHF shows a 15.0 price-to-earnings and a 1.6 price-to-book. In contrast, the S&P 500 is trading at a 19.9 P/E and a 2.8 P/B, according to ETF Trends.
SCHF is up 16.7 percent year-to-date, putting it about 200 basis points ahead of the MSCI EAFE Index.
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