Schwab Fundamental Emerging Markets Large Company Index ETF (FNDE)

Overview

The Schwab Fundamental Emerging Markets Large Company Index ETF (FNDE) seeks to track the RAFI Fundamental Emerging Markets Large Company Index, which selects and weights companies based on fundamental factors like sales, cash flow, and book value. It aims to provide exposure to large-cap emerging market companies while potentially mitigating risks associated with market capitalization weighting.

Reputation and Reliability

Schwab is a reputable and well-established financial services firm with a long track record in the ETF market.

Management Expertise

Schwab has a dedicated and experienced team managing its ETF offerings, leveraging its expertise in index tracking and investment management.

Goal

The primary investment goal is to track the total return of the RAFI Fundamental Emerging Markets Large Company Index.

Investment Approach and Strategy

Strategy: The ETF tracks the RAFI Fundamental Emerging Markets Large Company Index.

Composition The ETF primarily holds stocks of large-cap companies located in emerging market countries, selected and weighted based on fundamental factors.

Market Share: FNDEu2019s market share is moderate within the emerging market large-cap ETF segment.

Total Net Assets (AUM): 642000000

Key Competitors

• Vanguard FTSE Emerging Markets ETF (VWO)
• iShares Core MSCI Emerging Markets ETF (IEMG)
• iShares MSCI Emerging Markets ETF (EEM)

Competitive Landscape

The emerging markets ETF landscape is highly competitive, dominated by large players like Vanguard and iShares. FNDE differentiates itself by using a fundamental weighting strategy rather than market capitalization, which can offer diversification benefits. However, its AUM is significantly smaller than its main competitors, potentially affecting liquidity and visibility.

Historical Performance: The ETF's historical performance varies depending on the time period, reflecting the volatility of emerging markets and the effectiveness of its fundamental weighting strategy.

Benchmark Comparison: The ETF's performance should be compared to the RAFI Fundamental Emerging Markets Large Company Index to assess its tracking efficiency. Differences may arise due to fees and expenses.

Expense Ratio: 0.25

Average Trading Volume

FNDE's average trading volume is moderate, sufficient for most investors but lower than more popular emerging market ETFs.

Bid-Ask Spread

The bid-ask spread is typically competitive, reflecting the ETF's liquidity and trading efficiency.

Market Environment Factors

Economic growth rates in emerging markets, currency fluctuations, trade policies, and geopolitical events significantly impact the ETF's performance.

Growth Trajectory

The ETF's growth is tied to the performance of the emerging markets it invests in, and shifts in strategy or holdings can affect its long-term trajectory.

Competitive Edge

FNDE's primary advantage lies in its fundamental weighting strategy, which selects and weights companies based on financial metrics rather than market capitalization. This approach aims to reduce concentration in overvalued stocks and increase exposure to undervalued companies. The lower correlation with traditional market-cap weighted indices may provide diversification benefits. However, this fundamental approach can also underperform during periods of strong market momentum driven by specific large-cap stocks.

Volatility

Emerging markets are inherently more volatile than developed markets, and the ETF's volatility reflects this risk.

Market Risk

Specific risks include currency risk, political instability, regulatory changes, and economic downturns in the underlying emerging market countries.

Ideal Investor Profile

The ideal investor is one seeking exposure to emerging market large-cap companies with a fundamental weighting approach, willing to accept higher volatility for potentially higher returns.

Market Risk

The ETF is suitable for long-term investors with a higher risk tolerance and a diversified portfolio.

The Schwab Fundamental Emerging Markets Large Company Index ETF (FNDE) offers exposure to emerging market large-cap companies using a fundamental weighting strategy. It differentiates itself from market-cap weighted ETFs but has a smaller AUM than its competitors. The ETF is suitable for investors seeking diversification through emerging markets with a preference for value-oriented investing. While its expense ratio is competitive, investors should be aware of the inherent volatility of emerging markets.

Data Sources:

• Schwab Asset Management
• Morningstar
• ETF.com
• Bloomberg

Disclaimers:

The data provided is for informational purposes only and should not be considered investment advice. Past performance is not indicative of future results. Investors should consult with a financial advisor before making any investment decisions.