New addition to ETF line-up represents many
“firsts”: Schwab’s first ESG fund and first active ETF, as well as
the first ETF sub-advised by Ariel Investments
Schwab Asset Management, the asset management arm of The Charles
Schwab Corporation, today announced it is launching the Schwab
Ariel ESG ETF (SAEF), an active, semi-transparent (also known as
non-transparent) ETF that invests in small- and mid-cap stocks that
have been screened based on environmental, social and governance
(ESG) factors. The new ETF will be sub-advised by Ariel
Investments, LLC (“Ariel”). Ariel, the first African American-owned
investment firm in the U.S., brings nearly 40 years of experience
integrating ESG factors into every phase of its investment process.
The first day of trading is expected to be on or about November 16,
“Schwab is focused on empowering clients and we know that
investing in-line with one’s values is increasingly important to
many investors,” said Rick Wurster, President, The Charles Schwab
Corporation. “We are very excited to introduce the Schwab Ariel ESG
ETF in collaboration with Ariel. Together, we believe our
unparalleled ETF and ESG capabilities can help investors achieve
their financial goals.”
The Schwab Ariel ESG ETF will provide investors with access to
the proprietary ESG investment process pioneered by Ariel. The fund
seeks to deliver long-term capital appreciation by leveraging
Ariel’s value-based investment process, which is focused on small-
and mid-cap U.S. companies with favorable ESG characteristics as
measured by Ariel’s ESG risk rating process.
The Schwab Ariel ESG ETF can serve as a core or complementary
equity ESG allocation within a portfolio. The fund has an operating
expense ratio (OER) of 59 bps.
“We are delighted to expand our long-standing relationship with
Schwab and bring our value-based, high conviction ESG approach to
the market in this new ETF,” said John W. Rogers, Jr., Founder,
Chairman, Co-CEO, and Chief Investment Officer, Ariel Investments.
“ESG has influenced how Ariel invests and engages since our
founding in 1983. We believe in a more rigorous and thoughtful
approach to ESG investing that uses proprietary analysis to gain a
nuanced view of ESG risk, instead of relying solely on third-party
rating systems. As long-term investors, we are driven by dialogue,
not dictates. As a firm, we consistently engage with portfolio
company management teams to address ESG issues deemed material to
their financial health.”
The Schwab Ariel ESG ETF offers active management in a
semi-transparent ETF. Ariel’s focus on value and small- and mid-cap
equity securities differentiates the new ETF from most ESG
strategies, which tend to skew toward growth and large-cap
securities. Ariel will leverage its proprietary ESG research to
derive a proprietary ESG-risk rating for each holding, or
prospective holding, in the fund. In addition, Ariel will employ a
negative screening process in the fund’s security selection, which
seeks to exclude from the fund companies whose primary source of
revenue is derived from the production or sale of tobacco products,
the exploration for or the extraction of fossil fuels, the
operation of private prisons or jails, and the manufacture of
firearms, personal weapons, small arms, or controversial military
“At Schwab we deliver investment choices, resources and
education,” said Malik Sievers, Head of ESG Strategy, Schwab Asset
Management. “Our first proprietary ESG fund addresses a clear gap
in the market for a small- to mid-cap ESG fund managed through a
value investing lens. We are excited to bring investors a new
option for incorporating ESG into their portfolios and which may
help them to tailor their exposure to ESG investing based on their
goals and preferences.”
The fifth largest provider of ETFs, Schwab Asset Management has
more than a decade of experience managing ETFs and a robust capital
markets team that plays a crucial role in ensuring the Schwab ETFs
function efficiently. Schwab’s holistic approach to ESG includes
educational resources and broad access to third-party ESG products,
in addition to this new proprietary offering. Ariel brings a
distinctive actively managed, bottom-up investment approach aimed
at driving long-term results for investors. Its tailored approach
recognizes ESG issues as material to business outcomes and views
management teams as collaborative partners in strengthening ESG
performance. The Schwab Ariel ESG ETF will have two co-lead
portfolio managers, John W. Rogers, Jr., and Kenneth Kuhrt, who are
supported by Ariel’s dedicated ESG team.
Schwab and Ariel Investments have a long-standing relationship
and have collaborated for over 20 years on the Ariel-Schwab Black
Investor Survey, a body of research that explores the similarities
and differences between Black and white Americans when it comes to
saving, investing, and other financial priorities.
For more information, review the prospectus here.
About Schwab Asset Management
Schwab Asset Management offers a focused lineup of competitively
priced ETFs, mutual funds and separately managed account strategies
designed to serve the central needs of most investors. As part of
the Charles Schwab organization, we champion the needs of investors
and seek to enhance the financial lives of our clients in all we
do. Operating our business through clients’ eyes and putting them
at the center of our decisions, we aim to deliver exceptional
experiences to investors and the financial professionals who serve
them. Established in 1989, Schwab Asset Management manages more
than $640.5 billion in assets and draws on the knowledge and
expertise of more than 119 investment professionals (figures as of
9/30/2021). More information is available at
About Charles Schwab
At Charles Schwab we believe in the power of investing to help
individuals create a better tomorrow. We have a history of
challenging the status quo in our industry, innovating in ways that
benefit investors and the advisors and employers who serve them,
and championing our clients’ goals with passion and integrity.
More information is available at www.aboutschwab.com. Follow us
on Twitter, Facebook, YouTube and LinkedIn.
About Ariel Investments
Ariel Investments, LLC is a global value-based asset management
firm founded in 1983. Ariel is headquartered in Chicago, with
offices in New York City, San Francisco, and Sydney. As of
September 30, 2021, Ariel’s firm-wide assets under management,
including subsidiaries, totaled approximately $17.3 billion. Ariel
serves individual and institutional investors through five no-load
mutual funds and nine separate account strategies. For more
information, please visit Ariel’s website at
This fund is different from traditional ETFs.
Traditional ETFs tell the public what assets they hold each day.
This fund will not. This may create additional risks for
your investment. For example:
- You may have to pay more money to trade the fund’s shares. This
fund will provide less information to traders, who tend to charge
more for trades when they have less information.
- The price you pay to buy fund shares on an exchange may not
match the value of the fund’s portfolio. The same is true when you
sell shares. These price differences may be greater for this fund
compared to other ETFs because it provides less information to
- These additional risks may be even greater in bad or uncertain
- The ETF will publish on its website each day a “Proxy
Portfolio” designed to help trading in shares of the ETF. While the
Proxy Portfolio includes some of the ETF’s holdings, it is not the
ETF’s actual portfolio.
The differences between this fund and other ETFs may also have
advantages. By keeping certain information about the fund secret,
this fund may face less risk that other traders can predict or copy
its investment strategy. This may improve the fund’s performance.
If other traders are able to copy or predict the fund’s investment
strategy, however, this may hurt the fund’s performance.
For additional information regarding the unique attributes and
risks of the fund, see Proxy Portfolio Risk, Premium/Discount Risk,
Trading Halt Risk, Authorized Participant Concentration Risk,
Tracking Error Risk and Shares of the Fund May Trade at Prices
Other Than NAV in the Principal Risks and Proxy Portfolio and Proxy
Overlap sections of the prospectus and/or the Statement of
Investors should consider carefully information contained in
the prospectus, or if available, the summary prospectus, including
investment objectives, risks, charges and expenses. You can obtain
a prospectus, or if available, a summary prospectus by visiting
schwabassetmanagement.com/schwabetfs_prospectus. Please read it
carefully before investing.
Investment returns will fluctuate and are subject to market
volatility, so that an investor’s shares, when redeemed or sold,
may be worth more or less than their original cost. Unlike mutual
funds, shares of ETFs are not individually redeemable directly with
the ETF. Shares of ETFs are bought and sold at market price, which
may be higher or lower than the net asset value (NAV).
Active Semi-Transparent (also known as Non-Transparent) ETF
Risk: Active semi-transparent ETFs operate differently from
other exchange-traded funds (ETFs). Unlike other ETFs, an active
semi-transparent ETF does not publicly disclose its entire
portfolio composition each business day, which may affect the price
at which shares of the ETF trade in the secondary market. Active
semi-transparent ETFs have limited public trading history. There
can be no assurance that an active trading market will develop, be
maintained or operate as intended. There is a risk that the market
price of an active semi-transparent ETF may vary significantly from
the ETF’s net asset value and that its shares may trade at a wider
bid/ask spread and, therefore, cost investors more to trade than
shares of other ETFs. These risks are heightened during periods of
market disruption or volatility.
Proxy Portfolio Risk: Unlike traditional ETFs, this fund
does not disclose its portfolio holdings (Actual Portfolio) daily.
The fund instead posts a Proxy Portfolio on its website each day.
The Proxy Portfolio is designed to reflect the economic exposures
and risk characteristics of the fund’s actual holdings on each
trading day, but it is not the same as the fund’s Actual Portfolio.
Although the Proxy Portfolio is intended to provide investors with
enough information to allow for an effective arbitrage mechanism
that will keep the market price of the Fund at or close to the
underlying NAV per Share of the Fund, there is a risk (which may
increase during periods of market disruption or volatility) that
market prices will vary significantly from the underlying NAV of
the fund. ETF trading on the basis of a published Proxy Portfolio
may trade at a wider bid/ask spread than ETFs that publish their
portfolios on a daily basis, especially during periods of market
disruption or volatility, and therefore may cost investors more to
trade. Also, while the Fund seeks to benefit from keeping its
portfolio information secret, market participants may attempt to
use the Proxy Portfolio to identify a Fund’s trading strategy,
which if successful, could result in such market participants
engaging in certain predatory trading practices that may have the
potential to harm the Fund and its shareholders.
Proxy Portfolio Construction – The Proxy Portfolio is
designed to recreate the daily performance of the Actual Portfolio.
This is achieved by performing a “Factor Model” analysis of the
Actual Portfolio. The Factor Model is comprised of three sets of
factors or analytical metrics: market-based factors, fundamental
factors, and industry/sector factors. The fund uses a “Model
Universe” to generate its Proxy Portfolio. The Model Universe is
comprised of securities that the fund can purchase and will be a
financial index or stated portfolio of securities from which fund
investments will be selected. The results of the Factor Model
analysis are then applied to the Model Universe. The Proxy
Portfolio is then generated as a result of this Model Universe
analysis with the Proxy Portfolio being a small sub-set of the
Model Universe. The Factor Model is applied to both the Actual
Portfolio and the Model Universe to construct the fund’s Proxy
Portfolio that performs in a manner substantially identical to the
performance of its Actual Portfolio.
The Proxy Portfolio will only include investments the fund is
permitted to hold. The fund’s SAI contains more information on the
Proxy Portfolio and its construction. Proxy Portfolio and Proxy
Overlap Information regarding the contents of the Proxy Portfolio,
and the percentage weight overlap between the holdings of the Proxy
Portfolio and a Fund’s Actual Portfolio holdings that formed the
basis for its calculation of NAV at the end of the prior Business
Day (the Portfolio Overlap), is available by visiting the fund’s
Because environmental, social and governance (ESG) strategies
exclude some securities, ESG-focused products may not be able to
take advantage of the same opportunities or market trends as
products that do not use such strategies. Additionally, the
criteria used to select companies for investment may result in
investing in securities, industries or sectors that underperform
the market as a whole.
Value investing attempts to identify undervalued companies with
characteristics for improved valuations. Securities that exhibit
value characteristics tend to perform differently and shift in and
out of favor with investors depending on changes in market and
economic conditions. As a result, the fund’s performance may at
times fall behind the performance of other funds that invest more
broadly or in securities that exhibit different
Small cap funds are subject to greater volatility than those in
other asset categories.
Mid-cap companies may be more vulnerable to adverse business or
economic events than larger, more established companies and the
value of securities issued by these companies may move sharply.
Schwab Asset Management is the investment adviser and Ariel
Investments, LLC is the sub-advisor.
Schwab Asset Management is the dba name for Charles Schwab
Investment Management, Inc. (CSIM). Schwab Asset Management is a
part of the broader Schwab Asset Management Solutions organization
(SAMS), a collection of business units of The Charles Schwab
Corporation aligned by a common function—asset management-related
services—under common leadership. CSIM and Charles Schwab &
Co., Inc. (Schwab) Member SIPC are separate but affiliated
companies and subsidiaries of The Charles Schwab Corporation.
Schwab ETFs are distributed by SEI Investments Distribution Co.
(SIDCO). Ariel Investments, LLC and SIDCO are not affiliated with
The Charles Schwab Corporation or any of its affiliates.
version on businesswire.com: https://www.businesswire.com/news/home/20211102005972/en/
Christine Hudacko Charles Schwab 415-961-3790
Christina Sciarrino Ariel Investments 321-277-2854
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