Schwab to Cut Expenses on 4 ETFs as Fee Wars Wind Down

Charles Schwab Corp. (SCHW) slashed fees on four of its equity exchange-traded funds, bringing the cost of all its equity and fixed-income market-cap-weighted index ETFs below 10 basis points, according to a company announcement Monday.

The fee cuts come as Morningstar reports fund fees hit record lows in 2024, with many index funds and ETFs approaching what may be a pricing floor as some providers offer zero-fee options, according to the research firm’s annual study. The moves highlight how investors continue to favor the cheapest funds, with the cheapest 20% of funds attracting $930 billion in net inflows last year.

Read More: Fund Fees at Record Lows but Decline Is Slowing: Morningstar

The reductions, effective June 10, affect the Schwab 1000 Index ETF (SCHK), the Schwab International Equity ETF (SCHF), the Schwab International Small-Cap Equity ETF (SCHC) and the Schwab Emerging Markets Equity ETF (SCHE), according to the release.

SCHK, which tracks 1,000 of the largest U.S.-listed stocks and manages $4.1 billion in assets, saw its expense ratio drop from 0.05% to 0.03%, according to Schwab Asset Management. The fund has returned 2.5% year to date, with Microsoft Corp. (MSFT) and NVIDIA Corp. (NVDA) as its top holdings at 6.3% and 6.2%, respectively.

SCHF, the company’s $48.1 billion international equity fund, had its fees cut from 0.06% to 0.03%, according to the announcement. The fund, which tracks the FTSE Developed ex-US Index and has gained 18.2% this year, holds SAP SE and ASML Holding NV as its largest positions.

John Sturiale, head of product management and innovation at Schwab Asset Management, said the company is looking for new opportunities to make investing more accessible, according to the press release.

SCHC, focused on international small-cap stocks with $4.4 billion in assets, saw its expense ratio reduced from 0.11% to 0.08%, according to Schwab. The fund has posted a 19.3% return this year and holds WSP Global Inc. as its top position.

SCHE, the emerging markets fund managing $10 billion, had its fees lowered from 0.11% to 0.07%, according to the filing. Taiwan Semiconductor Manufacturing Co. (TSM) represents 9.5% of the fund’s holdings, with the ETF gaining 10.4% year to date.

The broader industry has seen fees approach rock-bottom levels, with many index funds already charging less than 0.05%, according to Morningstar. Some providers now offer zero-fee options, suggesting the price wars of recent years may be winding down, the research firm noted.