Page 16 - Investment Advisor - December 2021

ETF ADVISOR

By Bernice Napach

Schwab Launching First ESG, Active ETF

Also, what are the problems with Bitcoin futures ETFs?

chwab Asset Management is
introducing its first fund focused
Son environmental, social and gov-
ernance factors, joining a growing list of
asset managers who sponsor ESG mutu-
al funds and exchange traded funds.
The ESG ETF also will be Schwab’s first
actively managed ETF.
The Schwab Ariel ESG ETF (SAEF)
is structured as a semi-transparent fund
that invests in small- and mid-cap stocks
screened for their ESG factors. Ariel
Investments is its subadvisor, respon-
sible for managing the portfolio on a
daily basis. The ETF is expected to start
trading “on or about Nov. 16,” on the
New York Stock Exchange, according to
the Schwab press release. It has an oper-
ating expense ratio of 0.59%.
The Schwab Ariel ESG ETF will use
the NYSE’s proxy portfolio structure,
which allows the fund to limit the daily
disclosure of its actual holdings and
prevent any potential front-running. A
proxy portfolio, which closely tracks Companies that have their primary Schwab had announced plans for the
the actual portfolio, will be published source of revenue derived from the pro- Schwab Ariel ESG ETF in early April. It
daily instead. duction or sale of tobacco products, the is the first collaboration between Schwab
“Our first proprietary ESG fund exploration for or the extraction of fossil and Ariel on an investment fund, but the
addresses a clear gap in the market fuels, the operation of private prisons firms have worked together for over 20
for a small-to-mid-cap ESG fund or jails, and the manufacture of fire- years on the Ariel-Schwab Black Investor
managed through a value investing arms, personal weapons, small arms, or Survey, which compares attitudes and
lens,” said Malik Sievers, head of ESG controversial military weapons will be behaviors about investing and saving
Strategy, Schwab Asset Management, excluded from the ETF. among Black and white Americans.
in a statement.
Added Rick Wurster, president
of The Charles Schwab Corp., “We The Problem With Bitcoin Futures ETFs
know that investing in line with one’s
values is increasingly important to ilings for Bitcoin futures ETFs are Commission on Oct. 26. The ETF would
many investors.” Fproliferating following the launch deliver 1.25 times the reference price for
Ariel will use both a negative screen- of two such ETFs in mid-October. Bitcoin. The same day, Direxion, known
ing process and its proprietary ESG Valkyrie Investments, sponsor of for leveraged and inverse ETFs, filed for
research to derive an ESG-risk rating the second Bitcoin futures to launch, an ETF that would short Bitcoin futures,
for each holding, or prospective holding, filed for a leveraged Bitcoin futures allowing investors to place a negative Adobe Stock
in the fund. ETF with the Securities and Exchange bet on the contract.

14 INVESTMENT ADVISOR DECEMBER 2021 | ThinkAdvisor.com