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Schwab launches global real estate mutual fund tracking fundamentally weighted index


Charles Schwab Investment Management (CSIM) is to expand its index mutual fund line-up with the launch of the Schwab Fundamental Global Real Estate Index Fund (SFREX).

The fund is the only US-based real estate fund to apply the Russell Fundamental Index Series to a broad-based, global portfolio of real estate securities.
Managed by CSIM, the Schwab Fundamental Global Real Estate Index Fund will track the Russell Fundamental Global Select Real Estate Index. The index, which comprises more than 200 real estate companies in 20 countries, measures the performance of residential and commercial real estate companies and real estate investment trusts (REITs) in US and non-US markets, including developed and emerging markets, using a fundamentally weighted methodology.
Products using fundamentally weighted strategies generally fall into the category of smart or strategic beta investing; they break the link with price by weighting securities based on economic factors such as adjusted sales, retained operating cash flow, and dividends plus buybacks, rather than by market capitalisation.
“This new addition to Schwab’s index mutual fund family marries the diversification and dividend potential of global real estate with the intelligence of the Fundamental Index methodology, which we believe is a powerful combination,” says John Sturiale, senior vice president of product management at Charles Schwab. “We’re pleased to be the first firm that offers investors a low cost way to access this foundational asset class by using this approach.”
In a whitepaper released by the Schwab Center for Financial Research, Anthony Davidow, alternative beta and asset allocation strategist, explores the role of global real estate within an investor’s portfolio and the rationale for gaining exposure to the asset class using fundamentally weighted indexing.
“Global real estate represents a valuable addition to a diversified asset allocation model and has historically delivered strong performance, attractive yields, and diversification benefits relative to traditional investments,” said Davidow in his research. “Fundamentally weighted indexing can provide a great complement to traditional cap weighted indexing, and we think that applying these strategies to global real estate makes a lot of sense.”

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