Schwab Bank Cuts Expense Ratios in Target Date Collective Trust Funds for Large Retirement Plans

New 0.35% unit class for Schwab Managed Retirement Trust Funds™ opens to plans that invest at least $300 million

Wednesday, April 16, 2014 10:00 am PDT



Public Company Information:

"The SMRT Funds appeal to many employers for good reason – they offer an open-architecture approach and a wide array of choices in investment strategies at an incredible value for plan participants."

SAN FRANCISCO--(BUSINESS WIRE)--To meet increasing demand for target date funds in large retirement plans, Charles Schwab Bank (“Schwab Bank”) is introducing a new unit class for its Schwab Managed Retirement Trust Funds™ (“SMRT Funds”) with a lower 0.35 percent operating expense ratio. The SMRT Funds are collective trust funds offered exclusively to qualified retirement plans. Beginning July 1, 2014, the new unit class will be available to retirement plans with $300 million or more in SMRT Fund assets.

“More than ever, large plan sponsors and their consultants are telling us they want open-architecture target date funds because they are concerned about possible conflicts of interest with all-proprietary target date funds,” said Jake Gilliam, managing director, Charles Schwab Investment Management, Inc. “The SMRT Funds appeal to many employers for good reason – they offer an open-architecture approach and a wide array of choices in investment strategies at an incredible value for plan participants.”

Employer interest in Schwab Bank’s collective trust funds has risen dramatically since last year when the U.S. Department of Labor published fund selection tips for ERISA plan fiduciaries and identified the benefits of low-cost, open-architecture target date funds. With $8.1 billion in assets under management as of March 31, 2014, the SMRT Funds were among the first to use unaffiliated, industry-recognized investment managers as sub-advisors1 and to combine active and passive strategies to deliver an efficient and diversified portfolio.

The SMRT Funds’ newest unit class comes at a time when adoption of target date funds is growing among employers and employees alike. More than $573 billion was invested in target date funds as of October 31, 2013, up from $115 billion at the end 2006, according to the Investment Company Institute (“ICI”).2 A recent study by the ICI and the Employee Benefit Research Institute (“EBRI”) revealed that 72 percent of 401(k) plans offered target date funds at the end of 2012. The same study found 41 percent of plan participants invested in target date funds in 2012, more than double the number that held them in 2006.3

SMRT Funds Investment Line-up as of December 31, 2013




Fund Investment


Sub-Advisor(s) 1

Domestic Equity

    Schwab Instl Large Cap Value Trust Fund*     Dodge & Cox (Large Value)
BNY Mellon Large Cap Stock Index Fund BNY Mellon (Large Blend) +
Schwab Instl Large Cap Growth Trust Fund* Wellington Management (Large Growth)
Vanguard Mid-Cap Index Fund Instl Plus Vanguard (Mid-Cap Blend) +
BNY Mellon Small Cap Stock Index Fund Instl BNY Mellon (Small Blend) +
Schwab Instl Small Cap Trust Fund* Wellington Mgmt. (Small Value)
ING (Small Growth)
BMO (Small Growth)

International Equity

SSgA Emerging Markets Index Fund A SSgA (Diversified Emerging Markets) +
Schwab Instl International Diversified Trust Fund* Franklin Templeton (Foreign Large Value)
American Funds (Foreign Large Blend)
DFA (Foreign Sm/Mid Value)
William Blair (Foreign Sm/Mid Growth)

Real Assets (Equity)

BlackRock Developed Real Estate Index Fund E BlackRock (Global Real Estate) +
BlackRock DJ-UBS Commodity Index Fund E BlackRock (Commodities) +

Intermediate-Term Bond

BNY Mellon U.S. Aggregate Bond Index Fund Instl

BNY Mellon (Core) +

Schwab Instl Core Plus FI Trust Fund III* PIMCO (Core Plus)
Loomis Sayles (Core Plus)
BNY Mellon (Core) +

Short-Term Bond & Cash Equivalents

BNY Mellon Active 1-5 Year U.S. Aggregate Bond Fund BNY Mellon (Short-Term Bond)
State Street U.S. Government Short Term Investment Fund SSgA (Cash Equivalents)

Real Assets (Fixed Income)

BlackRock U.S. TIPS Index Fund E BlackRock (Inflation-Protected Bond) +

* The SMRT Funds invest in other Schwab Bank Collective Trust Funds to gain exposure to the underlying third-party sub-advised strategies.
+ Passive strategy.

“At Schwab, we want to help plan participants make the right choices when it comes to investing for retirement, and target date funds certainly can play a role in that process,” said Gilliam. “As more plan participants seek managed investment solutions from their employers, we expect the demand for target date funds to continue to grow.” Schwab Bank has already secured a $400 million retirement plan transfer to the new 0.35 percent unit class, which will take place in July 2014.

Schwab Bank also offers fully passive Schwab Indexed Retirement Trust Funds™ (“SIRT Funds”), which are also collective trust funds, and recently cut the expense ratio for the SIRT Funds to 0.14 percent because of growing employer interest. The SIRT Funds follow the same open-architecture approach as the SMRT Funds. Both the SMRT and SIRT Funds are available through participating retirement plan providers.

Schwab Bank Retirement Collective Trust Funds – Unit Class Pricing


Unit Class


Expense Ratio

SMRT Funds

  I   0.89%
II 0.69%
III 0.54%
IV4 0.45%
NEW V5 0.35%

SIRT Funds

I 0.14%

More information is available on the Schwab Bank Collective Trust Funds at

Schwab also provides the Schwab Target Funds, which are mutual funds for retail investors considering target date funds outside of their workplace retirement plans. For more information on Schwab Target Date Funds, visit Schwab’s mutual fund website or speak with a Charles Schwab & Co., Inc. financial consultant.

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 Follow us on Twitter, Facebook, YouTube, LinkedIn and our Schwab Talk blog.


Through its operating subsidiaries, The Charles Schwab Corporation (NYSE: SCHW) provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC,, and affiliates offer a complete range of investment services and products, including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; compliance and trade monitoring solutions; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at and

The Schwab Managed Retirement Trust Funds™ and Schwab Institutional Trust Funds® are collective trust funds maintained by Schwab Bank, as trustee of the Schwab Bank Collective Trust Funds (the “Fund”), which are available for investment only by eligible retirement plans and entities. The Funds are not insured by the Federal Deposit Insurance Corporation or any other type of deposit insurance; are not deposits or other obligations of, and are not guaranteed by, Schwab Bank or any of its affiliates; and involve investment risks, including possible loss of principal invested. The Funds are not mutual funds and are exempt from registration and regulation under the Investment Company Act of 1940 (the “1940 Act”), and their units are not registered under the Securities Act of 1933, or applicable securities laws of any state or other jurisdictions. Unit holders of the Funds are not entitled to the protections of the 1940 Act. The decision to invest in the Funds should be carefully considered. The Funds’ unit values will fluctuate and may be worth more or less when redeemed, so unit holders may lose money. The Funds are not sold through prospectuses and are not available for investment by the public; Fund prices are not quoted in newspapers.

The material presented here is based on information from a variety of sources we consider reliable, but we do not represent that the information is accurate or complete. Errors and omissions can occur. None of the information constitutes a recommendation or a solicitation of an offer to buy or sell any security by Schwab Bank or any of its affiliates. Please review the trust document and participation agreement, Schwab Bank Fund Fact Sheet and other disclosure materials before making any decision to invest in the Funds. Performance data quoted is past performance and is no indication (or "guarantee") of future results. Current performance may be lower or higher. Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than original cost. There is no guarantee the Funds will provide adequate income at or through retirement.

The Funds select investments based on advice received from, or products offered by, industry-recognized investment management firms ("sub-advisors"). The Funds access investment strategies through various investment vehicles, including, but not limited to, collective trust funds, mutual funds, and/or exchange-traded funds, and may also access strategies through sub-advisors engaged by Schwab Bank to advise one or more separate accounts of a Fund. Exposure to some strategies may be indirect through investment in other Schwab Bank Collective Trust Funds. For example, the SMRT Funds invest in the Schwab Institutional Large Cap Value Trust Fund, Schwab Institutional Large Cap Growth Trust Fund, Schwab Institutional Small Cap Fund, Schwab Institutional International Diversified Trust Fund, and Schwab Institutional Core Plus Fixed Income Trust Fund.

Investors should consider carefully information contained in the underlying funds’ prospectuses, including investment objectives, risks, charges and expenses. You can request a prospectus for Schwab Funds by visiting Please read the prospectus carefully before investing.

Target date fund asset allocations are subject to change over time. The principal value of the funds is not guaranteed at any time, and will continue to fluctuate up to and after the target date. There is no guarantee the funds will provide adequate income at or through retirement. The funds are built for investors who expect to start gradual withdrawals of fund assets on the target date, to begin covering expenses in retirement.

The investment risks of the Funds will change as asset allocations change. Investors should consider risk tolerance and personal financial conditions along with age and retirement date when investing in the Funds.

The funds are subject to market volatility and risks associated with the underlying investments. Risks include exposure to international and emerging markets, small company and sector equity securities, and fixed income securities subject to changes in inflation, market valuations, liquidity, prepayments, and early redemption.

Fund Affiliations

The Charles Schwab Corporation provides services to retirement and other employee benefit plans and participants through its separate but affiliated companies and subsidiaries: Schwab Bank; Charles Schwab & Co., Inc.; Charles Schwab Investment Management, Inc. (“CSIM”); Schwab Retirement Plan Services, Inc.; Schwab Retirement Plan Services Company; and Windhaven Investment Management, Inc. Trust and custody products and service are offered by Schwab Bank. Brokerage products and services are offered by Charles Schwab & Co., Inc. (Member SIPC). Schwab Retirement Plan Services, Inc. and Schwab Retirement Plan Services Company provide recordkeeping and related services to retirement plans. CSIM provides investment research, advisory and fund administration services to Schwab Bank and the Funds. Windhaven Investment Management, Inc. ("Windhaven") provides investment advisory services to the Diversified Allocation collective trust funds. CSIM and Windhaven are investment advisers registered with the Securities and Exchange Commission.

CSIM (the investment advisor for Schwab Funds, Laudus Funds and Schwab ETFs), Schwab Bank, and Charles Schwab & Co., Inc. are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation.

Schwab Funds are distributed by Charles Schwab & Co., Inc. (0414-2581)

1 Charles Schwab Bank uses an open-architecture sub-advised approach to investing. Fund investments are selected based on advice received from, or products (such as mutual funds, collective trust funds, or exchange-traded funds) offered by industry-recognized investment management firms (collectively, “sub-advisors”). The Funds may invest in other Schwab Bank Collective Trust Funds to access the underlying sub-advised strategies.

2 Investment Company Institute (ICI), “The U.S. Retirement Market, Third Quarter 2013.”

3 Investment Company Institute (ICI) and Employee Benefit Research Institute (EBRI), “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2012,” 2013.

4 To invest in Unit Class IV by a plan not custodied with Charles Schwab Bank on the Schwab platform, a $25 million minimum mapping or plan assets >$100 million is required.

5 To invest in Unit Class V by a plan either custodied or not custodied with Charles Schwab Bank, a minimum of $300 million mapping is required.


Charles Schwab
Mike Peterson, 330-908-4334
The Neibart Group
Sarah Gormley, 718-875-2122

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