Schwab’s ETFs Are Gobbling Up a $2.4 Trillion Market

Generic funds can do well when you run a financial supermarket.

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By Charles Stein

October 6, 2016 at 9:00 AM UTC

This article is for subscribers only.

This article is part of the October 10, 2016 issue of businessweek.

In the crowded race for a piece of the $2.4 trillion exchange-traded fund market, one contender is coming up rapidly from behind. Charles Schwab, better known for its low-cost brokerage, has attracted more than $10 billion to its ETFs this year. Only the three giants of the business—BlackRock, Vanguard, and State Street—added more money. Five years ago, Schwab wasn’t even in the top 10 of ETF managers by assets. Now it’s ranked fifth, with $54 billion in its 21 ETFs.

Surprisingly, Schwab has done this while focusing on plain-vanilla investment options, where there’s stiff competition. ETFs are funds that trade like stocks, and the most popular ones, such as State Street’s $197 billion SPDR S&P 500 Trust, mimic broadly diversified market indexes, just like Schwab’s biggest funds do.