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Schwab Plans Changes in Funds of Funds


Charles Schwab Investment Management of San Francisco is taking steps to provide more investment flexibility for the managers of Schwab's four MarketManager funds of funds.

Schwab is asking the SEC for an exemption from federal securities laws that would allow the MarketManager funds to buy more than three percent of the outstanding shares of other funds in which the MarketManager funds invest, according to an application Schwab filed with the SEC Oct. 1. The application, if approved, will enable managers running the MarketManager funds to take a bigger stake both in other Schwab funds and non-Schwab funds in which the MarketManager funds invest, said Morrison Shafroth, a Schwab spokesperson.

Schwab has international, balanced, growth and small-cap MarketManager funds. The funds of funds have approximately $501 million in assets under management in the four funds as of Sept. 30, according to Schwab. MarketManager Growth is the largest of the funds, with approximately $172 million in assets under management. The funds invest primarily in the funds participating in Schwab's mutual fund supermarket, Mutual Fund OneSource, according to information posted at the Schwab website.

The funds, through a single purchase, offer investors alternatives for asset allocation or provide diversification in their sectors, Schwab said in the SEC filing. It will take at least until next year before the MarketManager funds could make changes as a result of the application, Shafroth said.