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Portfolio > Portfolio Construction

Schwab Introduces Hedged Stock Fund

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Aug. 7, 2002 — Charles Schwab & Co. Inc. (SCH) said it has launched the Schwab Hedged Equity Fund, a new mutual fund that will leverage Schwab equity ratings to invest in both long and short positions in U.S. securities.

Schwab said the fund is designed to provide investors with long-term capital appreciation with less volatility than the broad equity market.

The fund went into subscription August 6 and will commence operations on September 3. During the subscription period, which ends August 30, Schwab clients can invest in the fund at an offering price of $10 per share. The initial minimum investment in the fund is $25,000, with subsequent investment minimums of $5,000. Operating expenses are 2%.

The fund will buy stocks that Schwab believes will outperform the market while at the same time partially offsetting its overall exposure by selling “short” stocks that Schwab believes will under-perform the market to hedge or to reduce the risk of the overall portfolio.

Schwab explained that this type of hedging strategy “may be particularly appealing in today’s market as it is designed to reduce market volatility of the fund’s portfolio without sacrificing the potential for long-term appreciation.”

The fund’s portfolio managers will decide which stocks to buy and which to sell short based largely on Schwab equity ratings.

The new fund’s portfolio management team consists of: Robin Jackson, senior vice president, Schwab Capital Markets, LP; Elie Spiesel, vice president, Electronic Trading; and Geri Hom, vice president and senior portfolio manager for Charles Schwab Investment Management Inc., a subsidiary of Schwab.

Both Jackson and Spiesel joined Schwab through its 2001 acquisition of Bunker Capital Management, LLC, a hedge fund management firm. Hom joined Schwab in 1995 from Barclays Global Investors.


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