A smart beta exchange traded fund, the Schwab Fundamental International Small Company Index ETF (FNDC) debuted on 08/13/2013, and offers broad exposure to the Foreign Small/Mid Value ETF category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Because the fund has amassed over $2.99 billion, this makes it one of the larger ETFs in the Foreign Small/Mid Value ETF. FNDC is managed by Charles Schwab. FNDC seeks to match the performance of the Russell RAFI Developed ex-U.S. Small Co. Index (Net) before fees and expenses.
The RAFI Fundamental High Liquidity Developed ex US Small Index measures the performance of small non-U.S. developed market companies based on their fundamental size and weight.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for FNDC are 0.39%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 2.70%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Celestica Inc (CLS) accounts for about 0.23% of the fund's total assets, followed by Spectris Plc (SXS) and Doosan Corp.
FNDC's top 10 holdings account for about 1.56% of its total assets under management.
Performance and Risk
Year-to-date, the Schwab Fundamental International Small Company Index ETF has added about 26.46% so far, and it's up approximately 29.98% over the last 12 months (as of 08/07/2025). FNDC has traded between $32.97 and $43.36 in this past 52-week period.
The fund has a beta of 0.80 and standard deviation of 15.68% for the trailing three-year period, which makes FNDC a low risk choice in this particular space. With about 1727 holdings, it effectively diversifies company-specific risk .
Alternatives
Schwab Fundamental International Small Company Index ETF is a reasonable option for investors seeking to outperform the Foreign Small/Mid Value ETF segment of the market. However, there are other ETFs in the space which investors could consider.
Invesco RAFI Developed Markets ex-U.S. Small-Mid ETF (PDN) tracks FTSE RAFI Developed Markets ex-U.S. Mid-Small 1500 Index and the WisdomTree Dynamic International SmallCap Equity Fund (DDLS) tracks WisdomTree Dynamic Currency Hedged International SmallCap Equity Index. Invesco RAFI Developed Markets ex-U.S. Small-Mid ETF has $365.06 million in assets, WisdomTree Dynamic International SmallCap Equity Fund has $438.6 million. PDN has an expense ratio of 0.47% and DDLS changes 0.48%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Foreign Small/Mid Value ETF
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Schwab Fundamental International Small Company Index ETF (FNDC): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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