Making its debut on 08/13/2013, smart beta exchange traded fund Schwab Fundamental International Small Company Index ETF (FNDC) provides investors broad exposure to the Foreign Small/Mid Value ETF category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by Charles Schwab. FNDC has been able to amass assets over $3.38 billion, making it one of the larger ETFs in the Foreign Small/Mid Value ETF. Before fees and expenses, FNDC seeks to match the performance of the Russell RAFI Developed ex-U.S. Small Co. Index (Net).
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.39%.
The fund has a 12-month trailing dividend yield of 3.44%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Taking into account individual holdings, Ibiden Ltdaccounts for about 0.3% of the fund's total assets, followed by Helvetia Baloise Holding N Ag (HBAN) and Celestica Inc (CLS).
Its top 10 holdings account for approximately 2.24% of FNDC's total assets under management.
Performance and Risk
The ETF return is roughly 12.28% and is up about 45.37% so far this year and in the past one year (as of 02/12/2026), respectively. FNDC has traded between $32.97 and $50.02 during this last 52-week period.
The ETF has a beta of 0.75 and standard deviation of 13.74% for the trailing three-year period, making it a low risk choice in the space. With about 1486 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 $397.66 million in assets, WisdomTree Dynamic International SmallCap Equity Fund has $475.06 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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