Charles Schwab Investment Management today announced that six new fundamentally weighted exchange-traded funds will begin trading next week. The funds will track the Russell Fundamental Index Series that’s based on strategies developed by Research Affiliates LLC. Schwab already has five fundamental index mutual funds, which had $4.5 billion in assets under management through June 30.

The new ETFs will be added to the Schwab ETF OneSource platform and will trade commission-free online in Schwab accounts starting August 15. The funds’ expense ratios won’t match the rock-bottom fee levels of Schwab's existing 15 proprietary ETFs, but they will be competitively priced, Marie Chandoha, president of CSIM, said during a press call.

“They will be higher than our cap-weighted ETFs because the costs to manage them are higher,” she said.

The following four funds will have operating expense ratios of 0.32 percent:

· Schwab Fundamental U.S. Broad Market Index ETF (FNDB), which tracks the Russell Fundamental U.S. Index

· Schwab Fundamental U.S. Large Company Index ETF (FNDX), which tracks the Russell Fundamental U.S. Large Company Index

· Schwab Fundamental U.S. Small Company Index ETF (FNDA), which tracks the Russell Fundamental U.S. Small Company Index

· Schwab Fundamental International Large Company Index ETF (FNDF), which tracks the Russell Fundamental Developed ex-U.S. Large Company Index

The following two funds will sport expense ratios of 0.46 percent:

· Schwab Fundamental International Small Company Index ETF (FNDC), which tracks the Russell Fundamental Developed ex-U.S. Small Company Index

· Schwab Fundamental Emerging Markets Large Company Index ETF (FNDE), which tracks the Russell Fundamental Emerging Markets Large Company Index

Fundamental indexes screen and weight companies based on objective measures such as adjusted sales, cash flow and dividends/buybacks. That differs from traditional market-cap weighted indexes, which tend to overweight popular stocks and underweight value stocks.

Fundamentally weighted strategies break the link with price and have historically produced excess returns relative to the market-cap equivalent, Tony Davidow, vice president at the Schwab Center for Financial Research, said during the call. He added that fundamental strategies follow a disciplined rules-based approach with pre-determined rebalancing intervals.

He noted that Schwab’s research indicates that fundamental index strategies, when used in tandem with cap-weighted index strategies and active strategies, deliver better risk-adjusted results and less volatility over time.

Rob Arnott, CEO at Research Affiliates, said that fundamental strategies tend to lag cap-weighted indexes modestly during trend-driven and growth-dominated markets, and outperform substantially during periods of mean reversion.

Chandoha said that 59 percent of Schwab’s RIA clients said they use fundamentally weighted products, and that about 20 percent said they will invest in them more going forward.

CSIM is an asset management subsidiary of The Charles Schwab Corp. It had AUM of more than $205 billion as of June 30, and manages 76 mutual funds, 21 ETFs and two separate account model portfolios.