Schwab Hedged Equity Fund
 

Investment Objective

The Fund seeks long-term capital appreciation over market cycles with lower volatility than the broad equity market.

Investment Strategy

The Schwab Hedged Equity Fund employs a long/short strategy to achieve its objective of capturing the performance of the broad U.S. equity market while using active risk-management techniques to minimize volatility. To manage the fund, the portfolio managers use Schwab Equity Ratings®, Schwab's systematic, disciplined approach to stock evaluation that has earned industry recognition for its role in helping to produce superior results. The Fund seeks long-term capital appreciation over market cycles by outperforming the S&P 500® Index1 with a lower level of investment risk.

Schwab Hedged Equity Fund
TickerNet OER2Min. Investment
SWHEX2.48%$100
Cumulative Growth of a $10,000 Investment (pre-tax)
Growth of $10,000 Investment as of         
Fund
Category

Distinguishing Characteristics and Benefits

Different from Market-Neutral Funds

Unlike many long/short funds that are benchmarked against Treasury Bills, the Schwab Hedged Equity Fund is benchmarked to the S&P 500 Index, allowing it to be considered a core portfolio holding. Its long positions–or specific combinations of long and short positions–are designed to provide market-beating performance (alpha), while its shorts–or mixture of longs and shorts–are designed to offer lower volatility (beta).

Two Alphas with Half the Beta

The result of this strategy is that the Fund provides two alphas (from both longs and shorts) with half the risk exposure of the market, creating a portfolio positioned to take advantage of the market's upside potential while managing the downside. Combined with the management team's active investment management philosophy of exploiting market inefficiencies through disciplined research and portfolio construction, the Fund is continually reevaluated and fine-tuned to react to real-time changes within a multi-factor optimized investment model. And unlike many long/short funds that look at the two separately, managers of the Schwab Hedged Equity Fund look at long and short positions together, providing them the capability to more-efficiently manage diversification, risk and beta.

Driven by Schwab Equity Ratings®

The Fund uses Schwab Equity Ratings to aid its stock selection, which represents Schwab's point of view on the 12-month performance outlook for approximately 3,000 of the largest U.S.–headquartered stocks (by market capitalization) using a scale of A through F. It employs a systematic, disciplined methodology that evaluates each stock on the basis of investment criteria from four broad categories: fundamentals, valuation, momentum and risk. Generally, the Fund seeks to establish long positions in stocks that are rated A or B and short positions in stocks rated D or F.

Investment Management Process

The portfolio management team employs a multifactor approach to finding what it believes is the right blend of risk and reward, not only within each individual stock but also with regard to how such stocks fit together to satisfy the investment style and risk profile of the Fund. As such, Schwab Equity Ratings is just one component of stock evaluation; other essential factors also constitute the basis for portfolio construction and optimization. As an actively managed fund, the Schwab Hedged Equity Fund's allocations across sectors and specific holdings will often vary from its benchmark, seeking to capitalize from selected over- and under-weightings based on market and economic considerations.

Investment Management Team

Jonas Svallin, CFA

Managing Director, Head of Disciplined Active Equity Strategies
Full Bio>
 
Investment Management Bio

Jonas Svallin, CFA

Managing Director, Head of Disciplined Active Equity Strategies

Jonas Svallin is a Managing Director and Head of Disciplined Active Equity Strategies for Charles Schwab Investment Management, Inc. (CSIM). Mr. Svallin leads the portfolio management team of Schwab’s disciplined active equity funds, which comprise the Schwab Active Equity Funds and Schwab Global Real Estate Fund. He also has overall responsibility for all aspects of the management of the funds. Prior to joining CSIM in 2012, Mr. Svallin spent nearly three years as a partner and a director of quantitative analytics and research at Fiduciary Research & Consulting, where he provided oversight of quantitative analytics and risk management efforts. From 2003 to 2009, Mr. Svallin was a principal and head portfolio manager at Algert Coldiron Investors (ACI). Prior to joining ACI, Mr. Svallin worked as a quantitative research associate at RCM Capital Management and a senior consultant at FactSet Research Systems.

Mr. Svallin earned an MA in International Economics and Finance from Brandeis University, and a BS in Finance from Western New England University. He is a CFA charterholder and a member of the CFA Society of San Francisco.

0213-0942

Wei Li, Ph.D., CFA

Managing Director, Senior Portfolio Manager
Full Bio>
 
Investment Management Bio

Wei Li, Ph.D., CFA

Managing Director, Senior Portfolio Manager

Wei Li is a Managing Director and Senior Portfolio Manager for Charles Schwab Investment Management, Inc. (CSIM). She is responsible for the day-to-day co-management of the Schwab Active Equity Funds and Schwab Global Real Estate Fund.

Prior to joining CSIM in 2012, Ms. Li spent more than ten years at BlackRock, Inc. (formerly Barclays Global Investors), where she held a number of positions. From 2001 to 2009, she worked in various roles in the Global Advanced Active group, including portfolio management and quantitative research for both U.S. and international equity markets. After 2009, she worked in the defined contribution research and product development area for almost two years.

Ms. Li earned a Ph.D. in Statistics from the University of California, Berkeley, an MS in Mathematics from Iowa State University, and a BS in Computer Science from the University of Science and Technology of China. She is a CFA charterholder.

(0713-4842)

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