Schwab index fund security lending in 2017

Schwab stock index funds earn additional income by lending securities to qualified institutional borrowers.

A fund’s expenses are paid out of fund earnings. Given that the US tax code gives a tax preference to dividends that qualify for lower tax rates, it is prudent for fund managers to allocate non-qualified income to fund expenses. The table below shows the amount of security lending income earned by each fund in fiscal year 2017 and calculates its percentage ratio to total annual fund expenses.

Fund Security lending income Fund expenses Pct.
US total market 1,274,468 2,829,007 45.05%
S&P 500 481,022 12,559,534 3.83%
US large cap 343,658 8,869,650 3.87%
US small cap 5,439,371 3,027,665 179.66%
International 906,885 3,359,828 26.99%
ETF
US broad market 992,387 2,471,323 40.16%
US large cap 462,663 2,357,940 19.62%
US large growth 275,188 1,683,695 16.34%
US large value 147,849 1,395,851 10.59%
US mid cap 647,729 1,684,736 38.45%
US small cap 4,469,388 2,669,341 167.43%
International 1,645,011 5,342,552 30.79%
International small 1,274,453 1,492,640 85.38%
Emerging market 223,743 3,726,750 6.00%

Notes

  • Table data is derived from fund annual reports for fiscal year 2018. The computations are derived from the linked spreadsheet: Schwab index fund security lending.
  • The Schwab US large cap growth,  US large cap value, and US mid cap index funds were created during the 2017 fiscal year and thus do not yet have reported yearly data.
About

Barry Barnitz, administrator of both the Bogleheads® wiki and of Financial Page, a Bogleheads® blog. In addition I serve as an administrator of finiki, the Canadian financial wiki, and as an administrator of the John C. Bogle Center for Financial Literacy site.

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