Is Schwab Fundamental International Small Company Index ETF (FNDC) a Strong ETF Right Now?

The Schwab Fundamental International Small Company Index ETF (FNDC) was launched on 08/13/2013, and is a smart beta exchange traded fund designed to offer 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.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

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.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of 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

FNDC is managed by Charles Schwab, and this fund has amassed over $3.14 billion, which makes 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

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Operating expenses on an annual basis are 0.39% for this ETF, which makes it on par with most peer products in the space.

FNDC's 12-month trailing dividend yield is 3.55%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Taking into account individual holdings, Ibiden Ltdaccounts for about 0.45% of the fund's total assets, followed by Samsung Life Ltd and Kingboard Laminates Holdings Ltd.

Its top 10 holdings account for approximately 2.71% of FNDC's total assets under management.

Performance and Risk

So far this year, FNDC has added about 14.68%, and it's up approximately 20.34% in the last one year (as of 08/21/2026). During this past 52-week period, the fund has traded between $42.95 and $51.35.

The fund has a beta of 0.75 and standard deviation of 14.53% for the trailing three-year period, which makes FNDC a low risk choice in this particular space. With about 1594 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 $359.49 million in assets, WisdomTree Dynamic International SmallCap Equity Fund has $427.3 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

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This article originally published on Zacks Investment Research (zacks.com).

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