Designed to provide broad exposure to the Foreign Small/Mid Value ETF category of the market, the Schwab Fundamental International Small Company Index ETF (FNDC) is a smart beta exchange traded fund launched on 08/13/2013.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
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.
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
Because the fund has amassed over $3.07 billion, this makes it one of the larger ETFs in the Foreign Small/Mid Value ETF. FNDC is managed by Charles Schwab. This particular fund seeks to match the performance of the Russell RAFI Developed ex-U.S. Small Co. Index (Net) before fees and expenses.
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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for FNDC are 0.39%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 3.63%.
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.
When you look at individual holdings, Ibiden Ltdaccounts for about 0.35% of the fund's total assets, followed by Gfl Environmental Subordinate Voti (GFL) and Easyjet (EZJ).
Its top 10 holdings account for approximately 2.47% of FNDC's total assets under management.
Performance and Risk
The ETF has added about 11.96% so far this year and is up roughly 16.51% in the last one year (as of 10/22/2026). In the past 52-week period, it has traded between $42.95 and $51.66
FNDC has a beta of 0.77 and standard deviation of 14.40% for the trailing three-year period, which makes the fund a low risk choice in the space. With about 1588 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 $346.33 million in assets, WisdomTree Dynamic International SmallCap Equity Fund has $413.61 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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Schwab Fundamental International Small Company Index ETF (FNDC): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).