Schwab is launching a new mutual fund, the Schwab Core Equity Fund, Jeff Lyons, executive vice president asset management products and services at the firm, told the MutualFundWire.com. The fund utilizes the firm's Equity Ratings system, a new tool designed to analyze stocks. This is the first Schwab fund to make use of the system.

Equity Ratings assigns letter grades for stocks ranging from A to F, with A being the best and F being the worst. Fund managers will use Equity Ratings as well as other analytical tools at their disposal to pick the stocks for the fund; the fund is looking to outperform the S&P 500.

"What makes this fund special is the way it blends broad market exposure with a disciplined approach to selecting stocks," opined Jeff Lyons. "It is truly a value-added approach to mutual fund management because it provides investors with a methodology they can trust and the risk management they demand."

The fund will only invest in companies with market values of $500 million or more. From there, the firm contends that there is a three-step process for including a stock in the portfolio.

• 1.) The managers will use Equity Ratings to grade the stocks. Only those stocks with at least a B will be considered.
• 2.) Those stocks that pass the first hurdle are screened a second time. Schwab managers will review them using proprietary software and investigate such factors as industry exposure and risk management.
• 3.) Schwab will continue to review stocks that are selected for the fund.

The fund will be managed by Geri Hom and Larry Mano.

Schwab intends this fund principally for its retail channel, though it is sending out a communications packet to its advisor community. The firm is also making the fund available to 401(k) plan clients.

Lyons further added that the firm would be looking at the possibility of other funds based on the Equities Rating System. "We want to leverage that as much as we can," he said. 

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