Rated out of 60 funds in the Long-Short category by Morningstar.
The Overall Morningstar Rating of 60 funds in the Long-Short category as of 3/31/2008 is derived from a weighted average of the risk adjusted performance figures associated with a fund's 3-, 5-, and 10-year (if applicable) Morningstar Rating™
metrics.
Tap leading stock performers with reduced
downside risk
If you view equity investing as an exercise in targeting high performers and avoiding low performers, you might be leaving returns on the table. Savvy investors know there is earning potential on both ends of the spectrum. The Schwab Hedged Equity Fund™ seeks to capture the performance potential of stocks while using active risk management techniques such as short selling to reduce the effect of market swings on the fund’s long-term performance.
The fund offers:
A unique investment process—Using sophisticated portfolio-construction techniques, the fund takes traditional “long” positions in stocks Schwab expects to outperform the market and “short” positions in stocks expected to underperform the market to reduce volatility.
The power of Schwab Equity Ratings®—Fund managers use our objective, industry-recognized approach to stock evaluation to take long positions primarily in stocks that have higher ratings (A and B) and to short-sell stocks that have lower ratings (D and F).
Impressive performance—The fund earned a four-star rating from Morningstar on its three-year performance and overall track record for the period ending 3/31/2008. And, with a low 0.4 beta1, measuring market risk, the fund has demonstrated much lower volatility than the S&P 500’s beta of 1.00.
Performance data quoted is past performance and no guarantee of future results. Investment value will fluctuate and shares, when redeemed, may be worth more or less than their original cost. Please go to schwab.com for month-end performance figures.
The Schwab Hedged Equity Fund is not a hedge fund and as such has no performance fees or lock-up period.
Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges and expenses. You can view, download and print a prospectus by clicking on Prospectuses & Reports. Please read the prospectus carefully before investing. Morningstar proprietary ratings reflect historical risk-adjusted performance as of 3/31/2008. The Schwab Hedged Equity Fund was rated 4 stars overall in the Long-Short category as of 3/31/2008. It was rated 3 stars out of 60 funds for the three-year period and 4 stars out of 45 funds for the 5 year period ending 3/31/2008. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) The top 10% of the funds in an investment category receive 5 stars, 22.5% receive 4 stars, 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star.
The fund’s long positions can decline in value at the same time the value of the short stock increases, thereby increasing the potential for loss. The potential loss associated with short positions is much greater than the original value of the securities sold. The use of borrowing and short sales may cause the fund to have higher expenses than those of equity funds that do not use such techniques.
Trades in no-load mutual funds available through Mutual Funds OneSource service (including SchwabFunds) as well as certain other funds, are available without transaction fees when placed through schwab.com or our automated phone channels. For each of these trade orders placed through a broker, a $25 service charge applies. Schwab reserves the right to change the funds we make available without transaction fees and to reinstate fees on any funds. Funds are also subject to management fees and expenses.
For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.)
The S&P 500 is an index of 500 widely traded stocks. It is not an investment product available for purchase.
1. Beta is a measure of an investment’s sensitivity to the market, with the S&P 500 Index as the most common proxy. The index is defined as having a beta of 1. Investments with a beta higher than 1 are expected to rise and fall more than the index, while those with a beta less than 1 are expected to rise and fall less.
2. Schwab and the investment adviser have agreed to limit the fund’s ‘‘net operating expenses’’ (excluding interest, taxes, certain non-routine expenses and expenses for dividends and interest paid on securities sold short) of the Investor Shares and Select Shares to 2.00% and 1.77%, respectively, through 2/27/09.
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