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.

Schwab index fund security lending

FundSecurity lending incomeFund expensesPct.
US total market1,274,4682,829,00745.05%
S&P 500481,02212,559,5343.83%
US large cap343,6588,869,6503.87%
US small cap5,439,3713,027,665179.66%
International906,8853,359,82826.99%
ETF   
US broad market992,3872,471,32340.16%
US large cap462,6632,357,94019.62%
US large growth275,1881,683,69516.34%
US large value147,8491,395,85110.59%
US mid cap647,7291,684,73638.45%
US small cap4,469,3882,669,341167.43%
International1,645,0115,342,55230.79%
International small1,274,4531,492,64085.38%
Emerging market223,7433,726,7506.00%

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.
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