Schwab has to provide all the interest earned by the Treasuries held by the MMF to the MMF (that is required by federal investment company laws), but then it deducts the costs of the fund (as reflected in the expense ratio). What interest income it earns on other Treasury (or other bond holdings), some of which may be investments of “cash” of its clients is another matter.The OP was wondering about the differences of return between the Schwab and Vanguard fund. That was answered: fees. So the original question has essentially been dealt with. Then the discussion evolved to whether Schwab (or any other firm) can charge fees in excess of actual costs (yes). And it's well known that a major source of Schwab's profits come from their profits on "cash" (including maybe MMFs?). So it seems natural to bring that up as 1) supporting that they can make profits on money market funds and 2) explains why there is a difference in fee, and thus yield, between schwab and vanguard MMFs.What does this have to do with their Treasury fund that this thread is discussing?Looking at Schwab's latest second quarter results, it looks like net interest revenue is over 46% of their total income.
Now "interest revenue" may not directly be related to MMF fees. But I think it does. Because schwab earn interest on their Treasury holdings, but does not give all of that interest to the owners of the MMFs. That's my understanding. But it's possible that "interest revenue" only includes cash that Schwab holds on behalf of clients that's NOT held in MMFs (e.g. bank products). So indeed, interest revenue may not be relevant specifically to their Treasury MMF.
Statistics: Posted by Geologist — Sun Jul 28, 2024 2:34 pm — Replies 14 — Views 1072