Yahoo Finance’s Alexis Christoforus and Brian Sozzi and John Hoffman, Invesco’s Head of Americas, ETFs & Indexed Strategies, discuss the new QQQ Inovation Suite.
BRIAN SOZZI: All right. There’s a new way to invest on the biggest ETFs. Invesco just rolled out the new QQQ Innovation Suite, offering different ways to get a piece of their famous QQQ and target different parts of the NASDAQ.
Here to talk about all this stuff is John Hoffman, head of America’s ETFs and index strategies at Invesco. John, good to see you. So why roll out these products now?
JOHN HOFFMAN: Sure so if we start with– to pick up on the comment you just made around the NASDAQ 100, one of the largest, most successful ETFs in the market, $140 billion in that ETF, tracking the NASDAQ 100, one of the most traded securities in the world.
And so this was all about expanding choice, providing more ways for investors to access the most innovative companies in the market and providing them more ways to get that access, whether it’s in an ETF, a mutual fund, a unit investment trust. That’s what this was all about.
ALEXIS CHRISTOFOROUS: So John, what do each of these new ETFs, though, offer investors that they cannot get in the current QQQ?
JOHN HOFFMAN: Sure. So a great question there. The QQQ, with all the success it’s had, as we talk to our clients– and our research shows us there’s a number of factors that investors preference when they’re selecting a particular investment. And so the QQQ, with high liquidity, short-term traders, traders that prioritize that liquidity, the onscreen volume, we think they’re going to continue to use that product.
But as I mentioned, the expansion of choice here, QQQM– we call that mini-Q’s, the M is for Mini there– really, the idea there is a lower management fee. So lower fees. It has a lower share price. So it’s mini in those two ways. We think that long-term buy-and-hold investors– that may be an appealing play.
And then the QQQJ, which we also launched this week, is really about expanding into the next 100, the up-and-coming innovators, if you will, the next generation of innovation. And so that’s another 100 securities. The J is for, again, Junior, in that you’re getting exposure to the mid-cap of innovation, if you will. And so again, about expanding choice, providing more ways to invest in innovation.
BRIAN SOZZI: But John, are you partially concerned here that this product might just concentrate portfolios even more on high-beta tech names? I know it’s going to happen here. Investors are going to go out there. They’re going to buy some of these products and trade around it. And they also have the FAANG stocks in their portfolios. So now, suddenly, they own a whole bunch of tech.
JOHN HOFFMAN: You know what, Brian? It’s actually broader than that. So if we look at the NASDAQ 100, less than 50% of the fund is actually in the tech sector. So over half the fund, said another way, is not in technology from a sector perspective.
What’s common, though, is that all of these companies are using technology to drive innovation and really to disrupt the industries that they’re a part of. And that’s the common theme here. So slightly different than just a pure tech play. There’s other ways just to know pure tech exposure.
And look, to your point on valuation, I mean, investors are paying a premium for consistent earnings and sales growth. And this is about providing more ways to get that exposure.
ALEXIS CHRISTOFOROUS: When you look at how far the NASDAQ has come in a short amount of time– I mean, it’s up something like 32% year to date, I believe– is it just too expensive for the average investor? Is the NASDAQ just too frothy?
JOHN HOFFMAN: So again, I think if I pick up on where we’re at today, and especially relative to other periods of time– and I think what you’re also talking about is probably the narrowness of some of that. At Invesco, we really believe in long-term investing, and we provide other ways to balance that exposure.
So for example, we offer an equal-weight S&P 500 for folks that want a slightly more balanced approach. And we’re starting to see clients use both the NASDAQ 100 and the equal-weight– again, the RSP– to create a more balanced approach if they view the market having gone or moved too far in this space.