Invesco has expanded its ‘QQQ Innovation’ suite in the US with a new fund that focuses on Nasdaq’s small-cap equity market.
Invesco now offers Nasdaq-focused ETFs for each major capitalization segment of the US equity market.
The Invesco Nasdaq Future Gen 200 ETF (QQQS US) has been listed on Nasdaq with an expense ratio of 0.20%.
Invesco debuted its QQQ Innovation suite two years ago with the launch of the $4.5 billion Invesco Nasdaq 100 ETF (QQQM US), a lower-cost Nasdaq 100 tracker compared to the seasoned $150bn Invesco QQQ (QQQ US); and the $700 million Invesco Nasdaq Next Gen 100 ETF (QQQJ US), which targets Nasdaq’s mid-cap segment by investing in the 100 largest non-financial stocks outside of the Nasdaq 100.
QQQS completes the suite in the sense that Invesco now offers Nasdaq-focused ETFs for each major capitalization segment of the US equity market.
The fund adopts a slightly different methodology compared to its large-cap and mid-cap counterparts, however. Whereas QQQM and QQQJ offer ‘plain vanilla’ cap-weighted exposure, QQQS first screens its universe by a key marker of innovation – high-quality patents – a move that Invesco says helps to build a portfolio of companies that are more likely to become the next industry giants.
John Hoffman, Head of ETFs and Index Strategies in the Americas for Invesco, said: “Companies included in the Invesco QQQ Innovation Suite have always spent considerably more on research and development, and Invesco wanted to capture that same commitment to innovation on a smaller cap tier. By applying a high-quality patent screen, the QQQS portfolio will focus on smaller-cap companies with a competitive advantage on certain inventions. This will allow investors to customize their market capitalization exposure to companies who are pioneering the future.”
The fund is linked to the Nasdaq Innovators Completion Cap Index which begins with a universe of Nasdaq-listed, non-financial stocks that are not current constituents of the Nasdaq 100 or the mid-cap Nasdaq Next Generation 100 Index.
The methodology harnesses the insights of IPR Strategies, a firm specializing in patent valuation, to assign realistic values to patents based on multiple parameters including a high commitment to research and development and valuable intellectual property.
The index selects the 200 firms with the most valuable portfolios of patents according to IPR Strategies’ research. Constituents are equally weighted in the index which is reconstituted semi-annually and rebalanced on a quarterly basis.
As of 14 October, over half (56.4%) of the index weight was allocated to healthcare stocks, while firms in the information technology sector accounted for almost a third (30.7%) of the total exposure.