VictoryShares launches Nasdaq Q-50 ETF

Sep 11th, 2020 | By | Category: Equities

San Antonio, TX-headquartered VictoryShares has launched an ETF that provides exposure to stocks that are next in line for inclusion in the Nasdaq-100 Index.

Mannik Dhillon, President, VictoryShares

Mannik Dhillon, President, VictoryShares

The fund, the VictoryShares Nasdaq Next 50 ETF (QQQN US), has listed on Nasdaq and is linked to the Nasdaq Q-50 Index.

The Nasdaq Q-50 is a market-capitalization-weighted index composed of the top 50 securities ranked by market cap that fall outside the Nasdaq-100.

The index tracks companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade, and biotechnology. As with the Nasdaq-100, the index does not contain securities of financial companies including banking and investment companies.

By targeting stocks beyond the established, large- and mega-cap leaders of the Nasdaq-100, the index can offer additional diversification opportunities while also potentially capturing high-growth companies earlier on in their growth trajectory.

Commenting on the launch, Mannik Dhillon, President, VictoryShares, said, “We wanted to democratize access to an index of disruptive and innovative companies, helping to capture their potential early, well before they may grow to be tomorrow’s mega-cap leaders. Our goal is to provide investors with cost-effective exposure to the next generation of innovators with the potential to graduate to the Nasdaq-100 Index.”

The fund has a net expense ratio of 0.18% and comes with $2.5m in launch assets.

It is the twenty-first VictoryShares ETF and joins a platform with $4.7 billion in assets under management. Parent company Victory Capital manages in excess of $130bn.

Index profile

The index has a different profile to its larger cousin while still reflecting the growth and technology biases associated with Nasdaq listings.

The largest stock in Nasdaq Q-50 is data infrastructure semiconductor manufacturer Marvell Technology Group which boasts a market cap of $26 billion. This compares to the largest stock in the Nasdaq 100, Apple, which commands a market cap of $2 trillion. The weighted average market cap of Q-50 constituents is just over $20bn, in contrast to the average market cap of Nasdaq-100 stocks which is around the $700bn mark – distorted in part by outsized contributions from Apple, Amazon, Microsoft, Alphabet, and Facebook.

The formal information technology sector tops both indices with a weight of 45.7% for the Nasdaq Q-50 and 48.4% for the Nasdaq 100. Beyond information technology, however, the sector weights start to diverge. Health care is the next largest sector in the Nasdaq Q-50 with a weight of 20.7%, whereas the second largest sector in the Nasdaq-100 is communications services with 19.7%. In third place is the industrials sector for the Nasdaq Q-50 with 11.1%, compared to consumer discretionary for the Nasdaq 100 with 17.1%.

Of course, the sector weights of the Nasdaq 100 are flexed in large part by the aforementioned mega-cap tech titans.

In terms of performance, the Nasdaq Q-50 has lagged its larger cousin but has nonetheless chalked up an annualized return of 16.2% over the past five years.

Nasdaq Q-50 Index vs Nasdaq-100

Cameron Lilja, Vice President, and Head of Global Index Products at Nasdaq, added, “Nasdaq is committed to creating powerful index strategies and methodologies that help investors access financial markets. This includes leveraging Nasdaq’s history of having the most innovative global companies listed on our exchange.”

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