This year marks the 25th anniversary of the Invesco QQQ Trust, the exchange-traded fund (ETF) that tracks the Nasdaq-100 Index®. This milestone celebrates a product that has long provided investors with access to companies at the forefront of innovation.
It’s also a moment that highlights Invesco’s longstanding and fruitful relationship with Nasdaq, whose Nasdaq-100 Index® serves as the backbone for QQQ, also known as “the Q’s.”
Emily Spurling, Senior Vice President and Global Head of Index at Nasdaq describes the partnership as “symbiotic,” allowing Nasdaq to focus on serving the markets as an index provider and Invesco, as an asset manager, to offer dynamic ETFs to investors around the world.
“The Nasdaq-100® is a wonderful index, but it's not investable until you have an asset manager that brings a product to life,” Spurling said.
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Innovation-Driven Success
Nasdaq has its roots in technology and innovation. The company disrupted the capital markets by bringing electronic markets to the exchange industry back in 1971. It should come as no surprise that the companies that list on Nasdaq are disruptors in their own right within their respective industries and that connectivity to innovation drives them to list there.
The Nasdaq-100 Index® follows a rules-based methodology that tracks 100 of the largest non-financial companies listed on Nasdaq. Over time, certain trends have come into favor based on the companies included in the index. According to Nasdaq’s data, the constituents contribute a disproportionate amount of patent filings in key disruptive technology areas such as Artificial Intelligence and invest substantially more in research & development (R&D) than other large cap US companies included in broad benchmarks like the S&P 500 Index.
The weighted average market cap of companies in the Nasdaq-100 Index® was $157.5 billion in 1999; and at the end of 2023, that number had jumped to $882.1 billion – a 460% increase.
Nasdaq created the QQQ ETF to track the Nasdaq-100 Index® in 1999 and in 2007 sold the Qs to PowerShares, which is now part of Invesco.
QQQ has documented the journey of innovative early-stage companies blossoming into major industry leaders. Among its ranks are groundbreaking companies like Alphabet (Google), Amazon, Apple, Microsoft, Nvidia, Adobe, Meta (Facebook), Starbucks and Tesla.
Learn more about the History of the QQQ ETF on Nasdaq’s TradeTalks.
Suite Expansion
As the QQQ grew in AUM over time, Nasdaq and Invesco continued to discuss expanding their offerings.
“What is the next evolution of the value of the companies that list on the Nasdaq Stock Market?” Spurling noted, referring to one of the questions asked in these conversations. “How do we capture more of the essence of our brand in the products that we bring to market?”
Collectively, they decided to offer more exposure to investors looking for additional value around the Nasdaq-100®. “That's where we said, ‘Okay, well, what's the next 100?’” Spurling added. “Or how do we creatively come up with the future generation of leaders?’”
Nasdaq and Invesco launched the Invesco Innovation Suite in 2020, during the Covid pandemic. In the subsequent months, there was an “incredible recovery in the market that was led by the Nasdaq-100®,” said Mark Marex, Senior Director of Index Research at Nasdaq. The products within the Invesco Innovation Suite saw growth not just by positive index performance, but also by historically strong inflows into the ETF space more broadly.
“This was a unique opportunity to take what the Nasdaq-100® was already tracking and reflect it to people, to say, ‘Technology and innovation is what’s going to save us and get us through this,’” said Marex.
The Innovation Suite offered a differentiated solution for investors to gain exposure to the companies driving the modern-day economy, backed by Nasdaq’s long-running leadership as an exchange in attracting the listings of innovative companies.
“We didn’t have as many indexes,” said Efram Slen, Vice President and Global Head of Index Research at Nasdaq, of the time when the Qs launched. From that point Nasdaq began to expand its indexes to all the U.S. and globally – today calculating and managing over 10,000 indexes. “The ETF launch and subsequent partnership [with Invesco],” he added, “certainly spawned a big part of that index development, along with our ability to grow and partner with many additional leading asset managers.”
The Innovation Suite today offers seven investment options, focused on next-generation and ESG-focused companies in addition to the core QQQ ETF. Nasdaq and Invesco have also launched various other products beyond the Innovation Suite, including funds tracking small-cap companies; including those that score favorably on certain metrics such as dividend growth or relative strength (momentum); thematic areas such as the Internet Economy and Water; and specific sectors such as banks, biotech, and semiconductors. In all, as of March 31, 2024, Invesco manages 50 ETFs listed globally that track Nasdaq Indexes with over $310 billion in assets under management.
The Partnership Today—and Tomorrow
QQQ is now the second-most traded ETF in the world and enjoys a high rating with the Morningstar investment research agency. It continues to provide investors with the opportunity to invest in high-quality and frontier-pushing firms at a low fee.
Slen spoke about the importance of Nasdaq’s research in better understanding the companies listed in QQQ. “They’re perennial leaders in their share of total spend on R&D versus the rest of the world.” Insights like this can be used to develop future investment products with Invesco and other asset manager partners.
In Marex’s opinion, the Nasdaq-100 Index® is, “the benchmark of the 21st century.”
As for the QQQ ETF, “the 25th anniversary is just the beginning,” said Spurling. “The speed with which assets have accumulated in the QQQ over the past five years is astronomical.”
Nasdaq and Invesco will continue to rethink the possibilities of meeting investors’ needs and delivering new products that accomplish that goal.
