Posted By 
After the huge success of Cathie Woods and the ARK ETFs in 2020, rival investment managers have been quick to characterize technology funds as “Innovation” or “Disruption” products.
Such was the case on Thursday, as Invesco Canada Ltd. announced the launch of two new exchange-traded funds (ETFs) offering Canadian investors exposure to several relevant technology themes. This follows the February announcement from Franklin Templeton of the Franklin Innovation Fund (FINO), which appeared on the Hub under the headline Invest in Innovation, a Driver of Wealth Creation.
Both the words “Innovative” and “Disruptive” appear in the top of the press release for the debut of the Invesco NASDAQ Next Gen 100 Index ETF (QQJR and QQJR.F) and the Invesco NASDAQ 100 Equal Weight Index ETF (QQEQ and QQEQ.F. As the release says, these funds “build on the innovative solutions offered by Invesco and Nasdaq, allowing clients several distinctive entry points to own the disruptive companies listed on The Nasdaq Stock Market.”
Invesco also announced the launch of CAD Units of Invesco NASDAQ 100 Index ETF (QQC).
The Invesco innovation suite was launched in October 2020 and is just now expanding to Canada, with the following TSX-listed ETFs that started trading on the TSX today (Thursday, May 27). Of the three below, I find the equal weight Nasdaq 100 offering the most interesting:
- Invesco NASDAQ Next Gen 100 Index ETF (QQJR and QQJR.F)
- Invesco NASDAQ 100 Equal Weight Index ETF (QQEQ and QQEQ.F).
- Invesco NASDAQ 100 Index ETF (QQC and QQC.F)
The innovation play was also highlighted in the following quote attributed to Pat Chiefalo, Head of Canada, Invesco ETFs & Indexed Strategies: “The launch of two new Invesco Nasdaq ETFs reaffirms the commitment of Invesco’s Canadian ETF business to providing our clients with products that access the themes and companies at the forefront of innovation … Now Canadian investors can choose several unique ways to gain exposure to the category-defining companies listed on The Nasdaq Stock Market.”
There are of course several existing rival plays on the top 100 Nasdaq companies apart from Invesco’s famous QQQs. Incidentally, Invesco says it recently changed the name of the Invesco QQQ Index ETF to the Invesco NASDAQ 100 Index ETF, dropping the management fee to 0.20% of NAV to “make it the most cost-effective ETF in Canada tracking the Nasdaq 100 Index.”
By contrast, the new QQJR and QQJR.F are relatively unique: it tracks the Nasdaq Next Generation 100 Index, which includes the “next 100” non-financial companies listed on The Nasdaq Stock Market, outside of the Nasdaq 100 Index, in a mid-cap ETF.
Invesco says the top 200 non-financial companies listed on The Nasdaq Stock Market have “a legacy of using innovation to disrupt their respective markets, with a strong tilt to many of the top themes in technology. The two new ETFs will provide robust exposure to a number of relevant technology themes, including the internet economy, cloud computing, ai/big data, biotech, robotics and cybersecurity.”
Equal weighted Nasdaq 100 index avoids overweighing FANG names
Personally I find the equal weight ETF the most interesting: QQEQ and QQEQ.F track the Nasdaq 100 Equal Weighted Index, which re-weights the companies included in the Nasdaq 100 Index so that each of the companies is set at a weight of 1% of the Index at each quarterly rebalance. Traditional market-cap weighted ETFs like Invesco’s long-established QQQ hugely overweight the massive tech names like Apple and Microsoft, which each make up roughly 10% of the QQQ. Those who already own the big “FANG” names might find the equal weight approach a better way to build positions in promising but lesser known holdings in the index.
For more on equal weighting, see this post earlier this week on the Hub: Equal weight indexing during an economic recovery.
The Invesco release also quotes Nasdaq Vice President and Head of Index and Advisor Solutions Sean Wasserman: “Through the years Invesco and Nasdaq have continued to grow our partnership, working constructively to find new and unique ways to ensure the same innovation found in Nasdaq listed companies is echoed in the Invesco Nasdaq ETFs.”
