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The Weird Burden of QQQ
Aug 17, 2023
In this podcast, the hosts discuss the surprising fact that Invesco's QQQ does not generate revenue for the company. They explore the structure of the QQQ ETF and its high expense ratio. The podcast also delves into the decline of unit investment trusts (UITs) and Invesco's unique situation with QQQ. The possibility of a shareholder vote and the history of QQQ are also discussed. Additionally, the hosts compare QQQ and QQQM ETFs, highlighting liquidity and the top stocks in the Qs.
19:09
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Quick takeaways
- Invesco's QQQ ETF, despite its popularity, does not generate revenue for the company due to its structure as a unit investment trust (UIT), limiting Invesco's ability to make money from the product.
- Invesco has taken steps to monetize the QQQ ETF by launching spinoff products like QQQM, with a lower expense ratio that directs all the money to Invesco, and expanding the QQQ lineup to include other ETFs like QQQJ and QQQS, indicating an intention to leverage marketing and revenue streams.
Deep dives
The QQQ ETF is not making money for Indusco
The QQQ ETF, which is synonymous with tech investing, is not generating revenue for Indusco despite its popularity. The QQQ has a relatively high expense ratio of 20 basis points, but virtually none of it goes to Indusco. Instead, the expenses are allocated to the index provider NASDAQ, the trustee, and marketing. The QQQ is structured as a unit investment trust (UIT), which limits Indusco's ability to generate income from the product. Invesco has attempted to address this by launching QQQM, a similar ETF with a lower expense ratio that directs all the money to Indusco.
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