ETF Spotlight: Invesco QQQM Outshines QQQ

The $22.2 billion Invesco Nasdaq 100 ETF (QQQM) stood out as one of the bright spots in the Invesco Ltd. first-quarter earnings report this week, which highlighted the 4-year-old fund for its $2.8 billion worth of net inflows.

But let’s not forget about the Invesco QQQ Trust (QQQ), the $245 billion flagship that took in $9.1 billion during the quarter, or more than three times the inflows of QQQM.

It comes down to revenue generation and QQQ doesn’t generate a dime for Invesco.

The distinction between the two ETFs is both interesting and subtle and underscores the hit Invesco suffered in the first quarter when the realities of lower management fees contributed to a decline in quarterly profits at the $1.6 trillion Atlanta-based asset manager.

That brings us to the anomaly of QQQ, which is more than 10 times the size of QQQM and is 33% more expensive at 20 basis points yet contributes nothing to Invesco’s bottom line.

QQQ, QQQM: Mag 7 Exposure

Invesco executives and representatives are keen to boast of the marketing benefits of a high-profile ETF like QQQ, which, like QQQM, offers easy exposure to the popular Magnificent Seven stocks. But the unit investment trust structure of QQQ, dating to its launch in 1999, means the expense ratio is essentially split between the provider of the underlying index, Nasdaq, and the trustee of the ETF, Bank of New York Mellon.

Doubling down on the positive spin of a giant ETF that isn’t generating any profits for the issuer, a company spokesperson described QQQ as among the most liquid equity ETFs in the world, which is used as a trading vehicle for the largest institutions.

A company spokesperson described QQQ, which is a trading vehicle for major financial institutions, as among the world's most liquid equity ETFs.

For the more fee conscious, longer-term investor, the edge goes to QQQM, which gained 36.02% over the past 12 months, compared to a 35.89% gain for QQQ over the same period.