Invesco launches ESG screened QQQs
QQQ, Invesco’s extremely famous and successful Nasdaq 100 ETF, is getting two siblings that apply ESG screens.
- Invesco ESG Nasdaq 100 ETF (QQMG)
- Invesco ESG Nasdaq Next Gen 100 ETF (QQJG)
QQMG is very similar to QQQ. However it applies an ESG-lite screen that is both positive and negative. The negative is entirely cookie cutter, and removes the eternal baddies in fossil fuels, nuclear energy, guns, porn, alcohol and UNGC violators. The tech-heavy Nasdaq has very few of these types of companies anyway, meaning that according to an analysis from ETF.com, it only removes six companies. The positive screens give corporate goodies more weight, although looking at the fund’s holdings its pretty marginal.
QQJG invests in an ESG-screen version of the Nasdaq Next 100 index, which is the next 100 biggest companies on the Nasdaq’s board. It removes ten companies, and makes weightings that are a bit more different.
Both funds charge 0.20%, in line with QQQ. From what I can tell, their performance will track it closely. But with ESG-lite screens like these that often tends to be the whole point anyway. And the Nasdaq is a more ESG-friendly index to begin with.
Bernie’s commentary – super profits and exclusivity agreements
QQQ is one of the wonders of the ETF industry, with almost $200 billion in assets under management. And with a fee of 0.20%, it makes almost $400M in run rate revenue a year. That’s more than many medium sized businesses. Without drilling into Invesco’s quarterly reports, I’d suggest that that single ETF makes a more important margin contribution to Invesco than almost anything else that company does.
The super profits owe to an absence of competition. Only Invesco has Nasdaq 100 ETFs in the US. Which raises obvious questions about why.
The answer I think is there must be an index exclusivity agreement. Invesco is the only ETF issuer with ETFs benchmarked to the Nasdaq 100 in the United States (unlike Europe). And I suspect that’s not because BlackRock, SSGA and Vanguard are incapable or unwilling to list Nasdaq 100 ETFs. They can see like the rest of us the numbers that QQQ is putting up. These two ETFs look like moat products to protect the king.