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When it comes to US-listed ETFs tracking the famed Nasdaq 100 Index (NDX), there are really just two sheriffs in town: the Invesco QQQ ETF (QQQ) and the Nasdaq 100 ETF (QQQM).
QQQ is 27 years, almost ancient in ETF terms, and has nearly $497 billion in assets under management, making it the fifth-largest ETF in the U.S. QQQM, which Invesco introduced in October 2020 as a lower cost alternative to QQQ, is handled itself quite well, amassing nearly $98 billion in assets.
Given the age and size of those products, particularly QQQ, they’d appear to be immune from competition, but in the world of ETFs, moats rarely exist. That much is proven with Wednesday’s debut of the State Street® SPDR® Portfolio Nasdaq® 100 ETF (QNDX).
The latest addition to State Street’s low-cost core State Street® SPDR® Portfolio ETFs, QNDX provides the same exposure as QQQ and QQQM with an important difference.
The QNDX ‘Twist’
In assigning royal labels to Nasdaq 100-tracking ETFs, QQQ is the undisputed king and QQQM is the prince. That is to say any competitor taking aim at the throne needs to have the goods to compel advisors and investors to even look at the new product.
The only way to do that when the ETFs in question are essentially the same is for the new kid on the block to be a fee disruptor. QNDX is that. It’s annual fee is 0.10%, or $10 on a $10,000 investment. That’s well below the 0.18% and 0.15% charged by QQQ and QQQM, respectively.
Obviously, it’s too early to judge QNDX’s asset-gathering acumen, but what’s not up for debate is the fact that advisors and investors love low-cost ETFs. Each and every year the ETFs accumulating the most assets are those with annual expense ratios of 0.10% and below.
“Investors today are looking for efficiency at the core of their portfolios without sacrificing growth potential,” said Anna Paglia, Chief Business Officer at State Street Investment Management, in a statement. “QNDX has been built with this need in mind, combining low cost with exposure to many of the market’s largest and most established growth companies, which may make it a compelling core allocation rather than a tactical position.”
Another Reason QNDX Matters
For advisors and ETF nerds that enjoy observing industry competition, the debut of State Street’s QNDX is relevant for another reason. Not only is the new ETF a potential rival to the aforementioned QQQM, but it beat a competing product to market.
Earlier this year, iShares parent BlackRock filed plans for the iShares Nasdaq 100 ETF, which trade under the ticker “IQQ.” Obviously, IQQ is/will be a competitor to QQQ and QQQM, but it’s not live yet. QNDX beat it to the punch.
It’s admittedly speculative, but the debut of QNDX could affect IQQ planning. Emphasis on “could.” iShares may be forced to bring IQQ to market with a fee that undercuts the new State Street ETF or scrap its plans altogether if QNDX gets off to a hot start.
Again, I’m just spit-balling here, but what’s not up for debate is the fact that the Nasdaq 100 ETF segment is now a hotly contested space.
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