Invesco QQQ Sponsor Spotlight

Please welcome to the stage Bloomberg’s Michelle Lynn, global Head of Data, Insights and Planning, and also Paul Schroeder from Invesco. Thank you. Hi there. I’m Michelle Lynn, global head of Data Science and insight for the Bloomberg Media Organization. And I’m joined by Paul Schroeder, QQQ Equity Product Strategist for Invesco QQQ Sponsor Spotlight Rethinking Innovation. Welcome, Paul. Thank you so much for being with us today. Thanks for having me. OK, So as a quick reminder for everyone, can you tell us what QQQ is? Sure. So I’m sure most people here have heard of QQQ, if not all, but QQQ is an ETF that tracks the NASDAQ 100 index. Now the NASDAQ 100 index is comprised of the 100th largest non financial companies that are listed on the NASDAQ Stock Exchange and that index really has become one of the pre eminent large cap indices in the world. So it seems like the appetite for investing in innovation has grown. How has QQQ benefited from that? Yeah, I I definitely agree with you. I think especially over the last four years investors are seeking out ways to access and invest in innovative companies. You know really overall though if we take a look and and think about QQQ and some of the major holdings within it, it really has held some of the most innovative companies in the world that that that we’ve seen. If we take a look and think about some of the technologies that have affected the way that that we live our day-to-day and work in our day-to-day lives. You know, for example, if we think of the rise of the Internet, if we think of you know, the dawn of social media or the pivot to smartphones and obviously more recently the focus on artificial intelligence, QQQ companies really have been at the center or adjacent to bringing those technologies to market. And you know, common question that that I get is you know why? Why is that? Why does it seem that these QQQ companies within QQQ are positioned so well? It’s because they have a high propensity to innovate. Now really we like to quantify innovation. You know, being an asset manager, we’re all about the numbers and figures, right. So we really quantify innovation through two different metrics. You know the first would be how much a company is spending on research and development. And what we’ve seen on average is that companies within QQQ outspend companies within the S&P 500 on research and development by about 2:00 to 1:00. Now I think the really interesting thing is, is if you take out the around 85 companies that are held in both from the S&P 500 that multiple goes up to 15 to 1. So the second metric that we really look at is patent activity. You know through all that research and development spend we want to see companies filing new patents for new technologies and we’ve seen companies within QQQ file patents within disruptive technologies at a pretty high rate. For example, over the last year we’ve seen out of all natural language processing patents filed worldwide, QQQ companies have filed about 40% of them. So obviously a very timely idea and another way that we like to look at patents is you know ways that it could be adding revenue currently into in the future. You know we see high activity still within cloud computing which is adding the bottom lines today and we’re obviously seeing activity within disruptive technologies that are companies are hoping to add to the bottom line in years to come. So why is this ultimately important is that we believe that this pensity to innovation has really added to the fundamental growth. We’ve seen earnings, dividends and revenue outpaced that of the S&P 500 / 10 year periods. And really we feel that fundamental growth obviously has led to the strong performance. QS are coming off of its strongest calendar year last year, which it was up almost 55% and since its inception, it’s outperformed the S&P 500 by about 2% on an annual basis annualized basis. So overall, we feel that the innovation has really paid a key, key role to that performance and the growth in the fund which is now accounts for about 26% of all large cap growth ETF assets. So who’s driving the growth? Yeah. So we’re really seeing a lot of different types of investors use the queues. AUM within the queues now is around 250 billion, which makes it the 5th largest ETF in the world, but it’s also the second most traded ETF in the world. So it’s not unusual to see 18 to 20 billion in notional value of the queues trade on a daily basis. So really what we’re seeing, what we have seen is that the queues have really been the growth engine of a lot of investors portfolios as small cap has started to underperform in recent years and we’ve seen larger more sophisticated institutional investors use it over shorter time periods because of the liquidity. But what I think is most interesting is that the QS is one of the very few ETFs that have been around as we’ve seen the investor, individual investor rise to prominence and it has played a key role along with ETFs in general and really democratizing investing. So as one of the oldest ETFs, you know QQQ was really a leader in the democratization that you’re mentioning, right? I think it has played a key role. It turned 25 in March, which we were very excited to, to celebrate. But if we think about where investing was 25 years ago, you know if an individual investor wanted to gain access to the NASDAQ 100, they would have to call their broker and place you know 100 trades in 100 different stocks probably pay a very large fee to do that or they purchased a mutual fund and be stuck with a single price. At the end of the day. Obviously now we can place a trade on the go through a mobile app using one ticker. So things have really changed quite a bit and you know obviously the queues have have been a part of that change. You know, overall, I think if we were to summarize the queues, you know the queues really provides a liquid, cost effective and tax efficient way for investors to access the basket of companies that have changed the way we lived. Paul, thank you so much for sharing your insights on rethinking innovation as part of the Invesco QQQ Sponsor spotlight. Thanks for having me.