Well, Kinderchion's I'm Joel Webber and I'm Eric Valchunis.
Eric.
There's this reporter that we work with in Bloomberg News who came over to me at Bloomberg Business Week recently and was like, Hey, do you know that QQQ makes no money for Invesco? And I go, Katie Greifield, this is a story we need to do, so we're doing it. Katie Greifield has written that story for Bloomberg business Week. Eric, is that a shaker to you, that QQQ makes no money for Invesco?
Well, it isn't because I'm an ETF nerd and this is sort of known in the nerd world, But for most people it's probably a shocker. And it's really a great insight into how different structures exist in the ETF world. Not every ETF is an open end fund. The early ones were structured a little differently, and the way people are is different. But the other thing that I find, I just find the cues fascinating for many other reasons. So I'm always up the Q discussing.
Nickname sure, yeah, shorthand for QQQ, which this is a tech juggernaut.
Eric, to say the least, our team and I we always sort of like we have an international team and we just there's something about the cues that captures like the American innovation that you just don't get in the rest of the world. And this index just something about this index and the NASAQ exchange attracts, you know, the tip of the spear of these kind of like juggernaut innovators that are you know, largely an American thing, and it just kicks ass this index, the CTF, and it's a phenomenon.
But here's the thing. Katie kind of buried the lead when she came to me because Invesco has found a way to make money on the cues. We're going to talk about that. So joining us Athanasio, Sarah Faegas of Bloomberg Intelligence where he's an ETF analyst, as well as Key Greifeld the Bloomberg News where she's an e ETF reporter, and so much more, this time on Trillions the Cues. Atanasios, Katie, welcome back to Trillions.
Yeah, nice to see you guys.
Thrilled to be here.
Okay, give me a sense, Katie, how big is QQQ.
If you want a number, it's two hundred billion dollars in assets under management. Give her take. I believe it's the fifth largest ETF out there, at least in the US, and it's one of the oldest too. And I think you and Eric set up really nicely in the intro. It's just synonymous with tech investing. At this point, you say, the Cues people know what you talked, you were talking about. It's one of those household names at this point.
Okay, So why does Investco not make any money on its flagship product.
It's pretty wild, And like Eric said, if you're in the know, you know. But I'd been covering ETFs for three and a half years and this was actually born out a tweet someone posted, I think it was Nate JERSI actually posted that the Cues are earning a ton of money this year because their expense ratio is twenty basis points, which is relatively high for a passive product. And obviously the AUM and the Cues has ballooned this
year because tech is on fire. And then I think it was Ben Johnson from morning Star who pointed out in the comments that Invesco earned no money off of that, and then from there I fill down a rabbit hole Athanasios has covered that that if you look at this structure of the CUES, it's set up as a unit investment trust. So that's important, you very important. It's like the vestigial organ of the ETF industry baked into that expense ratio. Part of it goes to the index provider NASDAC,
part of that goes to the trustee. The rest of that goes to marketing. For whatever reason, none of it, virtually none of it.
Goes to Investco worth mentioning. Invesco sponsors this program. We would do this episode even if they didn't, because it's fascinating. Athanasios U T Unit investment trust. What is it? Why did it become a vestisual organ?
So when you look at when the first ETFs launched, like Spy is also a u T, they were just cheaper, they were easier, you know, without getting too much into it, they don't Spy being the biggest, being the biggest and the first, so there's a few of them out there. Uh, they were just cheaper. You don't have to have a border director, so it's just a lot easier to launch these products. I also don't think issuers thought these products be this big when they first brought them to market.
So they're like, yeah, we're just going to offer this beta type investment maybe gets some money into it. We can't charge on it, and that's the biggest you know, Katie alluded to it. You can't make money on a u T. So we really think about it, like, I think this is like the biggest act of charity ever. Buy investo because not only are they not making any money on it, it's like one of the best performing
ETFs like ever. Right, so you're getting all this, you're getting these really good returns and this issue is making almost no money on it. So it's just like this incredible, Like, you know, why.
Don't they just change it and make it become a closed infun.
Uh you can't. You know, there's ways around it. I think we've sort of talked about they're trying to launch other products that are tied to the queues that are not in the U T structure, but a conversion unlikely, you know, maybe it could happen. I think we've talked about it on other shows. This Vanguard patent, so maybe if that opens up, maybe they can add a share
class to it. I'm sure lawyers are working on it, but you know, in the meantime, Investco is trying to you know, launch a different structure with KIQM that isn't a u T it's cheaper and all that money goes to Investco.
Well, just on that point, they could do a shareholder vote. They could, but talking to Investco about it, I mean, it would just there's tens of thousands of Q shareholders at this point hard to track down. It would just be so outrageously expensive and complicated that it's pretty much impossible.
I think this is the longest that Eric Bulchernis has ever been quiet. Eric. If you were in Vesco and you were not making money off of your flagship product QQ because of its structure, and that you couldn't do anything about that, what would you do?
Yeah, it would be tough to see all the success that you're helping and you don't get that much, you know, a real big taste of it. It seems like all these other places are getting royalties off of the song you wrote in a weird way, even though Invesco did buy it.
I mean it wasn't there, okay, Yeah, And Invesco Worth Mentioning did not create the product at an Ossios.
Actually the NASDAC created. It just has like a beta offering like to increase trading.
In like nineteen ninety nine, like right before everything blew up in the dot com world.
Yeah exactly, and like you know, before anyone really cared about ETFs or whatnot. And then eventually they sold it to power Shares and then power Share just rebranded to Investco, so you know, that's what it been. The the timeline of it.
Wait, Investco bought power.
Shares, it was zach So the way it worked was and the reason they they did this is so that money they do make quote unquote it has to be spent on marketing. So when you when it was called the power Shares QQQ, they had to call it power Shares, right, But Invesco wanted to leverage that into all their products, so saying, we're going to drop the power Shares name only called Investco and now we can stretch those marketing dollars to anything Investco related. So it's really like a
marketing ploy. So we sort of related to like no brewsters millions, we like have to spend all this money by like the end of the year. So they just did it to be able to leverage it, and so like, now you're not just thinking power shares, You're thinking Investco and this, you know, spills down to a lot of different products, not just the.
Cues Okay, Eric, what would you do?
Uh?
I mean what I would do is what they did exactly. I think putting Investco in the name, so at least you get Invesco in those advertisements, because Mike, you know, when there's other unit trust out there, and I feel like even though they advertise, they would rather advertise with their lower products that need it more or that are more timely, but at least they get the name in there. And I think what they did was interesting. So I
want to steal Katie's thunder. But they created go for It QQQM, which is again like a total carbon copy. It's the same thing. It's five basis points cheaper.
But when you say same thing, tell me what is it? Because is it the same index? And what is the index? And what's in it?
Yeah? It tracks the Nasdaq one hundred, just like the CUESA. So it launched an exact competitor to itself, which again is unusual, but I get it. I mean I can see why, you know, I shares did something not exactly the same, but when they launched their core series. We've seen people clone things like Spider has a they have a Spy, and they also have like a cheaper version of Spy that people don't really know about, but it's
like way cheaper. This isn't the first time it's happened, but you have seen these companies sort of get creative in a way that they can continue to offer cheap products but at the same time maybe make a little more money for themselves. And I look at this as one of those moves that is again not unprecedented.
If you're in the know, why would you buy qqq instead of QQQM, which is kind of a little bit of what you're describing, like, if I can get the exact same thing for cheaper, why wouldn't I.
Well, I mean, I've been looking at gold ets for the past few months because of the spot bitcoin race. I find those equal parallels, and GLD still is a massive monster ETF even though there's many cheaper ones, if you get liquidity, you pretty much have like almost like an unlimited life in ETFs. Liquidity is very hard to unwind, and there's bigger investors out there who prioritize liquidity above everything else. They don't really care that it's five basis
points more expensive. That's why ETFs like eem, EFA, GLD and SPY for that matter, are going to roll on
for decades because of that liquidity. Now, over time, over ten, fifteen, twenty years, it's possible as these cheaper ones sort of chip away and get liquid themselves, there could be a turning point where QQQM gets more liquid in the ques and then it's gradually then suddenly, and where our team is actually looking at will that ever happen with SPY, because it is starting to happen with EEM and IMG.
But for now, though, liquidity is so much more massive with the cues that it's probably only going to appeal to the advisor world for the time being.
Katie, So, QQQM a couple years old. How's it going so far?
It's doing pretty well. I mean, it launched October twenty twenty. I believe it's already up to fourteen billion dollars AUM, so that's a very successful launch. But you know, we're talking about two hundred billion dollars for the queue, so not quite comparable yet. But I mean to piggyback off what Eric is saying. The queues like spy trades like water, So institutional investors that's where they want to go for liquidity.
But if you talk to Investo about why they chose to launch QQQM, I mean, they'll tell you I did. They'll tell you then that revenue streams are important to them, surprise. But also it is geared towards a different type of investor. If you're a buy and hold investor, you care about that five basis points, and you're probably going to buy QQQM over the traditional cues because you don't necessarily need all that liquidity.
But by the way, Joel, just to add some data behind what Katie just said, So that fourteen billion is that's a fast fourteen billion. I was shocked that got that big. So fourteen billion basically has one fourteenth the assets of the queues already. That's not bad, but it still has one one hundred and thirteenth of the volume of ques. So again that that to speaks to it's easier to grab land than c in the ETF world, so to speak.
That's the first time you've ever said that. It's novel like that.
Yeah, land is assets, c is volume.
About that.
That's how we say the State Street and spiders. They may be getting losing the land war, but they have a killer navy. So I'll stop there.
Uh, Athanasius, Let's talk about what else they have in this strategy, because it doesn't end with qqq M, right, It's like, how how far can you take the cues? Uh?
Yeah, They're trying to take it pretty far. And what I thought was really interesting about this is when you look at like S and P five hundred ETFs, right, they're like two basis points, three basis points, You're like, well,
why the queues still twenty basis points. Invesco actually had an exclusive on this, so no one else could launch the queues besides them, and so I'm guessing, you know, in the last couple of years they came to some sort of agreement that they could start to expand this lineup, and they did so. They have something like QQQJ, which is sort of like the up and comers that could get added to the to the Nasdaq one hundred. Eventually I forget the other one.
There's also qqq S that's the Invesco Nasdaq Future Gen two hundred ETF.
Yeah, there's that one too. So now they've like got these you know little qqq offsprings that you know, babyques, baby cues.
Okay, so qq I'm doing well. How about these other babyqs they're doing okay.
If you look at QQQJ, that launch also launched in October twenty twenty, so the same time as QQQM, it doesn't have fourteen billion dollars though, it has about seven hundred million, which is still pretty good. Pretty good. Qqq S though, that has just under seven million dollars, so uh, not quite taken off yet, but that only launched last October.
Can I can I throw another one in here? You know JP Morgan has you know JETP. They have an Asdak version of that called jep Q. This thing has five billion dollars already. I mean, so it's I guess you can use the index in certain ways if you're not investco. But JP Morgan is notoriously good, especially this this equity premium suite they have of getting assets.
Yeah yeah, yeah, I was going to add there's this other ETF qqq E, which is equal weight NASDAQ one hundred by direction. So you know there's some other non tech names in there, so that one's like, really it's hardcore.
I want to bring this point up because on our team, and you know, being in data for all these years, we have to classify all these ETFs, and we've actually gone back and forth with whether the QUES is a tech fund or not because it's only half tech about but it just feels like a tech fund, right So I think right now we do not have it as tech. Occasionally we will count it if we're looking. It depends on what we're working on. But it is interesting that
it's not really anything. It's not beta, it's not a tech fund. It's just the companies that list on NASDAC and so it's its own little anomaly factor. I think that again makes it a real unique index.
Okay, So one thing that stowed out to me was as I was looking through the various offerings that Invesco had, I saw a ticker that was qqq E and then I noticed that's not Invesco, Katie with that about.
That's direction. That is an equal weight version of the NASAQ one hundred. It's a very clever ticker. And I did ask Invesco about it, how they felt about it, and Annopaglia was pretty clear, who's, you know, the head of Invesco's ETF business. I forget her long fancy title,
but she's the man if you will. She said that it was a decision for them not to launch an equal weight version of the NASAQ one hundred and I know we'll point out that QQQ E launched it in twenty twelve, but she said that if you're investing in the cues, that's she thinks of it as a thematic investment in that if you were investing in the cues, you want that megacap exposure, so it doesn't make sense to dilute it by going equal weight.
So they were fine with having one QQQ that wasn't part of the family.
It is a good ticker though it is.
Yeah, I like that would you have let that one get away? Would you have letten that one get getten away?
As I mean, you've got like the golden goose already right with QQQ, like they can have. You know, it's a great it's an interesting product, but they've already got the main one.
If you're investing with the cues, I mean you kind of want those juggernaut names to drive you, which everybody's calling them now the super seven. So we're looking at Apple, Microsoft, Amazon, Navidia, Meta Alphabet, Tesla, and those are the stocks at the top which make up I'm just going to guess they may here about thirty thirty five percent of the portfolio. And these are like again, these are special companies formed
by special founders. And I sometimes think that there's something about NASDAC that attracts real you know, workaholic, visionary, control freak type founder people, the Elon Musks, the Bill Gates, the Jeff Bezos. You don't get that in other countries. And I think that's the edge that the CUES has, which, by the way, over the past ten years, the CUES has doubled the S and P five hundred. I mean, the S and P is a juggernaut and the CUES
doubled it. And if we just did a run of all the mutual funds out there, all the active mutual funds are like three thousand, only two have beat it over the past ten years, so zer point one percent. And the one guy did it by just holding forty percent of Tesla, which is almost like cheating. And then the other one is this weird small cap growth fund that we're still trying to figure out how on how exactly it pulled that off. But the point being is
the CUES is basically beat everybody. So even though Athanasio has pointed out that twenty basis point expense ratio in a normal ETF category, you'd think that'd be priced down by now, I would say twenty BIPs is cheap. If you look at it as the best performing active fund for the past ten years, you know by far that twenty BIPs is pretty low.
Athanasius, Katie, thanks for joining us on Trillions.
This is great.
Yeah, thanks for having me.
Thanks for listening to Trillions. Until next time. You can find us on the Bloomberg terminal, Bloomberg dot com, Apple Podcasts, Spotify, or wherever else you like to listen. We'd love to hear from you. We're on X I'm at Joel Weber Show, He's at Eric Balchuna's Trillions is produced by Magnus Hendrickson, but credit for this episode goes to Carmen red Riquez. Saige Bauman is the head of Bloomberg podcast by