BlackRock Takes On Invesco, State Street With New Nasdaq-100 ETF

Three might just be a crowd. 

The iShares Nasdaq 100 ETF (IQQ), launched by BlackRock, is expected to begin trading as early as today. With the new wrapper, BlackRock joins State Street, which introduced a similar fund two weeks ago, in competing with Invesco’s QQQ, long the only exchange-traded fund tracking the index. Now that three asset managers are offering nearly identical funds, advisors have a bevy of options for exposure to the index and its newest entrant, the aerospace and AI giant SpaceX. For many, the choice may come down to fees and brand recognition, but experts agree that Invesco certainly has the incumbent advantage.

“The Qs are, outside of SPY, probably the second-most famous, most well-known ticker,” said James Seyffart, a senior analyst at Bloomberg Intelligence. “That’s still what most people and traders are going to use for their exposure, but for long-term, buy-and-hold investors and advisors, they’re going to be seriously considering these other products.” 

Q-ing Up Competition

Fees are among the main differences between the funds. For investors looking to gain new exposure to the Nasdaq, choosing a fund with a lower fee could make sense. But for those who already hold QQQ, or Invesco’s lower-fee index offering QQQM, a difference of a couple of basis points probably won’t be enough to move the needle, said Athanasios Psarofagis, an ETF analyst at Bloomberg Intelligence. “Let’s say all these launched at the same time, then I think the price would matter,” he said. “But trying to come in and go head to head with a product that’s so well established, it’s just harder.” 

Fees for each Nasdaq-100 ETF are as follows: 

• Invesco’s QQQ has the highest fee at 0.18%. QQQM’s fee is 0.15%. 
• BlackRock’s IQQ will cost 0.12%, but the issuer is offering a waiver that brings the fee down to 0.10% through the end of next July.
• State Street’s SPDR Portfolio Nasdaq 100 ETF (QNDX) has the lowest fee at 0.10%. 

BlackRock’s fee waiver has raised some eyebrows in the analyst community. “I don’t get what their approach is to try to do this temporary waiver, and then go back up to 12,” said Psarofagis. “Just come in at 10 basis points, like State Street did.” 

All About LiQQQuidity. Invesco’s fund may cost more, but it also has more liquidity. “As the cornerstone of the Nasdaq-100 ecosystem, a half a trillion dollars of options are tied to QQQ, offering deep liquidity that will be difficult to displace,” Brian Hartigan, Invesco’s global head of ETF and Index investments, said in an email. 

That liquidity matters, especially for institutional investors and short-term traders, said Bloomberg’s Seyffart. “You’re not even going to be considering these other ones, despite the lower fee.”