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The QQQ ETF Joins Exclusive $100B Club

In the world of exchange traded funds, it's often said that $100 million in assets is what an issuer needs to turn a profit on a particular fund. Of course, making it to $1 billion is impressive and $10 billion is rarefied air.

Benzinga · 05/13/2020 12:15

In the world of exchange traded funds, it's often said that $100 million in assets is what an issuer needs to turn a profit on a particular fund. Of course, making it to $1 billion is impressive and $10 billion is rarefied air.

What Happened

Speaking of exclusivity, $100 billion is truly elite company in the ETF space, but that club got a new member last week with the addition of the PowerShares QQQ (NASDAQ: QQQ). Bolstered by the leadership of technology and communication services equities, the Nasdaq-100 index — QQQ's underlying benchmark — recently returned to positive territory while the S&P 500 still labors in the red following the coronavirus March meltdown.

Year to date, investors added $9.37 billion to QQQ — a total surpassed by just five other ETFs — vaulting the fund to nearly $104 billion in assets under management.

Why It's Important

The only U.S.-listed ETFs larger than QQQ are the SPDR S&P 500 ETF (NYSE: SPY), iShares Core S&P 500 ETF (NYSE: IVV), Vanguard S&P 500 ETF (NYSE: VOO) and the Vanguard Total Stock Market ETF (NYSE: VTI).

“CFRA rates QQQ as a five-star diversified U.S. equity fund, believing it has a high probability of outperforming in the next nine months due to its low costs and high reward potential, despite slightly elevated risks,” said CFRA Research Director of ETF & Mutual Fund Research Todd Rosenbluth in a Tuesday note.

At $71.24 billion in assets under management, the iShares Core U.S. Aggregate Bond ETF (NYSE: AGG) is the next closest ETF to QQQ on the assets totem pole, but it could be awhile before the bond fund joins the $100 billion club.

“CFRA thinks it could be three or more years before another fund joins the $100 billion club given competitive pressure and modest returns for bond funds. But actions by the Federal Reserve could boost one fund into the upper echelon,” said Rosenbluth.

What's Next

Past performance is never a guarantee of future returns, but with the sectors QQQ is heavy performing well this year, it's hard to imagine investors won't remain fond of the fund. Plus, QQQ has history on its side when it comes to outperforming the aforementioned S&P 500 ETFs.

“The Nasdaq-100 is heavily allocated towards top performing industries such as Technology, Consumer Services, and Health Care, which have helped the Nasdaq-100 outperform the S&P 500 by a wide margin between Dec. 31, 2007 and March. 31, 2020,” according to Nasdaq Global Indexes.

The Nasdaq-100 beat the S&P 500 in 10 of those 12 years.

Photo credit: bfishadow, Flickr