Invesco has announced the expansion of the Invesco QQQ Innovation Suite to include a new ETF that will access smaller-cap companies screened by a key marker of innovation – high quality patents.
The Invesco NASDAQ Future Gen 200 ETF (QQQS) will add an efficient overlay to small-cap and micro-cap companies listed on The Nasdaq Stock Market that are not included in the Nasdaq 100 Index or Nasdaq Next Generation 100 Index. High quality and high value patents may be an indicator of future innovation potential in a smaller-cap company.
“Companies included in the Invesco QQQ Innovation Suite have always spent considerably more on research and development and Invesco wanted to capture that same commitment to innovation on a smaller cap-tier,” says John Hoffman, Americas Head of ETFs and Index Strategies, Invesco. “By applying a high-quality patent screen, the QQQS portfolio will focus on smaller-cap companies with a competitive advantage on certain inventions. This will allow investors to customise their market capitalization exposure to companies who are pioneering the future.”
The firm writes that two years ago on October 13, 2020, the Invesco NASDAQ 100 ETF (QQQM) and Invesco NASDAQ Next Gen 100 ETF (QQQJ) were launched to offer investors access to category-defining companies with a known legacy of innovation, as well as the next generation of companies who are just beginning to impact the world. This personalised exposure has resonated with investors, the firm says, and together QQQM and QQQJ have gathered USD5.2 billion in AUM since launch.
Now, the addition of QQQS to the Innovation Suite has created a modular set of three ETFs that can be used in together or separately to personalise investor access to companies of all sizes focused on future innovation, the firm says.
QQQS will track the Nasdaq Innovators Completion Cap Index, an intelligent, equal weighted index that uses a patent data screen created by IPR Strategies. IPR Strategies, a leader in the science of patent valuation, believes that high quality and high value patents represent a future asset and are an early indicator of future positive value. IPR Strategies works with Nasdaq to assign a realistic value to patents based on multiple parameters, including a high commitment to research and development and valuable intellectual property, to source small-cap and micro-cap companies that may be laying the groundwork to become the next industry giants. Given its long-standing expertise in smart beta, Invesco believes that the addition of a thoughtfully composed layer of criteria (patent value) to an overall capitalization screen (small and micro-cap) may be successful in identifying companies with a focus on innovation in their industries.
“The future of innovation, as uncovered by the patent screening process, underscores the transformative changes of the companies within their respective industries,” says Cameron Lilja, Vice President, Global Head of Index Product, Nasdaq. “We are excited to expand our Invesco partnership with this addition to their suite of Nasdaq index-based products, which provides investors with another option to help them achieve their investment goals.”