Invesco has expanded its suite of ETFs tracking Nasdaq indices with the launch of the Invesco NASDAQ-100 Equal Weight UCITS ETF.
The firm writes that the latest addition to the range offers investors a different perspective on Nasdaq’s flagship index and the portfolio of globally recognised leaders in innovation that it contains. By following an index that weights each constituent equally, the ETF is designed to provide balanced exposure across all 100 stocks rather than the more traditional market-cap weighting methodology that allocates to stocks according to their size.
The firm writes that the standard NASDAQ-100 Index is an iconic benchmark for US equity markets and one of the best-performing benchmarks in the world, with a gain of 460 per cent over the 10 years to the end of June 2023. These returns have been driven by the extraordinary growth of mega-cap stocks like Apple, Microsoft, Alphabet and Amazon, which carry an outsized weight in market-cap weighted indices. While this weighting methodology performs well in certain market environments, some investors may prefer to avoid having a high concentration of weight in a small number of companies, the firm says.
For investors who want exposure to the long-term growth potential of the companies listed on Nasdaq but seek a more diversified exposure, the NASDAQ-100 Equal Weighted index offers an interesting alternative to the standard index. The newly launched Invesco ETF is the only product available in Europe tracking this equal weighted index and provides a more balanced exposure to a greater variety of companies, some of which may be the mega-caps of tomorrow.
Gary Buxton, Head of EMEA ETFs and Indexed Strategies at Invesco, says: “Nasdaq has always been about innovation, both in terms of the company itself and the type of companies that choose to list there. That commitment to innovation sets them apart and was one of the reasons we started our relationship with Nasdaq almost 25 years ago. It is worth noting how the Nasdaq-100 index has evolved during this time, especially at the top end. Huge household names such as Dell and Starbucks have been replaced by the likes of Apple, Tesla and even PepsiCo, not because they fell out of favour but because other innovative companies have simply performed better.”
Invesco explains that the NASDAQ-100 Equal Weighted Index is constructed from the same constituents as the parent NASDAQ-100 Index but equally weights the issuers at each quarterly rebalancing date, rather than weighting them by their market capitalisation. The Invesco ETF aims to hold all the securities in the index in their respective weightings and will rebalance its holdings when the index is rebalanced.
The NASDAQ-100 Equal Weighted Index, just as the parent index, comprises the largest 100 stocks on the Nasdaq Stock Market, excluding financial companies. Sector exposures differ from those in the parent index due to the weighting methodology. The Information Technology sector represents just over half of the parent index but 35 per cent of the equal weighted index. The more significant difference is at the individual stock level, where the top 10 holdings make up 60 per cent of the parent index but only 10 per cent of the equal weighted index when it rebalances.
Chris Mellor, Head of EMEA Equity ETF Product Management at Invesco, says: “Nasdaq was once seen as primarily a technology index, and of course much of its success has been driven by tech giants. However, it is also home to companies in other sectors, including those traditionally viewed as more defensive. Innovation is the thread stitching all these Nasdaq-listed companies together, whether in terms of the industry in which the company is operating or the dynamism of its management. This equal-weighted ETF spreads exposure evenly across all these opportunities.”