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For decades, buying a Nasdaq-100 ETF was a one-off purchase. That’s not the case anymore.
With the recent SpaceX IPO and offerings from artificial intelligence giants Anthropic and OpenAI on the way, investor interest in the tech-heavy index is growing. State Street Investment Management launched a new index-tracking ETF on Wednesday. The State Street SPDR Portfolio Nasdaq 100 ETF (QNDX) follows the years of dominance of Invesco’s Nasdaq-100-tracking QQQ, which was restructured as a regular open-end fund in December. With a similar product from BlackRock already included, competition in the Nasdaq 100 space is heating up, and that gives advisors more options to track one of the world’s most recognized indexes.
“In time [State Street] now offers a lower cost alternative, and we expect iShares to quickly follow, Invesco maintains first-mover advantages,” said Todd Rosenbluth, head of research at VettaFi. “Like the big four funds that offer exposure to the S&P 500, there is room for more providers.”
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Money Wars
After BlackRock and State Street filed to introduce competing funds, with one day left in April, the industry is waiting to learn more about the fees. We now know that State Street’s fund undercuts QQQ by about half, charging 10 basis points to QQQ’s 18, respectively. “QNDX at 10 bps is not only competitive, but aggressive,” said Jeff Judge, CFP at Chesapeake Financial Planners. Recently, a client, invested in QQQ since 2017 and never asked about the payments, suddenly wanted to talk about the Nasdaq 100. “SpaceX changed that,” said Judge. “He came in and asked about the index, and we ended up doing a full review. That conversation is playing out in a lot of ways right now, and State Street and BlackRock are trusting right away.”
Instead of $500,000, the difference between State Street’s product and QQQ is $400 a year, Judge added. “It’s not life-changing in and of itself, but in a tax-deferred account compounded over ten years, that amount is real money,” he said. However, it may not be the last from Invesco, either. QQQ still has liquidity and an options market that will keep institutional traders there for years, he added. But more products are on the way to buy and grab investors, especially with two blockbuster tech IPOs slated for later this year. “When they get to Nasdaq, this happens again,” Jaji said. “All asset managers want to be the vehicle for that exposure. The era of one company holding the index is over.”
