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Speaker 1: Well, Kinderchion's I'm Joel Webber and I'm Eric Valchunis.

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Speaker 2: Eric.

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Speaker 1: There's this reporter that we work with in Bloomberg News

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Speaker 1: who came over to me at Bloomberg Business Week recently

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Speaker 1: and was like, Hey, do you know that QQQ makes

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Speaker 1: no money for Invesco? And I go, Katie Greifield, this

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Speaker 1: is a story we need to do, so we're doing it.

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Speaker 1: Katie Greifield has written that story for Bloomberg business Week. Eric,

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Speaker 1: is that a shaker to you, that QQQ makes no

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Speaker 1: money for Invesco?

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Speaker 2: Well, it isn't because I'm an ETF nerd and this

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Speaker 2: is sort of known in the nerd world, But for

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Speaker 2: most people it's probably a shocker. And it's really a

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Speaker 2: great insight into how different structures exist in the ETF world.

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Speaker 2: Not every ETF is an open end fund. The early

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Speaker 2: ones were structured a little differently, and the way people

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Speaker 2: are is different. But the other thing that I find,

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Speaker 2: I just find the cues fascinating for many other reasons.

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Speaker 2: So I'm always up the Q discussing.

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Speaker 1: Nickname sure, yeah, shorthand for QQQ, which this is a

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Speaker 1: tech juggernaut.

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Speaker 2: Eric, to say the least, our team and I we

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Speaker 2: always sort of like we have an international team and

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Speaker 2: we just there's something about the cues that captures like

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Speaker 2: the American innovation that you just don't get in the

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Speaker 2: rest of the world. And this index just something about

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Speaker 2: this index and the NASAQ exchange attracts, you know, the

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Speaker 2: tip of the spear of these kind of like juggernaut

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Speaker 2: innovators that are you know, largely an American thing, and

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Speaker 2: it just kicks ass this index, the CTF, and it's

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Speaker 2: a phenomenon.

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Speaker 1: But here's the thing. Katie kind of buried the lead

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Speaker 1: when she came to me because Invesco has found a

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Speaker 1: way to make money on the cues. We're going to

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Speaker 1: talk about that. So joining us Athanasio, Sarah Faegas of

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Speaker 1: Bloomberg Intelligence where he's an ETF analyst, as well as

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Speaker 1: Key Greifeld the Bloomberg News where she's an e ETF reporter,

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Speaker 1: and so much more, this time on Trillions the Cues. Atanasios, Katie,

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Speaker 1: welcome back to Trillions.

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Speaker 3: Yeah, nice to see you guys.

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Speaker 4: Thrilled to be here.

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Speaker 1: Okay, give me a sense, Katie, how big is QQQ.

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Speaker 4: If you want a number, it's two hundred billion dollars

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Speaker 4: in assets under management. Give her take. I believe it's

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Speaker 4: the fifth largest ETF out there, at least in the US,

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Speaker 4: and it's one of the oldest too. And I think

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Speaker 4: you and Eric set up really nicely in the intro.

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Speaker 4: It's just synonymous with tech investing. At this point, you say,

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Speaker 4: the Cues people know what you talked, you were talking about.

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Speaker 4: It's one of those household names at this point.

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Speaker 1: Okay, So why does Investco not make any money on

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Speaker 1: its flagship product.

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Speaker 4: It's pretty wild, And like Eric said, if you're in

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Speaker 4: the know, you know. But I'd been covering ETFs for

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Speaker 4: three and a half years and this was actually born

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Speaker 4: out a tweet someone posted, I think it was Nate

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Speaker 4: JERSI actually posted that the Cues are earning a ton

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Speaker 4: of money this year because their expense ratio is twenty

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Speaker 4: basis points, which is relatively high for a passive product.

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Speaker 4: And obviously the AUM and the Cues has ballooned this

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Speaker 4: year because tech is on fire. And then I think

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Speaker 4: it was Ben Johnson from morning Star who pointed out

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Speaker 4: in the comments that Invesco earned no money off of that,

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Speaker 4: and then from there I fill down a rabbit hole

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Speaker 4: Athanasios has covered that that if you look at this

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Speaker 4: structure of the CUES, it's set up as a unit

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Speaker 4: investment trust. So that's important, you very important. It's like

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Speaker 4: the vestigial organ of the ETF industry baked into that

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Speaker 4: expense ratio. Part of it goes to the index provider NASDAC,

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Speaker 4: part of that goes to the trustee. The rest of

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Speaker 4: that goes to marketing. For whatever reason, none of it,

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Speaker 4: virtually none of it.

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Speaker 1: Goes to Investco worth mentioning. Invesco sponsors this program. We

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Speaker 1: would do this episode even if they didn't, because it's fascinating.

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Speaker 1: Athanasios U T Unit investment trust. What is it? Why

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Speaker 1: did it become a vestisual organ?

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Speaker 3: So when you look at when the first ETFs launched,

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Speaker 3: like Spy is also a u T, they were just cheaper,

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Speaker 3: they were easier, you know, without getting too much into it,

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Speaker 3: they don't Spy being the biggest, being the biggest and

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Speaker 3: the first, so there's a few of them out there. Uh,

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Speaker 3: they were just cheaper. You don't have to have a

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Speaker 3: border director, so it's just a lot easier to launch

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Speaker 3: these products. I also don't think issuers thought these products

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Speaker 3: be this big when they first brought them to market.

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Speaker 3: So they're like, yeah, we're just going to offer this

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Speaker 3: beta type investment maybe gets some money into it. We

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Speaker 3: can't charge on it, and that's the biggest you know,

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Speaker 3: Katie alluded to it. You can't make money on a

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Speaker 3: u T. So we really think about it, like, I

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Speaker 3: think this is like the biggest act of charity ever.

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Speaker 3: Buy investo because not only are they not making any

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Speaker 3: money on it, it's like one of the best performing

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Speaker 3: ETFs like ever. Right, so you're getting all this, you're

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Speaker 3: getting these really good returns and this issue is making

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Speaker 3: almost no money on it. So it's just like this incredible, Like,

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Speaker 3: you know, why.

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Speaker 1: Don't they just change it and make it become a

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Speaker 1: closed infun.

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Speaker 3: Uh you can't. You know, there's ways around it. I

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Speaker 3: think we've sort of talked about they're trying to launch

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Speaker 3: other products that are tied to the queues that are

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Speaker 3: not in the U T structure, but a conversion unlikely,

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Speaker 3: you know, maybe it could happen. I think we've talked

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Speaker 3: about it on other shows. This Vanguard patent, so maybe

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Speaker 3: if that opens up, maybe they can add a share

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Speaker 3: class to it. I'm sure lawyers are working on it,

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Speaker 3: but you know, in the meantime, Investco is trying to

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Speaker 3: you know, launch a different structure with KIQM that isn't

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Speaker 3: a u T it's cheaper and all that money goes

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Speaker 3: to Investco.

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Speaker 4: Well, just on that point, they could do a shareholder vote.

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Speaker 4: They could, but talking to Investco about it, I mean,

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Speaker 4: it would just there's tens of thousands of Q shareholders

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Speaker 4: at this point hard to track down. It would just

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Speaker 4: be so outrageously expensive and complicated that it's pretty much impossible.

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Speaker 1: I think this is the longest that Eric Bulchernis has

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Speaker 1: ever been quiet. Eric. If you were in Vesco and

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Speaker 1: you were not making money off of your flagship product

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Speaker 1: QQ because of its structure, and that you couldn't do

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Speaker 1: anything about that, what would you do?

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Speaker 2: Yeah, it would be tough to see all the success

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Speaker 2: that you're helping and you don't get that much, you know,

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Speaker 2: a real big taste of it. It seems like all

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Speaker 2: these other places are getting royalties off of the song

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Speaker 2: you wrote in a weird way, even though Invesco did

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Speaker 2: buy it.

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Speaker 1: I mean it wasn't there, okay, Yeah, And Invesco Worth

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Speaker 1: Mentioning did not create the product at an Ossios.

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Speaker 3: Actually the NASDAC created. It just has like a beta

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Speaker 3: offering like to increase trading.

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Speaker 1: In like nineteen ninety nine, like right before everything blew

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Speaker 1: up in the dot com world.

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Speaker 3: Yeah exactly, and like you know, before anyone really cared

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Speaker 3: about ETFs or whatnot. And then eventually they sold it

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Speaker 3: to power Shares and then power Share just rebranded to Investco,

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Speaker 3: so you know, that's what it been. The the timeline

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Speaker 3: of it.

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Speaker 4: Wait, Investco bought power.

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Speaker 3: Shares, it was zach So the way it worked was

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Speaker 3: and the reason they they did this is so that

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Speaker 3: money they do make quote unquote it has to be

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Speaker 3: spent on marketing. So when you when it was called

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Speaker 3: the power Shares QQQ, they had to call it power Shares, right,

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Speaker 3: But Invesco wanted to leverage that into all their products,

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Speaker 3: so saying, we're going to drop the power Shares name

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Speaker 3: only called Investco and now we can stretch those marketing

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Speaker 3: dollars to anything Investco related. So it's really like a

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Speaker 3: marketing ploy. So we sort of related to like no

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Speaker 3: brewsters millions, we like have to spend all this money

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Speaker 3: by like the end of the year. So they just

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Speaker 3: did it to be able to leverage it, and so like,

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Speaker 3: now you're not just thinking power shares, You're thinking Investco

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Speaker 3: and this, you know, spills down to a lot of

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Speaker 3: different products, not just the.

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Speaker 1: Cues Okay, Eric, what would you do?

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Speaker 3: Uh?

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Speaker 2: I mean what I would do is what they did exactly.

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Speaker 2: I think putting Investco in the name, so at least

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Speaker 2: you get Invesco in those advertisements, because Mike, you know,

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Speaker 2: when there's other unit trust out there, and I feel

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Speaker 2: like even though they advertise, they would rather advertise with

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Speaker 2: their lower products that need it more or that are

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Speaker 2: more timely, but at least they get the name in there.

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Speaker 2: And I think what they did was interesting. So I

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Speaker 2: want to steal Katie's thunder. But they created go for

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Speaker 2: It QQQM, which is again like a total carbon copy.

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Speaker 2: It's the same thing. It's five basis points cheaper.

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Speaker 1: But when you say same thing, tell me what is it?

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Speaker 1: Because is it the same index? And what is the index?

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Speaker 1: And what's in it?

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Speaker 2: Yeah? It tracks the Nasdaq one hundred, just like the CUESA.

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Speaker 2: So it launched an exact competitor to itself, which again

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Speaker 2: is unusual, but I get it. I mean I can

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Speaker 2: see why, you know, I shares did something not exactly

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Speaker 2: the same, but when they launched their core series. We've

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Speaker 2: seen people clone things like Spider has a they have

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Speaker 2: a Spy, and they also have like a cheaper version

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Speaker 2: of Spy that people don't really know about, but it's

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Speaker 2: like way cheaper. This isn't the first time it's happened,

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Speaker 2: but you have seen these companies sort of get creative

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Speaker 2: in a way that they can continue to offer cheap

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Speaker 2: products but at the same time maybe make a little

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Speaker 2: more money for themselves. And I look at this as

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Speaker 2: one of those moves that is again not unprecedented.

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Speaker 1: If you're in the know, why would you buy qqq

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Speaker 1: instead of QQQM, which is kind of a little bit

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Speaker 1: of what you're describing, like, if I can get the

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Speaker 1: exact same thing for cheaper, why wouldn't I.

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Speaker 2: Well, I mean, I've been looking at gold ets for

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Speaker 2: the past few months because of the spot bitcoin race.

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Speaker 2: I find those equal parallels, and GLD still is a

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Speaker 2: massive monster ETF even though there's many cheaper ones, if

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Speaker 2: you get liquidity, you pretty much have like almost like

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Speaker 2: an unlimited life in ETFs. Liquidity is very hard to unwind,

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Speaker 2: and there's bigger investors out there who prioritize liquidity above

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Speaker 2: everything else. They don't really care that it's five basis

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Speaker 2: points more expensive. That's why ETFs like eem, EFA, GLD

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Speaker 2: and SPY for that matter, are going to roll on

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Speaker 2: for decades because of that liquidity. Now, over time, over ten, fifteen,

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Speaker 2: twenty years, it's possible as these cheaper ones sort of

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Speaker 2: chip away and get liquid themselves, there could be a

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Speaker 2: turning point where QQQM gets more liquid in the ques

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Speaker 2: and then it's gradually then suddenly, and where our team

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Speaker 2: is actually looking at will that ever happen with SPY,

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Speaker 2: because it is starting to happen with EEM and IMG.

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Speaker 2: But for now, though, liquidity is so much more massive

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Speaker 2: with the cues that it's probably only going to appeal

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Speaker 2: to the advisor world for the time being.

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Speaker 1: Katie, So, QQQM a couple years old. How's it going

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Speaker 1: so far?

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Speaker 4: It's doing pretty well. I mean, it launched October twenty twenty.

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Speaker 4: I believe it's already up to fourteen billion dollars AUM,

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Speaker 4: so that's a very successful launch. But you know, we're

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Speaker 4: talking about two hundred billion dollars for the queue, so

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Speaker 4: not quite comparable yet. But I mean to piggyback off

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Speaker 4: what Eric is saying. The queues like spy trades like water,

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Speaker 4: So institutional investors that's where they want to go for liquidity.

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Speaker 4: But if you talk to Investo about why they chose

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Speaker 4: to launch QQQM, I mean, they'll tell you I did.

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Speaker 4: They'll tell you then that revenue streams are important to them, surprise.

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Speaker 4: But also it is geared towards a different type of investor.

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Speaker 4: If you're a buy and hold investor, you care about

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Speaker 4: that five basis points, and you're probably going to buy

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Speaker 4: QQQM over the traditional cues because you don't necessarily need

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Speaker 4: all that liquidity.

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Speaker 2: But by the way, Joel, just to add some data

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Speaker 2: behind what Katie just said, So that fourteen billion is

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Speaker 2: that's a fast fourteen billion. I was shocked that got

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Speaker 2: that big. So fourteen billion basically has one fourteenth the

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Speaker 2: assets of the queues already. That's not bad, but it

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Speaker 2: still has one one hundred and thirteenth of the volume

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Speaker 2: of ques. So again that that to speaks to it's

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Speaker 2: easier to grab land than c in the ETF world,

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Speaker 2: so to speak.

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Speaker 1: That's the first time you've ever said that. It's novel

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Speaker 1: like that.

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Speaker 2: Yeah, land is assets, c is volume.

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Speaker 3: About that.

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Speaker 2: That's how we say the State Street and spiders. They

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Speaker 2: may be getting losing the land war, but they have

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Speaker 2: a killer navy. So I'll stop there.

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Speaker 1: Uh, Athanasius, Let's talk about what else they have in

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Speaker 1: this strategy, because it doesn't end with qqq M, right,

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Speaker 1: It's like, how how far can you take the cues? Uh?

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Speaker 3: Yeah, They're trying to take it pretty far. And what

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Speaker 3: I thought was really interesting about this is when you

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Speaker 3: look at like S and P five hundred ETFs, right,

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Speaker 3: they're like two basis points, three basis points, You're like, well,

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Speaker 3: why the queues still twenty basis points. Invesco actually had

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Speaker 3: an exclusive on this, so no one else could launch

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Speaker 3: the queues besides them, and so I'm guessing, you know,

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Speaker 3: in the last couple of years they came to some

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Speaker 3: sort of agreement that they could start to expand this lineup,

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Speaker 3: and they did so. They have something like QQQJ, which

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Speaker 3: is sort of like the up and comers that could

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Speaker 3: get added to the to the Nasdaq one hundred. Eventually

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Speaker 3: I forget the other one.

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Speaker 4: There's also qqq S that's the Invesco Nasdaq Future Gen

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Speaker 4: two hundred ETF.

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Speaker 3: Yeah, there's that one too. So now they've like got

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Speaker 3: these you know little qqq offsprings that you know, babyques,

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Speaker 3: baby cues.

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Speaker 1: Okay, so qq I'm doing well. How about these other

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Speaker 1: babyqs they're doing okay.

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Speaker 4: If you look at QQQJ, that launch also launched in

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Speaker 4: October twenty twenty, so the same time as QQQM, it

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Speaker 4: doesn't have fourteen billion dollars though, it has about seven

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Speaker 4: hundred million, which is still pretty good. Pretty good. Qqq

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Speaker 4: S though, that has just under seven million dollars, so uh,

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Speaker 4: not quite taken off yet, but that only launched last October.

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Speaker 2: Can I can I throw another one in here? You

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Speaker 2: know JP Morgan has you know JETP. They have an

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Speaker 2: Asdak version of that called jep Q. This thing has

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Speaker 2: five billion dollars already. I mean, so it's I guess

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Speaker 2: you can use the index in certain ways if you're

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Speaker 2: not investco. But JP Morgan is notoriously good, especially this

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Speaker 2: this equity premium suite they have of getting assets.

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Speaker 3: Yeah yeah, yeah, I was going to add there's this

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Speaker 3: other ETF qqq E, which is equal weight NASDAQ one

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Speaker 3: hundred by direction. So you know there's some other non

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Speaker 3: tech names in there, so that one's like, really it's hardcore.

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Speaker 2: I want to bring this point up because on our team,

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Speaker 2: and you know, being in data for all these years,

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Speaker 2: we have to classify all these ETFs, and we've actually

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Speaker 2: gone back and forth with whether the QUES is a

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Speaker 2: tech fund or not because it's only half tech about

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Speaker 2: but it just feels like a tech fund, right So

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Speaker 2: I think right now we do not have it as tech.

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Speaker 2: Occasionally we will count it if we're looking. It depends

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Speaker 2: on what we're working on. But it is interesting that

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Speaker 2: it's not really anything. It's not beta, it's not a

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Speaker 2: tech fund. It's just the companies that list on NASDAC

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Speaker 2: and so it's its own little anomaly factor. I think

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Speaker 2: that again makes it a real unique index.

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Speaker 1: Okay, So one thing that stowed out to me was

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Speaker 1: as I was looking through the various offerings that Invesco had,

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Speaker 1: I saw a ticker that was qqq E and then

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Speaker 1: I noticed that's not Invesco, Katie with that about.

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Speaker 4: That's direction. That is an equal weight version of the

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Speaker 4: NASAQ one hundred. It's a very clever ticker. And I

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Speaker 4: did ask Invesco about it, how they felt about it,

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Speaker 4: and Annopaglia was pretty clear, who's, you know, the head

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Speaker 4: of Invesco's ETF business. I forget her long fancy title,

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Speaker 4: but she's the man if you will. She said that

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Speaker 4: it was a decision for them not to launch an

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Speaker 4: equal weight version of the NASAQ one hundred and I

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Speaker 4: know we'll point out that QQQ E launched it in

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Speaker 4: twenty twelve, but she said that if you're investing in

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Speaker 4: the cues, that's she thinks of it as a thematic

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Speaker 4: investment in that if you were investing in the cues,

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Speaker 4: you want that megacap exposure, so it doesn't make sense

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Speaker 4: to dilute it by going equal weight.

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Speaker 1: So they were fine with having one QQQ that wasn't

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Speaker 1: part of the family.

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Speaker 4: It is a good ticker though it is.

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Speaker 1: Yeah, I like that would you have let that one

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Speaker 1: get away? Would you have letten that one get getten away?

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Speaker 3: As I mean, you've got like the golden goose already

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Speaker 3: right with QQQ, like they can have. You know, it's

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Speaker 3: a great it's an interesting product, but they've already got

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Speaker 3: the main one.

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Speaker 2: If you're investing with the cues, I mean you kind

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Speaker 2: of want those juggernaut names to drive you, which everybody's

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Speaker 2: calling them now the super seven. So we're looking at Apple, Microsoft, Amazon, Navidia,

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Speaker 2: Meta Alphabet, Tesla, and those are the stocks at the

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Speaker 2: top which make up I'm just going to guess they

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Speaker 2: may here about thirty thirty five percent of the portfolio.

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Speaker 2: And these are like again, these are special companies formed

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Speaker 2: by special founders. And I sometimes think that there's something

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Speaker 2: about NASDAC that attracts real you know, workaholic, visionary, control

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Speaker 2: freak type founder people, the Elon Musks, the Bill Gates,

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Speaker 2: the Jeff Bezos. You don't get that in other countries.

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Speaker 2: And I think that's the edge that the CUES has, which,

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Speaker 2: by the way, over the past ten years, the CUES

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Speaker 2: has doubled the S and P five hundred. I mean,

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Speaker 2: the S and P is a juggernaut and the CUES

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Speaker 2: doubled it. And if we just did a run of

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Speaker 2: all the mutual funds out there, all the active mutual

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Speaker 2: funds are like three thousand, only two have beat it

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Speaker 2: over the past ten years, so zer point one percent.

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Speaker 2: And the one guy did it by just holding forty

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Speaker 2: percent of Tesla, which is almost like cheating. And then

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Speaker 2: the other one is this weird small cap growth fund

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Speaker 2: that we're still trying to figure out how on how

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Speaker 2: exactly it pulled that off. But the point being is

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Speaker 2: the CUES is basically beat everybody. So even though Athanasio

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Speaker 2: has pointed out that twenty basis point expense ratio in

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Speaker 2: a normal ETF category, you'd think that'd be priced down

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Speaker 2: by now, I would say twenty BIPs is cheap. If

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Speaker 2: you look at it as the best performing active fund

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Speaker 2: for the past ten years, you know by far that

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Speaker 2: twenty BIPs is pretty low.

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Speaker 1: Athanasius, Katie, thanks for joining us on Trillions.

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Speaker 4: This is great.

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Speaker 3: Yeah, thanks for having me.

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Speaker 1: Thanks for listening to Trillions. Until next time. You can

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Speaker 1: find us on the Bloomberg terminal, Bloomberg dot com, Apple Podcasts, Spotify,

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Speaker 1: or wherever else you like to listen. We'd love to

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Speaker 1: hear from you. We're on X I'm at Joel Weber Show,

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Speaker 1: He's at Eric Balchuna's Trillions is produced by Magnus Hendrickson,

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Speaker 1: but credit for this episode goes to Carmen red Riquez.

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Speaker 1: Saige Bauman is the head of Bloomberg podcast by