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For decades, buying the Nasdaq-100 in an ETF wrapper was one-stop shopping. Not 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 picking up. State Street Investment Management launched Wednesday a new ETF that tracks the index. The State Street SPDR Portfolio Nasdaq 100 ETF (QNDX) follows years of dominance by Invesco’s Nasdaq-100-tracking QQQ, which was restructured as a traditional open-ended fund in December. With a similar product from BlackRock already filed, competition in the Nasdaq 100 space is heating up, and that’s giving advisors additional options to track one of the world’s most recognizable indexes.
“While [State Street] now offers a lower cost alternative, and we expect iShares to soon follow suit, Invesco retains first-mover advantages,” said Todd Rosenbluth, head of research at VettaFi. “Similar to the four sizable funds that offer S&P 500 exposure, there is room for multiple providers.”
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Fee Wars
After BlackRock and State Street filed to launch competing funds, just a day apart in April, the industry was waiting to learn more about fees. We now know State Street’s fund undercuts QQQ by almost half, charging 10 basis points to QQQ’s 18, respectively. “QNDX at 10 bps is not just competitive, it’s aggressive,” said Jeff Judge, a CFP at Chesapeake Financial Planners. Recently, a client, who has been invested in QQQ since 2017 and never asked about fees, suddenly wanted to talk about the Nasdaq 100. “SpaceX changed that,” Judge said. “She came in asking about the index, and we ended up doing a full wrapper review. That conversation is playing out across practices right now, and State Street and BlackRock are counting on exactly that moment.”
On a $500,000 position, the difference between the State Street product and QQQ is $400 a year, Judge added. “Not life-changing on its own, but in a tax-deferred account compounded over a decade, that number is real money,” he said. However, it’s likely not the last move from Invesco, either. QQQ still has the liquidity and an options market that will keep institutional traders there for years, he added. But more products are on the way for buy-and-hold investors, especially with two more blockbuster tech IPOs slated for later this year. “If they land on Nasdaq, this dynamic repeats,” Judge said. “Every asset manager wants to be the vehicle for that exposure. The era of one firm owning this index is done.”
Not Just for Tech-Heads. Matt Bartolini, global head of research strategists at State Street, said its latest fund is certainly a tech-heavy option, but it also fits in more traditional allocations. “It gives investors the ability to be both core and growth at the same time, and I think it does fit into an investor’s portfolio in that core element, and not just a satellite, tactical tech-like position.”
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