Invesco debuts first Nasdaq 'next generation' ETF for European market

Invesco has launched what it claims is the first ETF in Europe that provides investors targeted exposure to the eligible 101st to 200th largest securities listed on the Nasdaq stock market.

Just as the large-cap Nasdaq-100 Index excludes financial companies, so too does the new mid-cap Nasdaq Next Generation 100 Index that launched in August of 2020.

The constituents of the Nasdaq Next Generation 100 index are capped at 4% although currently the largest name is 3.3% of the index. The largest sectors currently represented within the index are technology (33.0%), consumer services (22.7%), healthcare (22.0%), industrials (11.8%) and consumer goods (7.2%).

The Invesco Nasdaq Next Generation UCITS ETF will aim to deliver the index performance by investing physically in each of the constituents in proportion to their index weight and rebalancing when the index does.

The ETF has a 0.25% pa ongoing charge and is available to trade in either USD or GBP share classes, with dividends automatically reinvested. 

Gary Buxton, head of EMEA ETFs and indexed strategies at Invesco, said: "We have worked with Nasdaq for more than 20 years and have built a long-term track record of delivering efficient and targeted exposure to the Nasdaq-100 index. Now, we are delighted to bring to the European market the first ETF capturing the opportunities of tomorrow's most innovative companies."

Sean Wasserman, ‎vice president and global head of index and Advisor Solutions at Nasdaq, said: "Today, over a third of the Nasdaq-100 companies ‘graduated' from the Nasdaq Next Generation 100, truly representing companies at the forefront of innovation. We are excited that Invesco is launching this ETF to provide access to the next generation of innovators."

Chris Mellor, head of EMEA equity and commodity ETF product management, said: "One of the biggest growth drivers of Nasdaq-listed companies tends to be their level of spending on research and development."

He added: "Plus, this is not just about technology companies. The next generation segment also provides significant exposure to leading-edge innovators in health care, communications, industrials and several other sectors."

Invesco also announced the launch of a synthetically replicated version of its $5.5bn EQQQ Nasdaq 100 UCIT ETF. The new Invesco Nasdaq-100 Swap UCITS ETF will employ the same method as the firm uses in its other synthetic ETFs, holding a basket of high-quality securities to provide most of the return and seeking to improve tracking and performance by using swap contracts.

The counterparties to the swaps - typically large banks and other financial institutions - agree to pay any difference between the returns of the basket of securities and the index. To reduce risk, swaps are reset when certain conditions are met, often daily.

Mellor said: "With the new EQQS ETF, we now offer low-cost physical and synthetic ETFs on this important large-cap growth index. Investors looking for efficient exposure just need to choose which replication method best suits their individual preferences."