Invesco soars on push to finally make QQQ, its most popular fund, a real cash cow

Invesco is topping the S&P 500 leaderboard on Friday morning, up double digits after telling the SEC that it’s seeking permission from owners of the Invesco QQQ Trust, its Nasdaq 100 tracking ETF with more than $350 billion in assets, to change the structure of the fund.

The investment management company wants to make the ETF an open-ended fund rather than a unit investment trust (UIT). QQQ is the most profitable ETF in terms of fee revenue, per Bloomberg Intelligence, but under its current structure the fund makes a lot of money for BNY Mellon and Nasdaq — not Invesco. The shift in the structure would enable Invesco to capture more of this fee revenue for itself.

“If the Proposals are approved, the Trust’s fees and expenses will move from a non-unitary approach (where all expenses of the Trust are paid separately) to that of a unitary fee paid to Invesco, as adviser to the Trust (out of which the Adviser pays substantially all of the ordinary expenses of the Trust, including Custodian, Administrative and Transfer Agency fees to BNY...),” per the filing. “This is a significant change in the expense structure of the Trust and one that will benefit Invesco in the form of revenue and potential profits (neither of which are available to Invesco serving as Sponsor to the Trust with the Trust operating as a UIT).”

The many holders of QQQ would stand to benefit, too: if the changes are approved, Invesco plans to replace BNY Mellon as the trustee of the fund, make one of its subsidiaries the investment adviser, and lower the fund’s expense ratio by two basis points to 0.18%.