Invesco’s (IVZ) most popular exchange-traded fund tracking the tech-heavy Nasdaq-100 (NDX), Invesco QQQ Trust ETF (QQQ), is about to witness a structural change and a fee cut for investors. Following the news, Invesco stock surged over 14% on Friday, signaling market optimism about lower fees and IVZ’s potential revenue growth.
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Invesco Eyes QQQ Revamp
With $355 billion in assets, QQQ is one of the most widely traded and profitable ETFs on paper. Yet, Invesco makes very little money from it.
This is because the QQQ ETF is structured as a unit investment trust (UIT). Under this setup, most of the fee revenue, about $711 million, is distributed between the fund’s trustee, Bank of New York Mellon (BK), and the index provider, Nasdaq. Any remaining revenue is then used for QQQ marketing efforts, leaving Invesco, the fund’s sponsor, with no direct financial gain.
To change that, Invesco seeks to convert QQQ into a modern open-ended fund. This would let IVZ keep more of the fees and potentially earn hundreds of millions in profit each year. As part of the plan, the company would also slightly lower the ETF’s fee, from 0.2% to 0.18%, offering a better deal for investors.
Importantly, Invesco has scheduled a special shareholder meeting for October 24 to vote on this proposed change. If approved, it could give Invesco more resources to invest in new products and grow its business.
Is IVZ a Good Stock to Buy?
Turning to Wall Street, IVZ stock has a Hold consensus rating based on 10 Holds assigned in the last three months. At $16.73, the average Invesco stock price target implies a 15.27% downside potential.
