Nasdaq Next Gen 100 Index and the Invesco Nasdaq Next Gen 100 ETF

Nasdaq Next Gen 100 Index and the Invesco Nasdaq Next Gen 100 ETF

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Each week a team member from Nasdaq Global Indexes provides insight into what is happening across a variety of investment themes. From index and ETF performance, to analysis of market trends, our experts will cover what’s hot in the world of passive investment strategies.

This week, Mark Marex, CFA, discusses the Nasdaq Next Gen 100 Index:

Highlights: 

  • Index launched on August 24, 2020, ticker: NGX
  • Index methodology is very straightforward: after the Nasdaq-100, it includes the next 100 largest non-Financial companies listed on Nasdaq
    • Individual position weights are capped at 4%
  • Index performance back tested to December 17, 2010
    • As of September 30, 2020: price returns of 271% (not quite as high as Nasdaq-100, but not far behind the Nasdaq Composite/similar to Nasdaq Q-50)
    • Compares very favorably to other midcap benchmarks (S&P Midcap 400 – 106%, Russell Mid Cap Growth – 209%)
  • Sector exposures somewhat distinct from Nasdaq-100, which makes it a good complement from a diversification perspective
    • Much lower exposure to Tech at only 35% (vs. 55-60% for NDX)
    • Much higher exposure to Health Care and Industrials (37% combined)
    • Compared to midcap benchmarks, much lower exposure in Basic Materials/Utilities/Financials/Oil & Gas
  • Natural extension of Nasdaq-100’s emphasis on growth and innovation, but in more of a midcap context
    • R&D as a percentage of total revenue averages 2-3x higher versus midcap benchmarks
    • Patent exposure metrics better than midcap benchmarks as well, with 38% of index constituents registering patent activity in one or more Disruptive Tech sub-themes over a recent 12-month period
    • Not only are NGX constituents more likely to file patents than midcap benchmark peers, they also tend to file them in more areas of innovation, on average 3.7 sub-themes per active company
    • For all of these reasons, it is likely that investing in the Next Gen 100 means getting early exposure to future members of the Nasdaq-100
  • Invesco Nasdaq Next Gen 100 ETF (ticker: QQQJ) launched today

For more information on the index, click here. For more Nasdaq index research and analysis, view our articles here.

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