Who says all the good ideas are taken when it comes to equity-based exchange-traded funds (ETFs)? As advisors know, the Invesco QQQ (QQQ) is one of the world’s largest ETFs. Home to about $500 billion in assets under management, just four ETFs are larger by that metric.

Advisors also know that this famous ETF tracks the Nasdaq-100 Index (NDX), which is a collection of the 100 largest non-financial services members of the Nasdaq Composite Index. The success of QQQ has spawned a collection of related Invesco ETFs as well as some copycat funds from rival issuers. Until last week, the QQQ approach had not been extended to international stocks, but that changed with the debut of the Invesco Nasdaq International Innovators 100 ETF (QQI).

Point of order: NDX and ETFs such as QQQ do hold small amounts of ex-US equities because the Nasdaq index, unlike the S&P 500, doesn’t have a domicile mandate. However, QQQ and the related ETFs allocate just 3% of their portfolios to international stocks and more than a third of that tally is commanded by just one stock – Dutch semiconductor fabricator ASML (ASML).

Said differently, QQI may be a timely rookie ETF, particularly for advisors and investors seeking efficient access to international large- and mega-cap growth equities.

Make the QQI Query

The newly minted QQI tracks the Nasdaq International Innovators 100 Index. Understanding that gauge’s methodology is essential to making an informed decision about this ETF.

“The index selects 100 members of the Nasdaq Global Ex United States Large Mid Cap Index with the highest multifactor Innovator Score, based on R&D intensity, revenue growth, and gross margin metrics, using a modified free-float market capitalization weighting methodology,” according to Invesco.

Another interesting point about this ETF is that it’s not confined to Nasdaq-listed stocks – one of the knocks on NDX and the related ETFs. For example, QQI holds the Taiwan-listed shares of Taiwan Semiconductor. Some of the fund’s other top-10 holdings include AstraZeneca and SAP SE, both of which trade on the New York Stock Exchange (NYSE). In simple terms, QQI is more concerned with growth outcomes than a stock’s listing venue and that could work in favor of long-term investors.

“Pursuing innovative opportunities abroad, however, takes more than broad exposure to non-US growth stocks,” notes Invesco. “A more focused approach looks for companies where innovation is visible in both inputs and outcomes: meaningful R&D spending, evidence that R&D expense is translating into revenue and margin growth, and profitability that suggests those innovative advantages can endure.”

Not Another Bland Growth ETF

With the Russell 1000 Growth Index up 420.1% over the past decade, no one is going to quibble with the performances of many of the basic large-cap growth ETFs and index funds on the market today. After all, those products are (mostly) low-cost, efficient and delivering the goods in terms of total returns.

However, even growth investing, particularly with international stocks, can use some refreshing and QQI provides that by emphasizing innovation over backward-looking methodologies.

The emphasis on competitive positioning, investments in innovation and success in R&D spending “help separate companies that have merely benefited from past growth from those actively investing in innovation and turning that investment into business performance,” adds Invesco. “For investors, that distinction may be critical when seeking international exposure that is both growth-oriented and grounded in a commitment to profitable innovation.”

If the chart below is any indication, QQI could prove to be more useful than some of the more basic international ETFs investors have flocked to.

(Image: Invesco)

QQI charges 0.29% annually, or $29 on a $10,000 investment.

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