CompanyGraph
Invesco Ltd.
IVZ · NYSE Arca · United States
Runs the QQQ Trust, an ETF that tracks the NASDAQ-100 Index and trades on stock exchanges throughout the day.
Invesco licenses the NASDAQ-100 Index from NASDAQ into the QQQ Trust, an ETF that holds the index's constituent stocks and charges a fee on the assets it manages. Because ETF shares trade on an exchange throughout the day, their price would drift away from the value of the underlying stocks unless authorized participants — primary dealers with standing agreements — continuously step in to buy or redeem share baskets and close the gap, which is what makes QQQ a usable instrument in the first place. Two decades of live operations across volatile markets have produced coordination protocols and counterparty trust between Invesco and those specific dealers that a new entrant cannot simply contract into existence, even if it licenses the same index and charges lower fees. The whole structure rests on NASDAQ continuing to honor the licensing agreement — if NASDAQ restructured or revoked it, the fund's obligation to track that index would terminate, and the entire arbitrage apparatus built around QQQ over those two decades would have no product left to support.
How does this company make money?
The company charges an annual management fee calculated as a percentage of the total assets it manages. ETF products like QQQ carry lower expense ratios, while actively managed mandates carry higher fees. Total revenue goes up when markets rise and assets grow in value, and down when markets fall or clients pull money out.
What makes this company hard to replace?
Institutional clients in separate accounts face formal ERISA fiduciary review processes before they are allowed to change investment managers, which takes time and internal approval. QQQ shareholders benefit from established market maker relationships that produce tighter bid-ask spreads than newer technology ETFs — switching means accepting worse trading conditions. Plan sponsors who have integrated PowerShares products into 401(k) platforms must go through their own approval processes before swapping in alternatives.
What limits this company?
Only primary dealers who have signed specific creation and redemption agreements can close the gap between QQQ's share price and the value of its underlying stocks. There are a finite number of those dealers. As the fund grows larger, that group does not automatically grow with it, so during high-volatility periods the fund can drift more than it should — no matter how big it gets.
What does this company depend on?
The fund cannot operate without the NASDAQ-100 Index licensing agreement from NASDAQ. It relies on authorized participant agreements with primary dealers to keep share prices accurate. State Street provides custody services that physically hold the fund's assets. Bloomberg terminal access supports portfolio management systems. SEC registration under the Investment Company Act keeps the fund legally permitted to operate.
Who depends on this company?
Retail brokerages like Charles Schwab have large numbers of clients holding QQQ shares — if the ETF stopped operating, those clients would face disruption finding a liquid replacement. Institutional pension funds running separate account mandates would need to hire transition managers to move into alternative products. Financial advisors who have built client portfolios around PowerShares ETFs would need to source substitute index exposure products.
How does this company scale?
Technology for trade execution and compliance reporting can be spread across more funds and more assets without much additional cost. What cannot scale as easily is the attention of senior investment professionals who oversee separate account relationships and ETF management — adding more funds eventually requires hiring and expanding investment teams in new locations, not just deploying more capital.
What external forces can significantly affect this company?
Federal Reserve interest rate decisions directly affect the value of any fixed-income and money market products in the fund lineup. European UCITS regulations shape how and where the company can distribute funds across borders, affecting international growth. Chinese capital controls limiting foreign asset managers cap how far the business can expand in Asia-Pacific.
Where is this company structurally vulnerable?
If NASDAQ revoked or fundamentally changed the licensing agreement that allows QQQ to track the NASDAQ-100 Index, the fund's legal reason to exist would disappear. Everything built around it — two decades of authorized-participant agreements, market-maker infrastructure, and coordination protocols — would have no product left to support.