Many investors are very familiar, of course, with the Invesco QQQ Trust Series I ETF (QQQ). The strategy has operated for almost a quarter century now and is well-known among investors. However, as part of that age and its approach, it brings certain quirks that can limit its approach. Compare that, for example, to the WisdomTree U.S. Quality Growth Fund (QGRW). Though the quality growth ETF is younger than QQQ, its approach offers certain advantages compared to the well-known QQQ.
QGRW tracks the WisdomTree U.S. Quality Growth Index, a market-cap-weighted index of 100 large-cap growth firms that meet quality thresholds. The fund uses a fundamentally-driven strategy to rank eligible securities in a 500-firm universe. It equally weights both growth and quality, determining those factors using metrics like sales growth and return on assets, respectively. Doing so for a 28 basis point fee, it has returned 48.8% YTD.
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While one year of significant, robust outperformance merits respect, compared to QQQ, it may not alone impress investors. However, QQQ’s simple tracking of its Nasdaq-100 Index sees it miss out on stocks that a quality growth ETF like QGRW can seek out. For example, QQQ misses out on firms like Mastercard (MA) and Visa (V). That limitation may not always make an impact, but it could prevent QQQ from accessing some particularly appealing firms.
Indeed, QGRW has outperformed QQQ year to date despite QGRW’s youth as a strategy. Despite operating for less than a year, the strategy has already accrued more than $75 million in AUM. In just the last month alone, the quality growth ETF added $11.7 million in net inflows. Ahead of QGRW turning one year old in December, it may be worth revisiting the strategy, especially if 2024 offers some improved economic news.
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