Despite the market's ups and downs, Invesco is building up its ETF business. The fourth-largest ETF issuer is expanding and launching some of the best ETFs.
With $1.6 trillion in total assets under management, the Atlanta-based money manager launched 16 new ETFs in the U.S. in 2021 and so far in 2022. As of April 30, it had 238 U.S. ETFs and 401 global ETFs (including U.S.), representing $528 billion in assets. In the first quarter of 2022 alone, its ETF business saw a total of $19.2 billion in inflows.
The fund manager doesn't take to creating new ETFs lightly. Invesco strives to only launch new ETFs when it has high conviction about a specific strategy or market exposure. The best ETFs also need to fill a need its clients have.
This may also explain why some of its best ETFs saw significant inflows as of late — on the order of billions of dollars. Low volatility, commodity, electric vehicle metals and quality value have seen strong demand.
But just as Invesco is careful about its new launches, it's also very thorough when it chooses not to launch a product. For example, it pulled the plug after an initial filing to launch a Bitcoin futures ETF in late 2021. The company had concerns over its cost and client suitability. Invesco still has a high conviction in the cryptocurrency space, but prefers a physical Bitcoin ETF.
Anna Paglia, global head of ETFs and Indexed Strategies at Invesco U.S., talks about new ETF launches, Invesco's best ETFs and her advice for investors.
Launching Best ETFs
IBD: After two years of Covid, now we have a war, inflation and a hawkish Fed. How have you addressed this through your ETF product suite and strategy for Invesco ETFs?
Anna Paglia: Invesco is at an advantage since we are able to offer our clients a robust lineup of ETFs that spans across asset classes, intelligent investing and themes. In fact, many of our nontraditional ETFs, such as broad-based commodities ETFs, are currently experiencing outsized growth in the current market environment.
To give you specific examples, we have seen strong flows into the Invesco S&P 500 Equal Weight ETF from clients worrying about the concentration of securities.
Every time you hear about rising interest rates, investors start worrying about growth companies, such as the innovative securities found in the Invesco QQQ. What Invesco has found is that when it comes to the technology sector, it is somewhat unique in the way it reacts to rising rates, because most large-cap tech companies found in the Nasdaq 100 Index tend to have very healthy balance sheets with access to cash. So even if the borrowing costs become higher that does not translate into an impediment of growth for these companies.
Investors seem to be aware of this as well, as we're actually seeing strong growth in the Invesco Nasdaq 100 ETF.
New ETFs For 2022
IBD: Which ETFs launched in 2021 and 2022?
Paglia: Invesco is very deliberate about our ETF launches and aims to only selectively launch ETFs that respond to the needs of our clients. We don't believe in chasing a shiny object and we don't believe in experimenting. New launches must solve a problem, not just be a slightly different version of what's already available. This has been our philosophy since day one and you can see that reflected throughout our existing ETF suite.
In late April we launched Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF. EVMT is an actively managed ETF designed to provide economic exposure to the commodities critical to electric vehicle production, including aluminum, cobalt, copper, iron ore, nickel, and zinc with the potential to expand both the number and type of metals included in the ETF as electric vehicle production and technology evolves.
Last August we launched the Invesco S&P Quality Value Momentum Suite of multifactor ETFs and the suite received a $1 billion allocation from the Municipal Employees Retirement System of Michigan (MERS) its first week.
In late 2021, we broke new ground with Nasdaq, expanding our Invesco QQQ Innovation Suite to include two ESG-focused ETFs. The Invesco ESG Nasdaq 100 ETF and Invesco ESG Nasdaq Next Gen ETF expand on our tradition of innovation and sustainable investing.
Finally, we launched two unique digital assets ETFs in partnership with Galaxy Digital, the Invesco Alerian Galaxy Crypto Economy ETF (the ticker is a nod to Bitcoin founder Satoshi Nakamoto) and the Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF. These ETFs use thematic equity to offer investors exposure to global public companies and select investment vehicles that are actively engaged in the cryptocurrency and blockchain sectors.
Spotting The Best ETFs
IBD: Which ETFs have been the best performers this year? And which ones saw the largest inflows?
Paglia: The Invesco S&P 500 Equal Weight ETF had strong inflows in 2021 and continues to be a leader in our inflows in 2022. In this market environment, we often see investors seeking smart beta ETFs that can mitigate concentration risk in their portfolio. RSP is one of the largest smart beta ETFs in the world with over $32 billion in assets under management (AUM).
We have also seen a lot of investor interest in the Invesco S&P 500 Low Volatility ETF, which added $2 billion in AUM in the last quarter. SPLV is leading Invesco inflows quarter to date as investors look to add defensive companies to their portfolio. SPLV has over 20% of its portfolio focused in the safe haven Utilities sector with additional large weightings in the Consumer Staples, Health Care and Real Estate sectors.
We are also seeing large inflows into our commodity ETFs, including PDBC, the Invesco DB Agriculture Fund and Invesco DB Commodity Index Tracking Fund.
Tracking The Economic Cycle
IBD: Where are we in the economic cycle and is the period of low rates and easy market returns over in your opinion?
Paglia: It is impossible to predict our current place in the economic cycle, especially in the face of so many unexpected issues in the last two years. No one could have predicted something as huge as the Covid-19 shutdown and how the industry behaved. If you think about the turmoil of 2020, we just have to appreciate that we are in a period of time where we had technology that allowed us the opportunity to pivot and adjust as much as we could. If these same issues had happened 15 years earlier, we would have been in a very different situation.
We are in a similar place now with the geopolitical unrest stemming from the Ukraine and Russia tensions, and the levels of unforeseen inflation. Given the mix of information we are armed with, there is no real way to know the exact position of the economic cycle, but I remain optimistic because the economy remains solid, earnings reports are still positive and the companies driving wealth continue to look healthy. I would advise investors to keep a clear head and think about a longer time horizon.
Advice For Rough Year
IBD: What would be your advice for investors for this year?
Paglia: Try to separate fundamentals from noise, facts from fiction. The market tends to react quickly and loudly to noise these days, which is not unexpected given the levels of anxiety and confusion, but you should always balance this information with fundamentals. Earnings releases, balance sheets of companies driving wealth; these remain solid. Consider these rather than just the news of the day. In addition, make sure you are diversified, especially in periods of market unrest.
