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Investing.com -- Invesco Capital Management (NYSE:IVZ) stock soared 13% Friday, reaching its highest intraday level since February, after the company filed a proxy statement with the Securities and Exchange Commission seeking to convert the Invesco QQQ Trust Series 1 into an open-ended fund.
The asset manager is asking shareholders to approve changing QQQ from its current unit investment trust structure to an open-ended fund, a move that could significantly alter revenue distribution. Currently, despite QQQ generating approximately $711 million in annual fee revenue with its $355 billion in assets and 0.2% expense ratio, Invesco earns virtually nothing from running it, with most revenue going to Bank of New York Mellon (NYSE:BK) as trustee and Nasdaq as index provider.
If shareholders approve the conversion, Invesco Capital Management would be appointed as investment adviser to QQQ under an investment advisory agreement with a unitary fee of 18 basis points. This would represent a 2 basis point reduction from QQQ’s current expense ratio of 20 basis points.
The stock rally also coincided with better-than-expected results from Charles Schwab (NYSE:SCHW) and other financial firms, boosting investor sentiment in the sector. Meanwhile, Nasdaq Inc. (NASDAQ:NDAQ) shares fell 1.2% Friday, potentially reflecting concerns about its revenue from the QQQ index if the conversion proceeds.
Bloomberg Intelligence ETF analyst Athanasios Psarofagis noted the significance of the potential change, saying, "They have basically been running this fund, which is the greatest ever, as a charity," referring to QQQ’s nearly 1,260% return since its 1999 inception. "If they can re-purpose that, it could free up revenue to invest in other areas, like new products."