The Evolve NASDAQ Technology Index Fund: Your pure tech investment

Sponsorship note: This article is sponsored by Nasdaq

Some investors naturally believe the best way to get pure exposure to technology for their portfolios is via the globally recognized Nasdaq-100 Index®. Turns out, there’s a different approach.

The Nasdaq-100® comprises some of the world's largest and most successful non-financial businesses listed on the Nasdaq exchange. What may come as a surprise, however, is that just over 40% of the Index’s components are classified within the technology sector.           

“There’s a massive misconception that the Nasdaq-100 is all technology”, says Raj Lala, President and CEO of Evolve ETFs. “At least 80-85% of the people I speak to do not know that only 42 companies would be categorized as tech. They don’t know that Pepsi, Marriott, Lululemon are part of the index.”

A few years ago, Lala had an epiphany.  His thinking, as he recounts it today, was simple: “If I can build a product that is just the technology component of the Nasdaq-100, I can position it with investors and advisors in a way that says, “I’m delivering the Nasdaq-100 you thought you were getting in the first place”.

A lunch with Nasdaq executives at an ETF conference proved fortuitous. Turned out, Nasdaq had been running a little known, pure-tech index for the last decade. The Nasdaq-100 Technology Sector Adjusted Market-Cap Weighted™ Index represents the 42 technology companies that are included in the Nasdaq-100®.

It’s a technology index for technology investors—and for good reason: Today’s leading technology companies are demonstrating the ability to generate record growth due to their best-in-class innovation. From artificial intelligence to software (and that’s just scratching the surface), the Nasdaq Technology Sector is home to some of today’s most dynamic firms.

Focusing solely on technology companies has its advantages. Over the last decade, the Nasdaq-100 Technology Sector Adjusted Market-Cap Weighted™ Index has demonstrated the unique growth potential of the tech sector within the Nasdaq-100. This reflects the pivotal role that technology companies play in driving the overall market returns.

Meet the Evolve NASDAQ Technology Index Fund

This summer, trading on the Toronto Stock Exchange (“TSX”) under the ticker symbol QQQT, the Evolve NASDAQ Technology Index Fund celebrated its first anniversary. This fund, available as an ETF (with CAD hedged, CAD unhedged and USD versions) and as a mutual fund, is derived from the Nasdaq-100 Technology Sector Adjusted Market-Cap Weighted™ Index. The fund is market cap weighted and rebalances quarterly to best reflect its underlying index. QQQT offers investors the ability to obtain exposure to the technology companies of the Nasdaq-100 Index®, without the dilutive effect of the broader benchmark’s non-technology components.

<sup>Source: Bloomberg, as at October 31, 2024.
* Performance since inception of QQQT.B, QQQT.U and QQQT on July 11, 2023.</sup>

QQQY: Technology Exposure Plus Income

While QQQT offers investors growth through capital appreciation, on October 3, 2023, Evolve launched a monthly income version of the same fund, aptly named Evolve NASDAQ Technology Enhanced Yield Index Fund. This fund trades on the TSX under the ticker symbol QQQY and provides investors with exposure to the same portfolio, with the benefits of enhanced yield through an active covered call strategy.

“In Canada we’re a little bit more conservative and yield oriented. And there’s very few sources in today’s world of somewhat tax-efficient yield for investors”, Lala observes.

<sup>Source: Bloomberg, as at October 31, 2024.
* Performance since inception of QQQY on October 3, 2023.</sup>

With QQQY, investors can get solid exposure to the tech sector while also enjoying regular income. And though a bit of the upside may be capped by writing calls, this means the downside is also cushioned in the event of a market correction.

Lala suggests to advisors that their clients will be pleased with this trade off.

Interested in learning more? Visit https://evolveetfs.com/product/qqqt/ and https://evolveetfs.com/product/qqqy/ or contact your financial advisor.

The contents of this piece are not to be used or construed as investment advice or as an endorsement or recommendation of any entity or security discussed.

This should not be construed to be legal or tax advice. Please consult your own legal and tax advisor.

Commissions, trailing commissions, management fees and expenses all may be associated with exchange traded funds (ETFs) and mutual funds. Please read the prospectus before investing. The indicated rates of return are the historical annual compound total returns net of fees (except for figures of one year or less, which are simple total returns) including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. ETFs and mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

The rates of return shown in the table are used only to illustrate the effects of the compound growth rate and is not intended to reflect future values of the ETF and mutual fund or returns on investment in the ETF and mutual fund.

Investors should monitor their holdings, as frequently as daily, to ensure that they remain consistent with their investment strategies.

Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Evolve Funds Group Inc. and the portfolio manager believe to be reasonable assumptions, neither Evolve Funds Group Inc. nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise

Nasdaq®, Nasdaq-100®, Nasdaq-100 Index®, Nasdaq-100 Technology Sector Adjusted Market-Cap Weighted™ Index are trademarks of Nasdaq, Inc. (which with its affiliates is referred to as the "Corporations") and are licensed for use by Evolve ETFs. The Product(s) have not been passed on by the Corporations as to their legality or suitability. The Product(s) are not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT(S). ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED.