On Monday, March 22, Invesco’s $155 billion QQQ Trust Series 1 ETF—the official exchange traded fund of the NCAA—realized its largest one-day inflow since 2000 ($4.9 billion). Timing of the spike is noteworthy in that it came on the heels of the opening weekend of the 2021 NCAA men’s basketball tournament, a weekend in which Invesco (an NCAA Corporate Partner activating the Big Dance for the first time) and its QQQ product were prominently featured in advertisements. While it seems unlikely that the March Madness commercial campaign was solely responsible for the inflow (particularly considering that Friday, March 19—effectively the first day of the tournament—was a significant day for the expiration of options and futures on indexes and equities, which may have triggered creation activity the following Monday), RSM US chief economist Joe Brusuelas said it was certainly a contributing factor in investments made at that time. “I watch the games. I watch the commercials,” he said. “And being a market professional, you can’t help but notice this very intelligent [campaign marketing to a new class of investor].”
Our Take: This new investor was born out of the pandemic. Brusuelas explained: “One of the interesting developments of 2020 was, as we were all locked down and there was a lack of opportunity to interact socially, many young men who were furloughed or unemployed took [their] government-sponsored stimulus checks and invested [those dollars] in the equities market [for the first time]. This happened across a broad array of categories, culminating with the popular uprising against [Melvin Capital].”
While this class of investor was largely not participating in the stock market before the pandemic, Brusuelas said Invesco’s March Madness campaign managed to tap into “one of the interesting zeitgeists of early 2021. Young men taking their stimmies and investing—or more accurately speculating—in things they are passionate about; whether that be sports or [the stock market],” he said.
Then again, few would think the individuals betting on Gamestop or AMC (i.e. the speculator willing to lose everything) would be the risk-averse investors that value the diversification of an ETF like Invesco QQQ. But Brusuelas doesn’t see it that way. “The most common comment I hear is, ‘This will all end in tears.’ That these amateurs taking enormous risks around new sources of cash are going to lose everything. Well, QQQ offers them an alternative. Invesco is saying we can meet their [speculative] needs with far less risk.” It should be noted retail investors have poured money into mutual funds and ETF equity funds in 2021.
The key to Invesco selling the ETF during the basketball tournament was their ability to speak to the target demo in a manner they can relate. “Go on the web and look at Invesco QQQ and who pops up? Grant Hill,” Brusuelas said. “They are connecting investing with sports. It’s a very sophisticated way of saying, ‘You speculate on [the outcome of games]. It’s not that big a leap to think perhaps you should take some of that money and put it into our exchange traded fund.’”
QQQ also consists of innovative NASDAQ 100 companies (think: Amazon, Microsoft), “names that [already] resonate really well with them,” Mitchell Manoff (CEO, Corinthian Partners) said.
Invesco deserves credit for creating a particularly smart campaign, but fortuitous timing would also seemingly be among the factors that contributed to the record inflow. “Look, the federal government put forward over $5 trillion to address the adverse impact of the pandemic. Those young men, many of them uneducated, many of them down-market, suffered the worst throughout the pandemic. And they’re the recipients of government cash [that is now being invested],” Brusuelas said. The third stimulus check hit many bank accounts on March 17—just days before March Madness began in earnest.
Retail investors following the market may have also sensed an opportunity following the first weekend of the tournament. “A number of the securities that go into the Invesco QQQ ETF—if not the QQQ itself—were down three of the prior four weeks,” Manoff explained. “So, because the market itself had moved down, people thought it was a good time to buy.”
Invesco’s success this March is likely to lead to more asset managers using sports as a marketing platform. “The investment industry is a little like the sports industry,” Brusuelas said. “When one team innovates and creates a new offense you’re sure to see imitators—whether it was the West Coast offense of the 1980s, the spread offenses of the 1990s or the more vertical passing games with mobile quarterbacks you see in football today. Other investment operations will watch what Invesco is doing, and you should expect similar-themed funds to follow along with very smart, very good creative advertising campaigns linked to what is going on in the NCAA, the NBA, the NFL and Major League Baseball.”
For the record, Invesco declined to comment on the catalyst for the March 22 inflow.