One of the Most Popular Exchange Traded Funds Will Soon have Solid Competition

One of the most popular Exchange Traded Funds, the NASDAQ 100
Trust, known as the cubes, may be soon having some strong
competition. The cubes (QQQQ) have been the default Fund for the
tech industry. This may be about to change.

A new exchange traded fund due to be introduced next year is
being planned by Archipelago Holdings Inc. This ETF will cover
the technology sector; however it is covering the technology
sector with a twist. Current technology funds give technology
companies weight in the index based on market capitalization.
Companies with large market capitalizations such as Microsoft
would have a larger influence on the index. For example many
technology indexes give Microsoft a 10% or more weight in the
index.

Archipeligos' new index will be price weighted. Companies with
the highest price will be given more weight in the index. By
this method Microsoft may only have a 1% weight in this new ETF
while Genentech would make up 3.3% of the index.

Another difference is this new fund will have a 25% investment
in healthcare companies, which are outside the traditional tech
sector. The highest priced issue in the index will be Genentech.
Genentech will have the greatest weight in this index.

This new fund will be very similar to an existing index. This is
the ArcaEx Tech 100 index. Over the past five years the ArchEx
Tech 100 index has trounced the performance of the QQQQ. Over
this period the QQQQ has shed about 10% a year, while during the
same period of time the ArcaEx Tech 100 index has only shed
about 2.4% a year. This is primarily due to the smaller cap
stocks that make up the index and the fact it includes 25%
investment in the healthcare industry. This performance alone is
bound to attract a lot of attention and competition for the
NASDAQ 100 Trust.

The QQQQ has about $1 Billion invested. If the new fund gets
even only 5% of that it will be a billion dollar fund right out
of the gate. This new fund is due to be introduced in early
2006, pending approval by the SEC.