SPHQ Outpaced JQUA by 500 Basis Points Over Five Years Despite Being the Riskier Trade

Why It Matters

The performance gap highlights a trade‑off between concentration‑driven alpha and diversification‑driven stability, guiding quality‑factor investors on portfolio construction choices.

Key Takeaways

• SPHQ delivered 92.36% five‑year return vs JQUA’s 84.42%.
• SPHQ outperformed JQUA by 500 basis points over five years.
• SPHQ’s higher volatility caused larger 2022 drawdown than JQUA.
• Concentrated S&P 500 quality screen rewarded investors willing to accept risk.
• JQUA provides smoother performance during rate‑spike environments.

Pulse Analysis

Quality‑factor ETFs have become a staple for investors seeking a blend of growth and defensive characteristics. Two of the most transparent options are Invesco’s SPHQ, which isolates the highest‑scoring quality names within the S&P 500, and JPMorgan’s JQUA, which casts a wider net across the Russell 1000 universe. Both funds apply similar screens—return on equity, accruals, and leverage—but differ markedly in concentration. This structural distinction sets the stage for divergent risk‑return profiles, especially when macro forces such as interest‑rate movements come into play.

Recent performance data underscore the impact of that concentration. From January 2022 through May 2026, SPHQ generated a 92.36% cumulative return, outpacing JQUA’s 84.42% and translating to a 500‑basis‑point edge over five years. The advantage persisted across one‑year, year‑to‑date, and calendar‑year windows, though SPHQ suffered a steeper 16.09% decline in 2022 versus JQUA’s 13.11% as long‑duration equities fell on rising Treasury yields. The broader JQUA basket absorbed the rate shock better, confirming the theoretical benefit of diversification during market stress, but it also diluted upside when the recovery accelerated.

For practitioners, the choice hinges on tolerance for volatility versus desire for smoother rides. Investors comfortable with deeper drawdowns in rate‑sensitive cycles may favor SPHQ’s concentrated approach to capture higher alpha. Conversely, those prioritizing capital preservation during abrupt rate spikes might allocate to JQUA for its cushioning effect. As the Federal Reserve’s policy path remains uncertain, the performance divergence offers a practical case study on how factor‑based ETFs can be tailored to distinct risk appetites, reinforcing the importance of aligning fund construction with an investor’s broader strategic outlook.