Nasdaq OMX Group (NDAQ) has recently announced a few changes to the Nasdaq 100 index as part of their annual rebalancing schedule.

The benchmark will remove stocks such as Expedia (EXPE), F5 Networks (FFIV) and Maxim Integrated Products (MXIM) from its index composition, while American Airlines Group (AAL - Snapshot Report), Electronic Arts (EA - Analyst Report) and Lam Research (LRCX - Snapshot Report) will be added to the index.

Moreover, the exchange has recently revised its methodology for stock inclusion. The new methodology allows for multiple share classes of index components.  As a result, Comcast Corp Class A Special (CMCSK), Twenty-First Century Fox Class B (FOX) and Liberty Global plc Class C (LBTYK) shares will be included the index. These changes will be effective from December 22, 2014.

Changes in this index are definitely going to alter the fund composition of ETFs closely tracking the index.

This brings PowerShares QQQ ETF (QQQ - ETF report) — the largest and the most popular product in the large cap growth space – in focus. The fund tracks the Nasdaq 100 index, and as such, changes in the index will alter the fund’s allocation (read: Ride on Wall Street Bulls with This Top-Ranked ETF).

QQQ ETF in Focus

Launched in March 1999, QQQ holds a basket 104 stocks. Its underlying index – the Nasdaq 100 – includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization.

Apple dominates the fund with 14% allocation, followed by Microsoft with 8.3% allocation. Apart from these two stocks, all the other individual securities have less than 4% exposure each in the fund (read: 3 Apple-Focused Tech ETFs to Bet on for the Holiday Season).

The three stocks to be removed from the index – Expedia, F5 Networks and Maxim Integrated Products – have a combined exposure of less than 1% in the fund.  Moreover, the inclusion of Comcast Corp Class A Special shares is expected to increase the total allocation of Comcast shares to more than 2.6% in the fund as Comcast Corp (CMCSA) alone has a 2.54% exposure in the fund right now.

Similarly Twenty-First Century Fox Inc. (FOXA) and Liberty Global plc (LBTYA) have 1.1% and 0.22% exposure in the fund, respectively, and the inclusion of other classes of their shares is likely to increase the stocks’ respective total allocation.

In terms of sector exposure, the fund is heavily concentrated on Information Technology with 60% of assets invested. However, Consumer Discretionary and Health Care also get double-digit exposure in the ETF (see all Large Cap ETFs here).

The fund manages an asset base of $45.2 billion and trades in heavy volumes of 40.4 million shares a day. The product is one of the cheapest in its space charging 20 basis points as fees.

QQQ has been among the best performers in its space in the year-to-date frame having returned 18%. The fund has returned 22.6% in the past one year and currently carries a Zacks ETF Rank #2 or Buy rating.

And the recent changes made in the index composition are unlikely to have any major impact on the fund’s composition. QQQ is expected to continue outperforming the broader markets.