Mutual funds have a big lead but the popularity of exchange-traded funds (ETFs) is making them sweat as more than one out of every three fresh dollar inflow from investors goes to upstart ETFs. ETF inflows went up from only $7 billion in 2000 -- a scant 2% of fund inflow -- to $60 billion in 2006, or 40% of fund inflow, according Strategic Insight data.
ETF assets ballooned from $65 billion at the end of 2000 to $422.4 billion in 2006 as the number of ETFs grew from 80 to 357. Jesse Emspak of IBD points out that the key to ETFs competing more effectively with mutual funds is to get inside get 401(k) plans.
Fidelity Investments spokeswoman Sophie Launay says the firm is unconcerned about ETFs replacing actively managed funds because of its long history of providing better returns with its managers.
By Carl Delfeld of the Chartwell ETF Advisor
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