• by Judy Warner , October 11, 2006

Vanguard locked up a primo position when it bought the Thursday front of The Wall Street Journal's Marketplace section to advertise its Exchange Traded Funds, or ETFs. Targeted to the institutional investor and financial advisors, Vanguard ETFs--which now number 26--are among hundreds being introduced each year.

Industry observers predict marketing activity in the category will one day equate to that of mutual funds.

To put what Forbes recently called ETF-O-Mania into context, the number of ETFs being created rivals the number of mutual funds being closed.

ETFs are the fastest-growing segment of the mutual funds industry--but still represent less than 5 percent of total assets, according to Thomas Lydon of Global Trends Investments in Newport Beach, Calif., who edits the ETF Trends newsletter. Mutual funds have $9.6 trillion in total assets; ETFs have $350 billion in total assets.

ETFs gained in popularity after the stock market crash and scandals in the mutual funds industry. Because they are traded like a stock instead of a traditional mutual fund, ETFs have the advantage of being more liquid, typically have lower management fees and some tax advantages, and are more accountable since they are tied to market indices, and not the performance of individual fund managers.

XTF, a New York-based provider of ETF platforms to investment companies, yesterday announced six so-called Target Maturity Portfolios geared to institutional investors and financial advisors who would recommend them to investors who are retired or planning to retire.

Susan Hunt, XTF director of marketing and product development, joined the company in July and has been working on the rollout. The marketing plan calls for an overhaul of the 6-year-old company's Web site and targeted newsletters that drive financial advisors to the site for information and resources.

XTF has "branded themselves as a manager of portfolios," Lydon says, and "they've done a nice job dressing these [portfolios] up as a launch." Even so, they are jumping on a bandwagon that other fund companies are expected to follow.

While today's marketing efforts for ETFs are largely aimed at professional investment types, comparisons are being drawn to the evolution of marketing of mutual funds to include individual investors.

"I'd say we're just beginning to see the tip of the iceberg," Lydon says.