Exchange-traded funds attracted $17.6 billion in cash flows year-to-date through June 30 more than the $14.6 billion ETFs attracted in all of 1999, according to a Strategic Insight study. The most popular vehicle was the QQQ, or cube which invests in Nasdaq 100 stocks with almost $7 billion, or 40%, of the year-to-date inflows. Merrill Lynch HOLDRs were second, with $5 billion in inflows.
The study estimates that institutional investors account for about half of the ETF assets, but that percentage should decline as the share of individual investors in the market increases, said Edgar Cha, Strategic Insight spokesman.
Overall, Mr. Cha expects ETF growth to continue in the next few years. I see them doubling in growth over the next 2 to 3 years, but after that we dont know, he said. While Mr. Cha doesnt see ETFs cannibalizing the industry, he does see them as big competition for the index funds.