Salient to Investors:

Almost all ETFs track indexes tied to benchmarks, appealing to investors because of their trading flexibility and lower costs.

Investment Company Institute said in 2011, ETFs attracted $118 billion in assets, actively managed mutual funds lost $31 billion in withdrawals.

Bloomberg said actively managed ETFs in the U.S. account for less than 1 percent of assets held by exchange-traded products, including exchange-traded notes, trusts and commodity pools.

Active managers have largely resisted offering ETFs because the structure requires revealing almost all holdings every day, allowing investors to replicate their strategy without having to pay fees and to front-run the managers.

Transparency is less a threat to fixed-income funds because it’s more difficult to replicate or front-run managers in the over-the-counter bond market.

Morningstar’s Paul Justice said more and more investors are using sector funds in lieu of single securities.

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