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Do ETF's Really Spell Investment Alternative?

Published: Thursday, 14 Dec 2006 | 1:43 PM ET

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By: Lee Brodie
Web Editor

It started with SPDRs and then we got QQQQs but now people know that all that alphabet soup spells ETFs (QQQQ is a Nasdaq ETF). Scratching your head? On “Power Lunch" Sue Herera tried to unscramble the confusion with Lee Kranefuss, the CEO of I-Shares (which is part of Barclays Global Investors--and part of Barclays PLC [BCS Loading... () ] )

FYI: Exchange traded funds are basically mutual funds that are traded like stocks.

Kranefuss said, “Exchange traded funds have been gaining not only mind-share but lots of money as well. This year has seen inflows of $55 billion and Morgan Stanley predicts that number will quadruple to $2 trillion by the year 2011.”

Herera asked, “What makes them so attractive?” Kranefuss responded with, “Investors like two things; 1) Choice – there are 118 funds in the U.S.--and 2) transparency - you can target a part of the world and you can trade it."

Kranefuss says investors want broad investment strategies which might include real estate and/or commodities and all sorts of other areas. And he says--ETF’s fit very well with that.

Sue Herera asked what’s next. Kranefuss said, “We’ll continue to provide the major indexes that people want. We have 108 equity funds and we’ll grow that more. We have 7 bond funds. And we have hard funds – real estates and commodities – in that area we have only 3 – but we’ll be working hard to expand that.”