June 07, 2008 at 1:00 am by Tom Lydon
Before funds of exchange traded funds (ETFs) gain popularity, regulatory hurdles must be dealt with for the popularity to materialize.
Current regulations prevent mutual funds from acquiring more than 3% of any other fund, however a pending rule submission would significantly liberalize that 3% limitation, reports Mariana Lehman for Ignites. This would allow mutual funds to invest in ETFs in a much easier way than now.
ETFs are used in lifecycle portfolios and these types have grown in number over the past few years. 2004 saw $85 billion and so far in 2008 there is $238 billion. There are 57 funds with 70% of assets invested in ETFs. These funds hold $2.97 billion in assets, and are dominantly used in a lifecycle setting or tactical sector rotation strategy.
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