The concept of an open-ended "fund of exchange traded funds (ETFs)" has yet to gain any momentum. Could it be that the right time has simply not yet arrived?

Most of these types of funds are lass than two years old, and the aggregate of net assets of the group total $251.6 million, less than 1% of all fund assets, reports Richard Widows for The Street.

The most recently launched funds are Seligman Target ETF Fund 2035 (STZAX) and the Seligman Target ETF Fund 2045 (STQAX), which were released in October 2006. Year-to-date, they’re both down 1.1%.

These funds are available in institutional and retirement versions, and if you buy shares of these funds, Widows wonders if the ETF exposure may justify the expenses. The exception, he says, might be investors who are making small initial investments.

Investors interested in diversification beyond what they’d get in no-load index funds might find a reason to consider funds of ETFs, as well. However, while the sales charges would likely be less than the brokerage commissions on direct ETF purchases, the expense ratios of the funds would eat into holdings over time.

For investors who are waiting for ETFs to become a standard option in 401(k) plans might find these funds useful while they wait it out.

Tags: 401(k), Retirement