According to a recent survey, financial advisors are moving some of their clients’ assets out of mutual funds and into exchange traded funds (ETFs), for a number of reasons.

Traditional mutual funds may continue to see assets bleed, as advisors make the switch from them and move that capital into ETFs. Reasons cited for the switch include performance and the overall transparency that ETFs provide, reports Jennifer Levitz for The Wall Street Journal.

According to survey respondents, many advisors expect to reduce their clients’ holdings of mutual funds to 27% in 2011, down 30% from today, and 35% in 2007. By 2011, expect ETF holdings to make up around 14% of their portfolios, or 8% more from now.

It appears that transparency of ETFs is the primary element driving the trend. The debate is still on over whether cheaper passively managed products like ETFs are better deals than actively managed funds.

We’ve always felt that with trillions on the sidelines in the wake of the market downturn, investors and advisors alike are going to find ETFs increasingly appealing. And what’s not to like? That being said, don’t expect the mutual fund industry to go anywhere anytime soon. While ETFs are growing, their assets are only a fraction of what’s in mutual funds.

For more stories about mutual funds, visit our mutual fund category.

Tags: Mutual Funds