Herb Morgan has a good barometer to tell how hot the market for exchange-traded funds is getting. Just count the number of mutual funds promoters who approach him to set up a mutual fund that invests solely in ETFs, says the president of Efficient Markets Advisors.

"We're definitely hearing more about mutual funds buying into ETFs," said Morgan, whose firm manages $230 million. "Just the other day I had one of those 'fund in a box' promoters ask me to manage a mutual fund he would set up that would invest in ETFs. And that happens all the time."

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