The recent decision of The Investment Company Institute, the industry trade group in Washington, D.C., to report exchange-traded fund flows is significant because it marks the industry's acceptance of a non-traditional fund product and could promote wider acceptance of the product, according to industry analysts.

Exchange-traded funds were an esoteric product created by non-traditional parties, so there was no reason for the ICI to initially focus on them, said Mary Joan Hoene, a lawyer with Carter, Ledyard & Milburn of New York. In the last two years, however, exchange-traded funds' popularity has increased and the products have become nearly mainstream, she said.

The new data will allow easy comparisons between exchange-traded and traditional fund flows, she said.

"I think it just promotes more awareness and I think it's useful to do comparisons and track what's going on in the industry," Hoene said.

Having an industry association publish data on exchange-traded fund flows should make the information more accessible to the general investing public, said Jim Folwell, an analyst with Cerulli Associates of Boston.

"It will be another thing that will bring [exchange-traded funds] to the public eye," he said.

The ICI, which issued its first report on exchange-traded flows and assets late last week, began experimentally reporting the data last September, said John Collins, an ICI spokesperson.

The report covers all exchange-traded funds except Merrill Lynch's HOLDRS, which are not regulated under the Investment Company Act of 1940, Collins said.

The report includes information on assets, new issuance of creation units (blocks of 50,000 shares), redemptions, net sales and total assets held in the funds, Collins said. The report will categorize the data under domestic equity funds and international equity funds, he said.

The ICI's decision reflects exchange-traded funds' growing prominence, said Christine Hudacko, a spokesperson with Barclays Global Investors of San Francisco.

"We're very pleased with their decision," she said. "I think it's a symbol of how important this market has become over the past year or so."

Last year, exchange-traded funds' assets grew from $35 billion in January to $65 billion in December, creating a stir in the industry which forced people to take notice, she said.

ICI officials probably felt compelled to report exchange-traded fund flows after some of ICI's constituents, in particular the Vanguard Group of Malvern, Pa., decided to offer the product, said Donald Cassidy, senior analyst with Lipper of Summit, N.J. The decision to track and report the data makes sense because the ICI's membership is directly affected by exchange-traded funds, he said.

The ICI had the support of its membership on the decision, said Collins.

"We undertook it knowing that the general consensus of the membership was that we measure 1940 Act products," he said. "It's a reasonably recent product. It's been around since the early 90's, but only a year or so ago that it grew to this size."

However, the ICI's decision was probably carefully considered, said Cassidy.

"I think it's pushing the envelope for them," he said. Because exchange-traded funds fall outside the realm of traditional fund products in the manner in which they operate, the ICI probably struggled with its decision, Cassidy said.

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