The day that the mutual fund industry eclipses $10 trillion in assets is awfully close, but experts say that exchange-traded funds could delay its arrival.

Between the end of 2000 and the end of 2005, the Investment Company Institute told Investor's Business Daily, the total net assets of all mutual funds swelled from $6.96 trillion to $8.91 trillion. Compounded annually, that's growth of a handsome 5.1%.

But it's still just one-third of the growth the industry realized between 1982 and 1999, which included one of the greatest bull markets in history. During the 1990s, the industry grew by an astonishing 21%.

"Is 5% growth sustainable?" asked Brian Reid, chief economist at the ICI in Washington. "I think that largely depends on what will be the appreciation of the market. I think that is the largest contributing force in the industry right now."

Reid observed that since fund assets have grown so large, new inflows are making less of an impact. The last bear market further dampened asset growth. But if the current trend continues, the industry should pass the $11 trillion mark by 2010.

There are, however, several caveats. Most prominent, according to Lou Harvey at Dalbar in Boston, are ETFs, which have grown five-fold in the last five years.

"They have a much more efficient structure," Harvey remarked, adding that ETF providers can also design them to look an awfully lot like a diversified, actively managed mutual fund.

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