Assets in exchange-traded funds rose 20% in the last nine months through September, buoyed, perhaps, by the continuing fallout from the mutual fund scandal. In its monthly report on ETFs, the Investment Company Institute found that assets grew to $180.8 billion compared to $151 billion at the end of 2003. The $180.8 billion represents a 3.6% increase from August, when ETF assets stood at $174.5 billion.

The low expenses associated with ETFs, as well as their tax efficiency, seem to be drawing customers who would normally be drawn to conventional mutual funds, even though each ETF trade does produce a brokerage commission (see related story, page 1). Ever since State Street Global Advisors introduced the first ETF 12 years ago, these investment products have steadily become a more popular investment vehicle. At the end of 2003, there were 119 ETFs. That's now up 20% to 143.

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