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Fundamentally weighted ETFs fuel growth

By David Hoffman

March 6, 2007 2:00 pm ET

Exchange traded funds that are not weighted by market capitalization, commonly referred to as fundamentally weighted ETFs, accounted for 156, or 45%, of the 347 ETFs issued over the past five years, Cliff Weber, senior vice president, ETF Marketplace for the American Stock Exchange said during the ETF Evolutions Conference in New York.

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But those ETFs only accounted for 15% of asset flows during that that period, Mr. Weber said.

The numbers highlight a challenge for ETFs, some of which he predicted will eventually disappear.

ETFs based on fundamental indexes were a hot topic at the conference.

"I think we are going to see a lot more of non-market cap weighted ETFs," said David Blitzer, managing director and chairman of the index committee at New York-based Standard & Poor's. "But at the end of the day cap-weighted will still be dominant."

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