Mutual funds have a 69-year head start on ETFs; ETFs are thus unlikely to have more assets under management than MFs anytime soon. However, ETFs are likely to increase their share of investment dollars and become the fastest-growing investment product as funds from declining mutual funds transition to ETFs. A research report suggests that ETFs are a threat to mutual funds because advisors, both strategic-asset allocators and ‘tactical-asset allocators, are increasingly using ETFs as part of investors’ portfolios.56 Data show that between ETFs, index MFs and Active MFs, ETFs accounted for 37.6 percent of net sales in 2007 compared to 21.5 percent in 2006. Active MFs accounted for 67.5 percent in 2006, but declined to 45.6 percent
in 2007.57

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