The PowerShares DWA fund, which invests in U.S.-listed companies, uses an index that selects them based on "relative strength," a proprietary screening methodology developed by Richmond, Virginia-based Dorsey, Wright & Associates Inc. The fund has advanced at an annual rate of 2 percent since its inception in March 2007, compared with the 1.2 percent gain for the Standard & Poor's 500 Index over the same period, and the 3.8 percent increase in the Russell 3000 Growth Index.

The United States Commodity Index Fund tracks an index programmed to select from 27 eligible futures contracts based on "observable price signals." It has returned 11 percent since its inception in August 2010, compared with a 0.5 percent decline for the S&P GSCI Total Return Index. The fund, which tracks its index using derivatives, is offered by Alameda, California-based United States Commodity Funds. The index is provided and maintained by SummerHaven Investment Management LLC in Stamford, Connecticut.

Fundamental Indexing

The idea that better indexes could be built on measures of strength such as cash flow isn't new. Robert Arnott, the founder of Research Affiliates LLC, in 2005 debuted "fundamental indexing," which shuns picking components of an index based on market capitalization.

Research Affiliates has licensed the use of its proprietary indexes to companies including Atlanta-based Invesco Ltd., which is the second-biggest provider of alpha-seeking ETFs. Invesco has about $3.5 billion within its PowerShares ETF series. First Trust is the biggest, with about $4.2 billion in ETFs that seek to beat traditional market benchmarks, according to data compiled by Morningstar.

Eroding Share

Their offerings may further erode the market share of active mutual funds, sold by traditional money managers such as Fidelity Investments, Capital Group Cos. and Franklin Resources Inc. The companies tout the ability of their managers to beat benchmarks mostly through individual security selection.

"Historically, active managers held a unique appeal to prospective investors," said Steven Bloom, who helped develop the first ETF in the 1980s and is now an assistant professor of economics at the U.S. Military Academy at West Point, New York. "Now, ETFs are infringing on that territory by holding out the prospect of alpha."

ETFs have benefited from the growing popularity of index- based investing, pioneered for retail clients by Vanguard Group Inc. Indexing proponents like Vanguard founder John Bogle, argue that active management will underperform markets, so investors are better off using cheaper, traditional index funds.

Trailing Benchmarks

Of 172 U.S. diversified domestic stock funds with $50 million or more in assets, a track record of at least 20 years and the S&P 500 as their primary benchmark, 10 beat the index in the two decades ended Dec. 31, according to data compiled by Bloomberg. The data doesn't include funds that didn't survive the full 20-year period.