For example, recent fears over the debasement of the dollar have become a theme with Rydex ETF's offerings. "Our CurrencyShares would be attractive to high-net-worth individuals," Resnick notes. Many of these sector ETF offerings weren't available a year or two ago.

A Barclays' portfolio manager notes that there are now about 900 ETFs and many more are in the pipeline.  Sean Crawford is a portfolio manager with Barclays Wealth, Americas, which was formerly a unit of Lehman Brothers. Barclays Wealth's Tactical Allocation Beta Portfolios, a new program that works with advisors and requires clients have at least $10 million in assets, uses ETFs because of their growing specialization, he says.
"The ETF is increasingly becoming more and more targeted so you can actually get the recommended allocation in a portfolio," Crawford says.  
"From my perspective of building a portfolio, there's a lot more ways of implementing our tactical recommendations than there were just 12 months ago," Crawford says.

Using ETFs, it becomes easier to overweight a sector, Crawford says. He argues that the ability to trade and value the vehicle throughout the day-not just at the end of the day-are also why he is often using this investment vehicle.
In 2002, ETFs only had some $100 billion in assets under management. Then ETFs took off. Today that amount of ETF assets under management is some $700 billion, according to Morningstar.

What's feeding this growth?
Cindy Zarker, director of retail asset management for Cerulli, says initially institutional investors such as pension funds and endowments built the ETF business. But over the past few years, buying patterns have changed and institutions only hold about a third of the assets. Individual investors now own 66% of the assets, according to Zarker.

Another reason for the ETF's success is that they are increasingly offering individuals exposure to exotic instruments, such as currency plays and commodity options, that were previously difficult for the retail investor to obtain, Zarker says.
The ETF sponsor heavyweights who are playing on this trend are Barclays, State Street Global Advisors and Vanguard, which together own 85% of the $700 billion ETF market, according to State Street Global Research.

Advisors and their clients, meanwhile, are attracted to the ETF's liquidity, transparency, expanded product line and cost.
"This is a cheap way to obtain beta when you're designing a portfolio," Burns says.

"Barclays is a leader because they have heavily invested in educating investors and individuals," Zarker says. The education push, which is not limited to Barclays, appears to be goosing up sales.

ETFs have had $8 billion or more in net inflows so far this year. Six of the seven ETF groups charted by Morningstar have gained assets this year through the end of October. Taxable bond, international stock, commodities and alternative investments have been the biggest gainers. U.S. stock was the only loser, according to Morningstar. Resnick contends there's a greater interest in the ETF among the well heeled than a decade ago. The product's portfolio, unlike its mutual fund cousin, is easier to understand. ETF portfolios are constantly disclosed.

By contrast, traditional mutual funds show positions once a quarter, Resnick notes. And, by the time investors receive those reports, some positions usually have been sold. That's not a problem with ETFs, which industry observers believe is one factor attracting assets from investors who were burned in the meltdown.

"It's a risk management issue," says Testa of Cerulli Associates. "You get daily pricing and can see what's in the ETF portfolio. In the market meltdown, many advisors with mutual funds weren't aware of what had gone on until they got their quarterly reports," Testa says.