Burns and many others believe a lot of others will follow suit.
"If Vanguard were to license ETF shares," Mr. Burns said, "you'd see 3,000 funds using them in six months."
Not all funds may go that far, but there may be no stopping this evolution.
ETFs are, effectively, funds that trade minute by minute like stocks. Typically, they have been based on index investing-and many use leverage to replicate an index and juice its potential returns-but there have been a number of active fund managers making the leap into the ETF world. By nature, ETFs are more transparent and cheaper to operate than traditional funds.
Still, Robert Reynolds, the president and chief executive of Putnam Investments, said the ETF structure works best with indexes, and active managers-especially in funds designed for the long haul-won't want to make a change. Moreover, the transparency cuts into the managerial edge that he believes a top professional gives a traditional fund. Not surprisingly, many ETF supporters think Putnam and some other firms are dinosaurs.
William McNabb, Vanguard's chief executive, said he isn't sure whether Vanguard will carry the ETF shares concept over to its big actively managed funds.
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