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A Year to Remember for Exchange-Traded Funds

ETFs will have a hard time following their own act in 2005.

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The year just ended was a good one for exchange-traded funds. ETF assets grew by 47% to $222 billion, according to current figures in Morningstar's database. ETF purveyors launched dozens of funds, including groundbreaking gold and China offerings. The industry also buzzed with talk of creating other commodity-linked and even actively managed ETFs. Here's a look at some of 2004's trends, as well as a look ahead to 2005.

How'd They Do?
Among ETFs, performance mirrored that of the traditional fund universe. Value-oriented ETFs beat growth-leaning ones, though both styles gained. Likewise, small-cap ETFs beat large-cap funds, and international offerings beat domestic vehicles. ETFs with exposure to emerging markets in Asia, Eastern Europe, and Latin America did well. Consumer, industrial, energy, and real estate sector ETFs also rallied. Anything tracking technology, semiconductors, and large-cap pharmaceutical stocks lagged.

My, How They've Grown
The ETF industry, which remains small compared with the $7.9 trillion traditional mutual fund business, continued to expand. Firms launched 35 new ETFs 2004, the most in five years and the second-largest number of new ETF offerings ever.

Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.