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The ETF Industry's 800-Pound Gorilla

Barclays' iShares family didn't get big by accident.

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In my previous ETF column, I profiled PowerShares, one of the newest and smallest exchange-traded fund shops. This time, I'll take a look at industry-behemoth Barclays Global Investors.

In a sense, San Francisco-based Barclays is the  McDonald's (MCD) of the ETF world. McDonald's didn't invent hamburgers and Barclays didn't create ETFs, but the companies each exploited and popularized their industry niches to a greater degree than anyone else. Barclays' family of 99 iShares is the undisputed 800-pound gorilla of the growing ETF market. IShares has grown from a few funds and $2 billion in assets in 2000 to a complex of 99 domestically available ETFs that cover virtually every major asset class and have about $115 billion in assets. It's now difficult to assemble an ETF portfolio without an iShare. The firm claimed more than 80% of all ETF flows in 2004.

That's not an accident. Barclays' strategy has been simple: Launch ETFs tied to as many of the most popular benchmarks available and market them relentlessly. It doesn't ask if seven broad-based large-blend funds or six technology offerings are too many for one category or sector, and it doesn't try to tell investors which of the indexes are the best. The firm just wants to make it impossible for investors who want a broad-based, style-specific, regional or sector ETF to ignore iShares.

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