So Many Niche ETFs, So Few Investors Who Care

There are a number of additional narrowly focused products in the pipeline, with names like the IndexIQ Customer Loyalty Leaders, the IndexIQ Effective Worldforce Leaders and the AirShares EU Carbon Allowances ETF.

Other funds in the pipeline will offer investors ways to invest in more foreign markets such as Turkey, Israel, Canada and India.

Commodities and fixed income will also continue to be growth areas, as will ETFs that offer a way to short stocks, both here and abroad.

But next year's biggest potential launch would be the first ETFs that are actively managed. PowerShares Capital Management, a unit of Invesco (IVZ Quote), has registered three and it expects to launch them in the first quarter of 2008. All of the ETFs currently available in the U.S. passively track indices, but if the Securities and Exchange Commission signs off on actively managed portfolios, it would open up a whole new investment arena.

As crowded as the U.S. ETF market is, it is apparently still strong enough to attract foreign sponsors. U.S. SPA ETF, a British firm, was the first foreign company to launch an ETF on American soil with its MarketGrader family of funds, including the MarketGrader 40 (SVF Quote), in October. More funds from European companies are expected.

Even as foreign firms vie to enter the U.S. market, U.S. firms are pushing into Europe. Currently, iShares , a unit of Barclays(BCS Quote), and State Street's (STT Quote) State Street Global Advisors sell ETFs in Europe, and PowerShares is expected to start next year.