ETF Craze a Boon for Licensor McGraw-Hill

The growing popularity of exchange-traded funds is bearing fruit for McGraw-Hill(MHP Quote - Cramer on MHP - Stock Picks).

The parent company of Standard & Poor's said it saw assets under management in S&P ETFs climb 36% in the third quarter to $66.6 billion.

The ETF is "a tremendous innovation and it's been hugely successful," said Edward Atorino, an analyst at Blaylock & Partners.

Atorino said while McGraw-Hill hasn't broken out how much money it's made from exchange-traded funds, he believes it is "a multimillion-dollar add-on to the financial service part of their business" and is poised to grow further.

Neil Godsey, an analyst at ThinkEquity Partners, noted that the ETF unit contributes just a small amount to the firm's overall revenue but agreed that the unit is "highly profitable" and likely to grow further as ETFs gain even wider acceptance.

Exchange-traded funds have become a popular investment tool over the past few years because they combine the benefits of mutual funds with the flexibility of stocks. For example, the Spiders ETF(SPY Quote - Cramer on SPY - Stock Picks) enables investors to purchase all of the companies in the Standard & Poor's 500 index in one transaction.

Like stocks, ETFs are traded on an exchange throughout the day and can be bought on margin or even sold short. So far this year, eight new ETFs have been brought to market, according to data from Merrill Lynch, bringing the total number available on U.S. exchanges to 134. That's up from 122 last year.

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