CHICAGO -- There's a new star at this year's

Morningstar

Investment Conference and it's not a mutual fund or money manager.

It's the ETF, short for exchange-traded fund. Unlike traditional

open-end mutual funds that price at the end of each trading day, ETFs are fixed baskets of several stocks, often tied to an index, that trade on an exchange as a single security. Since ETFs are cheaper and more convenient than traditional mutual funds, many believe they could start to replace mutual funds as the core holdings in many investors' portfolios.

The concept both intrigues and scares the money managers and marketers who have gathered here for the fund industry's version of Woodstock.

"They're a brilliant idea, with low costs and potentially a lot of tax efficiency," says Jack Bogle, the former chairman and perennial conscience of index-titan

Vanguard

. The firm recently filed paperwork with regulators for its own line of index-tracking ETFs, called VIPERs.

An informal poll of veteran fund marketers from large and small fund shops indicates a dearth of panic, even though some $45 billion is currently invested in ETFs with many more funds in development.

"It's something we're watching and that we're aware of, but we don't know much more than you at this point," said one veteran fund hawker at a Boston shop who asked not to be named.

Still, it appears ETFs have arrived. For instance, Friday's keynote speaker is Patricia Dunn, chairman of

Barclays Global Investors

. Dunn might not be a household name, but Barclays has launched more than two dozen ETFs and clearly hopes to become the major player in the game. Her inclusion at the conference's climax indicates that ETFs are not a flash in the pan.

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And there's plenty to talk about. Despite Bogle's rosy depiction of ETFs, he sees a downside too. He worries that Vanguard's foray into the area might be driven more by marketing "push" than investment criteria, a crime to which he pleads guilty for launching sector funds in the 1980s. His fear is the stock-like liquidity and up-to-the-minute pricing of ETFs invites excessive trading. Like a well-made rifle, ETFs have many sound uses, but "one is suicide," he says.

"I just hope the VIPERs don't turn out to be the most aptly-named product out there," he says, adding that he shot down the ETF concept when it was pitched to him some 10 years ago.

Among the marquee names expected to speak at this year's conference, which runs through Friday, are Morningstar Manager of the Year Jim Callinan

(

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Robertson Stephens Emerging Growth), Garret Van Wagoner (

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Van Wagoner Mid-Cap Growth), bond guru Dan Fuss (

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Loomis Sayles Fixed Income), Bill Miller (

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Legg Mason Value Trust) and Marty Whitman (

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Third Avenue Value).