Talk about going all the way. Exchange-traded funds, or ETFs, are no longer a secret among fund managers seeking an extra dose of diversification. ETFs, which are mutual funds that trade on exchanges like stocks, can be found in countless open- and closed-end mutual funds. But the folks at AdvisorOne funds believed so much in the potential of ETFs that a few years ago they switched their two hallmark funds to all-ETF formats. So far the move has been a smashing success. ( CLSAX) AdvisorOne Amerigo , the more aggressive of the two funds, is benchmarked to the S&P 500 and is up 5.1% -- 2.7 percentage points better than the index. ( CLERX) AdvisorOne Clermont , the more conservative fund, uses a blended benchmark of 45% S&P 500 Index and 55% Lehman 1-5 Year Government Credit Index. Clermont is up 1.6% year to date. Since the conversion to ETFs, combined assets of the AdvisorOne funds have increased from $50 million to in excess of $800 million. TheStreet.com chatted with Bob Jergovic, portfolio manager of the two funds, about the pros and cons of going all the way with ETFs. When and why did you decide to start an all-ETF portfolio? The AdvisorOne funds were started in 1997 as fund-of-funds, or mutual funds that invest in other mutual funds. The original intent of the funds was to provide individuals who may not meet our account minimums access to our investment process. We started an ETF-only investment strategy in 2001. It got off to a rather modest start. For the most part, ETFs were still a relatively new investment vehicle to many investors and financial planners. In August of 2002, we took a hard look at our two mutual funds, which at the time had combined assets of approximately $50 million, and came to the conclusion rather quickly that the fund-of-funds structure was too cumbersome and too expensive to serve as an effective investment vehicle. Exchange-traded funds were the right tool at the right time for us.