The Amex's Rzepski notes, however, that the exchange is working on listing active ETFs. Once that happens, there could be more opportunities to convert closed-end funds into ETFs.

There are also some closed-end funds that have launched, or are in the works, with features that make it easier to convert into an ETF structure. PowerShares has a patent pending on a product that it calls the Auto-Conversion Closed-End Fund, or ACCE Fund. According to PowerShares President Bruce Bond, if the fund trades at an average discount of 3% for 30 days or more, it would automatically convert into an ETF.

He says, however, that the intent of the feature is not necessarily to convert the fund but to keep the discount at or above 3%, since investors would likely bid shares higher in anticipation of a conversion once the discount reached this level.

This product isn't an ETF, Bond says, but instead it's "a closed-end fund that has a protection feature."

Several closed-end funds also have provisions that would allow a conversion into either an open-end mutual fund or an ETF. For example, the ( RYJ) Claymore/Raymond James SB-1 Equity Fund has a conversion provision that kicks in after 18 months if the fund trades at a discount of 10% or more to its NAV for 75 consecutive trading days. In that event, shareholders would be issued a proxy to decide whether to convert the fund to an open-end format. Shareholders who don't respond will be counted as though they had voted in favor of a conversion.

"The key is to create a structure that works best for shareholders and uses the opportunity to best meet the investment objective of the fund," says Jeff Keele, managing director of Claymore. "It's not saying one structure is better. But in the particular structure that you're using, you need some protection for shareholders."

If you liked this article you might like

Contrarian ETFs Grow

Contrarian ETFs Grow

Mutual Funds for Kids

Mutual Funds for Kids

Ask TheStreet: ETF Arbitrage

Ask TheStreet: ETF Arbitrage

Closed Funds Still Rake It In

Closed Funds Still Rake It In

XShares Reinvented as ETF Hawker

XShares Reinvented as ETF Hawker