NEW YORK (TheStreet) -- As investors quickly regain their appetite for risk, billions have flowed into leveraged and emerging-market ETFs in the first half of 2009. While large asset management firms like Schwab ( SCHW) and Pimco are seeking to capture more long-term assets with passive proprietary funds, other issuers are joining the ranks to offer more alternative strategies.

The development of a broad variety of ETF products both highlights the flexibility of the ETF model and underscores the desire of ETF issuers to see their products go mainstream.

The most recent funds to join the ranks at the NYSE have been the ETFS Silver Trust ( SIVR) from ETF Securities and the Dow Jones Emerging Markets Titans Composite Index Fund ( EEG) from Emerging Global Shares.

Both issuers are new to the U.S. ETF world: Emerging Global Shares released its first fund in May 2009 while SIVR is the first U.S.- listed ETF from Europe's ETF Securities.

Leveraged funds also have captured the attention of U.S. investors. At the beginning of 2008, inverse and leveraged funds had just $11 billion in assets. As of June 30, these funds had more than $32 billion in assets, with an 86% increase in the number of products (In the month of June, three of the top 10 ETFs with the most volume were leveraged or inverse products.)

This shift toward riskier fund strategies has been coupled with increased regulatory scrutiny, as agencies like FINRA probe to see if non-traditional ETFs are reaching the right audience. SSgA Strategy & Research reports that just 9.68% of the ProShares Ultra Financials ( UYG) had institutional ownership. ProShares UltraShort 20+ Year Treasury ( TBT) and ProShares Ultra Short S&P 500 ( SDS) also had a low percentage of institutional ownership -- 24.42% and 11.14%, respectively. The "2009 ETF Mid-Year Review" from State Street notes that the "interesting phenomenon with respect to this product set is its presence among retail investors, which is atypical for most ETFs."

The SPDR S&P 500 ( SPY), on the other hand, has an 87.65% institutional base. SPY saw a significant net outflow in the first quarter of 2009.

The proliferation of new products capitalizes on lingering fears in the wake of a market downturn. In the Post-Madoff era, investors are seeking transparency and hands-on access to their assets -- desires addressed by the ETF model. While investing in gold bullion or futures contracts may be impractical for a typical retail investor, this process is made easier by ETFs. According to SSgA, commodity ETFs have accounted for 53% of the industry net flows YTD, "despite making up just 3% of listed ETFs."

While ETFs are uniquely situated to provide commodity and leveraged strategies, issuers are not content to limit the scope of their offerings. The number of fixed-income ETFs has gone from six funds in 2006 to 63 funds today. Fixed-income ETFs are beginning to become more focused. iShares recently launched the S&P/Citigroup International Treasury Bond Fund ( IGOV) to give U.S. investors specific exposure to fixed income overseas.

ETF issuers are both venturing into uncharted territory and undercutting one another's existing products in the race to capture the influx of assets. While a rush of new funds into the marketplace may be a demonstration of "irrational exuberance" on the part of ETF issuers, investors must exercise measured caution when approaching the new funds.

-- Reported by Don Dion in Williamstown, Mass.
Don Dion is the publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.

Dion is also president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

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