As you know, Jim, Vanguard is the only company that can launch an ETF as a share class of an existing mutual fund. They came up with the idea a while back and by golly, they patented it. So far, I don't think anyone has licensed that patent, although Vanguard has spoken with a few firms about it.

The share class structure could make sense for an active shop, if Vanguard would let them do it—and if they got around the transparency issue.

Let's say, for instance, that you ran an actively managed fund that had been around for a few years. Let's also say that the fund had produced strong returns over the past few years, and some of the stocks it owned were bought at much lower levels. That could come back to haunt shareholders if you ever decided to sell, because the capital gains would be passed through to the fund's shareholders. But if you had an ETF share class, you could use the ETF to get rid of those high-cost shares, thereby improving the tax efficiency of the fund as a whole. It could be interesting for an active shop.

In the end, though, I think you're right—it's all about the money. And the money tells the active fund managers to stick with funds.

(BTW, regarding transparency, here's a bit of Matt Hougan trivia. My first real job was as a writer and biotech analyst for the first [and so-far only] fully transparent actively managed mutual fund, OpenFund. We posted all of our trades online in real time, and explained the reasons behind our trading decisions.

Our position—wildly unpopular with the ICI at the time—was that investors deserved to know what was in their portfolios more than once every six months, and that front-running and free-riding were just conceits for funds with less than a few billion in assets under management. I think we were right about that, even if we were wrong in our conviction regarding the "New Economy" ...

And yes, I know ... an active fund. A very active fund, in fact. What can I say? I was young. I came to my senses and started indexing later...)