As more investors turn to asset allocation and advisers increasingly use fee-only compensation models, at least one research group is predicting exchange-traded funds assets globally will top $1 trillion within two years.

After attracting $176 billion of inflows in 2008, the report by Strategic Insight says that "it seems inevitable that U.S. ETF assets, already topping the $500 billion level, will reach the $1 trillion milestone within several years."

While market appreciation is uncertain, more sponsors and advisement firms are likely to enter the ETF and exchange-traded notes industry, the report adds. "And with more than $725 billion in global ETF assets at the end of 2008, according to Strategic Insights' databases, "worldwide ETF assets should eclipse the $1 trillion mark within two years," SI's analysts concluded.

That doesn't seem like much of a stretch, although other analysts have put asset levels for ETFs and ETNs and different levels. For example, Barclays Global Investors' Debborah Fuhr in a report also released on Tuesday noted that at the end of January, some 1,601 ETFs listed around the world had $658 billion in assets. She also pointed out that more than 600 ETFs are planning to launch in the U.S. and Europe. Additionally, some 274 related exchange-traded products are preparing to come to market worldwide with an estimated $59.5 billion in initial assets.

And the National Stock Exchange, which reports monthly figures for ETFs and ETNs, estimated the industry had roughly $539 billion in assets at the end of 2008 with strong postive inflows. (See related story here.) Afterthe first month of a new year, that total slipped to $504.6 billion, according to NSX. But more significantly, some major ETF sponsors suffered slowdowns in key areas. That has raised concern an 18-month economic meltdown may be catching up with the industry. (See related story here.)

But a few points should be noted. First, while net inflows have definitely slowed entering 2009, overall flows remain positive for the industry. Also, last year,the amount of money investors were trading in ETFs surpassed 30% of the total volume of equities transacted in the U.S. That trend isn't likely to slow in coming years. (See related story here.)

The new study by Strategic Insight, which is branching into the ETFs field after more than 20 years supplying mutual funds and insurance industries with data and analysis, found that the trend towards more investors of all types adopting exchange-traded vehicles in coming years should remain strong. This should come from both individual as well as institutional investors, the study noted. 

It had several other findings, including:

• Advisers surveyed planned to increase their use of ETFs in the next two years. Among those already using them, 70% of those advisers questioned say it's highly likely they'll increase their use in the next two years. 

• ETFs use will grow faster in Europe, which is dominated more by institutional investors. 

• Some 70% of use by individual investors of ETFs will come in the form of replacements for stocks rather than substitutions of actively managed mutual funds. 

• Assets are skewing more towards retail channels. Including advisers, individual investors now represent at least half, and possibly as much as 60%, of the total ETF marketplace.  "This suggests a gradual deepening and broadening of the retail ETF market," noted the study.