In Brief

By Julie Rawe

GAINING ON GOLIATH Exchange-traded funds are growing rapidly. In December they attracted nearly as much new money as mutual funds, which netted $11.6 billion. ETFs are relatively new pooled investment vehicles, whose shares can be traded throughout the day. Total assets doubled last year, to $72 billion. Impressive but pocket change compared with the $7.2 trillion invested in U.S. mutuals.

RISKLESS? Money-market funds are the safe ways to get better-than-bank-account returns. Yet lots of them are stuffed with commercial paper--unsecured short-term IOUs. During the California energy crisis, utilities defaulted on that paper, prompting fund companies to eat the loss so their investors would not have to. Money funds hold $644 billion in such U.S. paper, says iMoneyNet.com but the risks remain small because the SEC prohibits a fund from investing more than 5% of its assets in the IOUS of a single company.

TELEBONDING Last week France Telecom sold a record $16.4 billion in bonds, proving that deals can be done in this battered sector, but at high premiums. The bonds (the 10-year coupon pays 7.75%) include step-up coupons that pay more if credit ratings drop. Downgrades have outnumbered upgrades for 11 quarters, and the industry's default probability more than doubled last year, to more than 4.85%. While the forecast is a bit rosier for wireless and data services, Moody's managing director, Bob Konefal, says, "The old Aa rates are, for the most part, history."

--By Julie Rawe