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Barclays’ sale of iShares to CVC Capital Partners two weeks ago for $4.4bn (£3bn) – more than 10 times 2008 earnings – prompted a broad market rally. This partly reflected a perception that at least one part of the UK banking system was better capitalised. But it perhaps also celebrated one glory story in financials that has not been punctured by the crisis - yet.

The success of iShares – it reported a pre-tax profit margin of 44 per cent for 2008 – can be explained by the meteoric rise of exchange traded funds (ETFs), of which it is the leading provider. But some industry experts suggest the growth of ETFs, which has only accelerated through the financial turmoil, may now slow.

Ironically, the success of ETFs over the past decade is not necessarily synonymous with the success of passive investing. They have been widely used by hedge funds and multi-asset managers within highly active asset-allocation strategies.

Tony Yousefian, chief investment officer at OPM fund management, for example, buys ETFs to gain short-term exposure to asset classes, such as UK equity, when he feels they have been oversold. These holdings complement, rather than replace, traditional stock-picking funds.

“My core belief is that focused, long-only fund managers are able to deliver outperformance over the long term. But in the short run, it is extremely difficult for active managers to outperform their index net of fees, so we use ETFs to reflect our short-term views,” he explains.

Over the past year, this strategy has expanded to include ‘short’ or ‘reverse’ ETFs, which track an index in the opposite direction. If the manager believes the FTSE 100 will fall, he will buy a ‘short’ FTSE 100 ETF rather than selling shares in his core, actively managed UK equity fund.

ETFs, which track almost any index imaginable, can also be used to participate in sudden sector rallies, such as the current upswing in financials.

“There can be times when active managers miss momentum in markets,” notes Tom Caddick, head of multi-manager at LV= Asset Management.

Such strategies have become popular in part because asset allocation has become an even more important driver of returns relative to stock selection over the crisis. The most obvious example is financials: picking a resilient bank proved insignificant in the broad sector sell-off that started in 2007.

Andrew Cole, who manages the Barings Multi Asset fund, says his team has for this reason made heavy use of passive, rather than active, vehicles. But he also suggests the trend is due to reverse.

“Having spent our risk budget on big asset-allocation calls over the past two years, we’re now increasingly of the opinion that active stock pickers have got the environment where they should be rewarded for correctly identifying the winning companies of the next business cycle,” he explains.

He points out that although all telecoms, media and technology companies did badly when the dotcom bubble burst, the recovery period from 2003-06 saw a massive dispersion in their performance. According to the manager, the next few years are similarly likely to sort the wheat from the chaff within sectors such as financials and industrials. This suggests it is a time for stock picking.

The problem with stock picking is that it is expensive, and investors have never been more focused on fees than now. ETF providers like iShares could leverage the remuneration debate to gain a foothold in the retail market, where they have traditionally struggled.

Mr Cole says: “I am still surprised at the number of retail investors who don’t use ETFs. People say they’re bullish on Japan and they've found a really great Japan fund – if they’re that bullish on Japan, why not just use the ETF and save themselves the fees?”

In theory, ETFs should be a popular choice for retail investors looking for exposure to the more liquid asset classes, such as Japanese or US equity. Passive funds famously tend to sit in the top quartile of these sectors, which are characterised by highly efficient stock markets.

One of the main obstacles to their further development is the remuneration structure of the retail market: ETF providers do not pay commission. This, however, is likely to change in 2012, when advisers are obliged to adopt the new rules laid out in the RDR proposal, currently in consultation. Depending on how the adviser community adapts, this could mark a new dawn for iShares.