By Daniel Bases

NEW YORK, Feb 16 (Reuters) - Increased use of asset allocation models and fee-for-service investment advice will help push the amount of cash into exchange traded funds (ETFs) over the $1 trillion mark in two years, a new study predicts.

These two major shifts in how money is invested helped pump the ETF market to more than $725 billion globally by the end of last year, New York-based mutual fund research firm Strategic Insight (SI) said.

"ETFs are benefiting from the trend of the investment community moving into a compensation model that favors fees for advice instead of point-of-sale commissions," Loren Fox, senior research analyst at SI, told Reuters in a recent interview.

Fox, a lead writer of the study set for release on Tuesday, said the overarching theme is a broadening and deepening of the ETF investor base. First appearing in 1993, ETFs are touted for their ease of use, tax efficiency and low cost to manage.

They also offer investors a way to target specific asset classes efficiently and increasingly are used as a hedging tool for portfolios, large or small.

As a result, retail rather than institutional investors hold a slight majority of ETF assets, SI found.

Even during the market meltdown of 2008, investors worldwide poured more than $260 billion into ETFs.

In the largest market, the United States, ETFs took in a net $176 billion in 2008, up 29 percent over 2007. However, market declines took the total value of U.S. ETF assets down to $536 billion at the end of last year from $614 billion at the end of 2007, Fox said.