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UPDATE 1-Northern Trust beats retreat on ETFs

* Lack of investor interest cited

* ETFs had $33 mln in assets

* Bigger rival State Street launches 2 ETFs

* Northern Trust shares up 1.7 pct

BOSTON, Jan 27 (Reuters) - Northern Trust Corp NTRS.O, a U.S. custody bank and asset manager, said on Tuesday it was exiting its small exchange-traded funds (ETFs) business due to poor investor response, less than a year after entering it.

Northern's move came on the same day that larger rival State Street Corp STT.N said it had expanded its ETFs business by launching two new fixed income funds. ETFs are mutual funds that track indices but trade like stocks on exchanges.

Some other smaller firms have curbed their ETF businesses as the worst financial crisis since the Great Depression has thrown markets into turmoil.

Northern said it will liquidate the 17 ETFs launched in mid-2008 and which track single-country stock indices. These funds had $33 million in assets as of Dec. 31.

“The board considered current market conditions, the inability of the funds to attract significant market interest since their inception, their future viability as well as prospects for growth in the funds’ assets in the foreseeable future,” the company said.

Northern said Feb. 9 will be the last day of trading for the funds on the NYSE Arca.

Northern shares closed 1.7 percent higher Tuesday at $56.12 on Nasdaq, matching the increase in the Standard & Poor's asset management index .15GSPAMCB. (Reporting by Muralikumar Anantharaman; Editing by Tim Dobbyn)

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