Aligned nanotube bundles have been produced by the pyrolysis of ferrocene along with methane, acetylene or butane. Ferrocene-acetylene mixtures are found to be ideal for the production of compact aligned nanotube bundles. The: nanotube bundles are associated with iron nanoparticles of diameters in the range 2-13 nm. These nanoparticles are ferromagnetic, showing low saturation magnetization compared to bulk iron. The ferromagnetism of the transition metal nanoparticles is likely to be responsible for the alignment of the nanotubes