Lee Kranefuss vividly remembers the nerve-racking launch of his exchange-traded fund IWM six years ago. As a top exec of Barclays Global Investors, Kranefuss held out big hopes for IWM, which tracks the benchmark index of small U.S. companies known as the Russell 2000. "I thought it could come out of the gate with huge trading volume, and it didn't," he says. Indeed, the fund languished for nearly four tortuous years.
But IWM is now a crown jewel in Barclays' family of exchange-traded funds--popularly known as ETFs--and on some days it trades more than 100 million shares. This year alone, says...