James Ross and Anthony Rochte are senior managing directors at State Street Global Advisors responsible for the SPDR family of ETFs. Recently, IndexUniverse.com assistant editor Heather Bell talked with them about what goes into creating a successful family of exchange-traded funds.

Index Universe (IU): What has State Street's strategy been in the area of ETFs?

James Ross (Ross): We focus really on three very important areas. One is product. We want to bring precise, quality products to the marketplace. We spent a lot of last year rounding out our product lineup—I think we launched a total of 25 funds in 2007. The major emphasis was to offer a full suite of international and fixed-income products that are really focused on investor needs.

We also focus significantly on communications and on developing our SPDR family of ETFs ... talking to advisors and the rest of the investment community to explain who we are and what we're doing, why we think these products are world class. We do that through strong marketing and branding.

Anthony Rochte (Rochte): The third leg of the stool is a very strong and efficient distribution force. As of today, we have 60 dedicated sales professionals, client service professionals and strategists who actually help service the intermediary community.

In the last 18 months, we've doubled the number of SPDRs products: We've gone from 32 to 65 U.S.-listed ETFs, and our assets have grown from $85 billion about 20 months ago to over $158 billion at year-end. The industry last year grew at 45%; we're happy to report that we grew somewhere in the 54%-55% range.

IU: How do you take market share if you're not first to market with an ETF that covers a certain asset class?

Ross: There's a couple ways that we look at that. Being first is great, but you're not always going to be first. You have to ask yourself, can I bring a quality product with a real quality index behind it that I think investors will be interested in? One that might be better constructed than the product that made it first to market?

That's our first focus, and then obviously we have the ability here through a skilled distribution force and our marketing capabilities to get that information out to the investor. This can be a successful strategy in that we give them a choice to consider that we believe might be better constructed and have better characteristics than a fund that might have made it to market first.

Rochte: Just building on what Jim said, there are a number of single-country ETFs that have been in the market for quite some time. Our strategy, as we began building our international ETF family, was not to go at it from a single-country point of view, but to go at it from a regional point of view. The reason we did that wasn't simply because these products weren't out there, it was because when you look at the way Wall Street research is done today and when you look at globalization trends, most of the research done is at a region level, not at a single-country level. One example is BRIC-Brazil, Russia, India, China-where we weren't first to market. But we accumulated almost $300 million in nine months in our BRIC ETF. Another example would be emerging Asia or emerging Europe. You can buy single-country ETFs in Europe or you can buy emerging Europe, which I think recently topped $100 million in assets.

Ross: We've actually used both approaches. We use the regional strategy in general, but for China-where we saw there was significant demand and only one product-we felt there was a better way of covering that marketplace with a better, broader index. So we brought to market a China product that has a much broader index, and we've really worked to ensure that it's a world-class product. It has started to gain significant traction in the marketplace, where there are now multiple products.

China is obviously a pretty hot area for investing, and it's not always a takeaway game. You're not necessarily trying to take assets from the existing providers in the marketplace, but you want to give the investor and the advisor a choice on their next trade or their next asset. It's not necessarily that we're trying to say, "Sell what you bought three months ago and buy this." More importantly, we're saying, "Next time you're thinking about investing one of your clients' assets in China, there's another opportunity for you, and we think this is a better product."

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