Schwab Makes ETF Fund Manager Acquisition

The firm today announced an agreement to acquire Windward Investment Management, Inc., for $150 million in stock and cash in a deal expected to close during the fourth quarter, subject to “customary closing conditions”.  

Headquartered in Boston, Windward Investment Management is an investment advisory firm that manages $3.9 billion at July 31, 2010 in three “broadly diversified investment portfolios” comprised primarily of ETF securities. According to the announcement, Windward’s clients include investment advisors, non-profit organizations, endowments, retirement plans, and individuals.  

According to a press release, Windward has enjoyed compound annual growth in client assets of 56% per year over the five years ending July 31, 2010, “through a combination of strong organic growth and strong investment performance, while delivering solid levels of profitability”.

Post-Acquisition Moves 

The firms said that the founder, president and chief investment officer of Windward, Stephen J. Cucchiaro, and his investment team will remain with the firm “in order to maintain and oversee the investment and portfolio management processes in place today”, while its money management solutions will be made “more conveniently available and at a lower cost to clients of independent Registered Investment Advisors (RIAs) through the Schwab Advisor Services platform.”  Windward’s portfolios will also be offered to Schwab retail clients as part of Schwab’s overall managed portfolios strategy.  Upon closing, Windward’s ETF-based investment portfolios will be available directly to individual investors through the Schwab platform, and Windward will no longer separately market to individual investors.

“Among independent advisors and retail investors there is a growing interest in the kind of value Windward can provide – portfolio construction which puts risk management at its core – an ideal approach for today’s world,” said Walt Bettinger, Schwab president and chief executive officer. “A number of Schwab Advisor Services clients currently rely on Windward for cost-effective and highly diversified core portfolio holdings for their clients, and we think that upon closing streamlined access and improved pricing from Schwab will further fuel Windward’s growth and enable us to add significant client value for advisors. Windward’s straightforward, scalable strategies are also a natural and consistent fit with Schwab’s existing approach to portfolio management for our traditional retail clients.”

“Schwab has provided our custodial platform for 15 years and today nearly a third of the assets we manage come directly through our relationship with Schwab, and over two-thirds of our assets are currently custodied at Schwab, so we are proud and excited to be joining such a great company,” said Stephen J. Cucchiaro, Windward president and chief investment officer, in the announcement.