Schwab Announces Agreement to Acquire Windward Investment Management, Inc.

Monday, August 30, 2010 5:45 am PDT



Public Company Information:

"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"

SAN FRANCISCO--(BUSINESS WIRE)--The Charles Schwab Corporation today announced an agreement to acquire Windward Investment Management, Inc., for $150 million in stock and cash. The deal is 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. Windward’s clients include investment advisors, non-profit organizations, endowments, retirement plans, and individuals.

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. At current assets under management (AUM) levels, Schwab anticipates that the acquisition will be modestly accretive to EPS in the first 12 months post-closing, though the company hopes to further leverage Windward’s strong track record of growth.

Post-closing plans for Windward include:

  • 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;
  • 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; and
  • Windward’s portfolios will also be offered to Schwab retail clients as part of Schwab’s overall managed portfolios strategy.

“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.”

According to Cerulli1, assets in separately managed account programs grew nearly 30 percent between Q1 2009 and Q1 2010, and investment advisors are one of Windward’s fastest growing client segments. At closing, Schwab will begin waiving transaction commission costs for Windward managed accounts custodied on Schwab’s Advisor Services platform.

Also upon closing, Windward’s ETF-based investment portfolios will be available directly to individual investors through the Schwab platform; Windward will no longer separately market to individual investors. Financial Research Corporation2 estimates that ETFs will experience compound annual growth rate of 23.4% between 2010 and 2014. Schwab experienced a 38% increase in ETF usage among clients from June 2009 to June 2010.

“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. “Schwab’s vibrant brand coupled with its unrivaled leadership with RIAs and individual investors will add significant strength to our message and our ability to introduce more investors to Windward’s unique and proven approach.”

Forward looking Statement

This press release contains forward-looking statements relating to the closing of the Windward transaction, the effect of the Windward transaction on Schwab’s EPS and other financial results, the employment of the Windward team post closing, and the growth of ETFs, that reflect management’s current expectations. Achievement of these expectations is subject to risks and uncertainties that could cause actual results to differ materially from the expressed expectations. Important factors that may cause such differences include, but are not limited to, satisfaction of conditions to closing the transaction, including regulatory approvals, integration of Windward’s business into Schwab, general market conditions, including the level of interest rates, equity valuations and trading activity, and other factors set forth in Schwab’s Form 10-Q for the period ending June 30, 2010.

About Charles Schwab

The Charles Schwab Corporation (NYSE:SCHW) is a leading provider of financial services, with more than 300 offices and 7.9 million client brokerage accounts, 1.5 million corporate retirement plan participants, 813,000 banking accounts, and $1.4 trillion in client assets. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (“Schwab”) (member SIPC,, and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and mortgage services and products. More information is available at and

About Windward Investment Management, Inc.

Headquartered in Boston, Windward Investment Management is an SEC-registered investment advisory firm that currently manages $3.9 billion at July 31, 2010. Windward’s clients include investment advisors, non-profit organizations, endowments, retirement plans, and individuals. The firm was founded in 1994 by Stephen J. Cucchiaro, whose research in nonlinear dynamic systems and portfolio management theory dates back more than 30 years to groundbreaking work while a student at the Massachusetts Institute of Technology and The University of Pennsylvania’s Wharton School of Business. Windward applies independent research and proprietary modeling to construct globally diversified portfolios that put risk management at their core, while pursuing market outperformance. More information at

1 Cerulli Associates, The Cerulli Edge, Managed Accounts Edition, 2Q 2010 Issue

2 Financial Research Corporation, FRC Monitor, August/September 2009


Charles Schwab
Alison Wertheim, 415-667-0475 (Media)
Rich Fowler, 415-667-1841 (Investors/Analysts)

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