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Shake-Up at Windhaven Investment Management

Posted by WrapManager's Investment Policy Committee
July 29, 2014

Shake Up Windhaven Investment Management Money ManagerIn 1994, Steve Cucchario founded what would later become Windhaven Investment Management, an investment advisory firm that uses actively managed ETF portfolios1 to “capture growth in rising markets while attempting to reduce exposure in declining ones.”2

Now, after 20 years running the company and serving as Chief Investment Officer, Cucchario has left for “personal reasons.”1

Investors who have assets with Windhaven or are considering investing should speak with their financial advisor about the implications of Cucchario’s departure. Windhaven’s initial success and tremendous growth came partially as a result of Cucchario’s vision and leadership, so investors must ask themselves if the future performance of the strategy is jeopardized by his departure.

Will the principles that Cucchario instilled in Windhaven that led to its success also depart with him?

New Management at Windhaven Prompts Review of Investment Strategy

When Bill Gates announced his departure from Microsoft, it was viewed as a major event in the company’s history. Shareholders re-evaluated whether they believed the company’s success could go on without him.

We view the departure of Steve Cucchario from Windhaven in the same way—the performance of money manager strategies are only as good as the key decision-makers driving it.

Cucchario was a successful money manager who worked hard over his career. He was mathematics major from MIT and received an MBA from the Wharton School at the University of Pennsylvania, and he impressively built Windhaven from nothing.3 He is considered by many as a pioneer in the field of ETF investing, having used financial models to allocate money across asset classes and growing Windhaven’s assets at a 60% annual rate over two decades.1

Now that he’s left Windhaven, it is important for investors to re-evaluate whether the future of Windhaven’s investment strategy and performance is sustainable without him.

Charles Schwab Appoints Liz Ann Sonders to Head Windhaven Investment Management

Charles Schwab, who purchased Windhaven over three years ago, appointed their own Chief Investment Strategist, Liz Ann Sonders, as Chair of Windhaven’s Investment Committee. Ms. Sonders, 49, will replace Steve Cucchario but will also remain Chief Investment Strategist of Charles Schwab. It is unclear to date how she will divide her time between the two roles.1

What also remains unclear is if the investment approach created by Cucchario at Windhaven will remain intact, or whether Ms. Sonders will apply fundamental adjustments to the strategy.

Presently, Windhaven actively manages portfolios mainly comprised of ETFs, with a strategy designed to help investors limit losses during a market downturn, though often the trade-off is that they “do not generate quite as much return in an up-market.”3

It remains to be seen whether new management at Windhaven can meet their goal to deliver “less volatile, sustained performance, as opposed to "win big, lose big" Wall Street performance as usual.”4

Windhaven Investors or Those Considering Windhaven Should Re-Evaluate

When a founder and visionary of a company leaves, it does not always imply that the company will have a difficult future. It does, however, merit taking a close look at new management to evaluate whether they uphold the principles of the original founder, or whether the company decides to chart a different course.

If you are currently invested with Windhaven or are considering an investment in one of their products, we would encourage you to take a step back and review what’s next for the firm and their investment strategies, and how that might affect you. Click here to request more information on Windhaven.

In this re-evaluation process investors should also consider other money manager strategies that approach investing from a similar direction as Windhaven—attempting to limit losses during a market downturn while participating in up-trends in the market. These are known as tactical money manager strategies, and one of our Wealth Managers can provide you information on the ones we are currently recommending.

We would be happy to spend time with you discussing our views on the change and what we think the next steps are. You can call one of our Wealth Managers today at 1-800-541-7774 to discuss this matter further, or contact us here.

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Sources:

1 Wall Street Journal

2 Charles Schwab

3 RIA Biz

4 Charles Schwab

Windhaven Investment Management