Windward Investment Management sees itself as a different kind of money manager, one that draws its inspiration from sailing and its acumen more from abstruse theories than from conventional investment concepts.
The Boston-based firm has its share of ex-Wall Streeters on the payroll, but the company boasts that it tunes out the Wall Street noise. Instead, it uses a proprietary investment model based on the behavior of interrelated variables in complex systems. Financial measures such as price-to-earnings ratios, profit margins and the like factor little into the equation.
Windward's unusual approach reflects its unusual staff. Along with the Wall Street veterans, the company is stocked with math whizzes, engineers, managers and entrepreneurs whose impressive academic and professional chops have given them a different take on the game.
The end product is an outside-the-box investment approach mixing active and passive management in search of solid risk-adjusted returns with a keen focus on downside protection. The approach incorporates a broad range of global markets and assets, including equities, fixed income, hard assets, real estate and currencies. The company rebalances its portfolios three times a year (or more, if necessary), and invests in indexes through low-cost exchange-traded funds, exchange-traded notes and registered funds. It might use some individual securities, such as money market funds when it holds cash as an asset.
In short, the company seeks to capture as much of the publicly traded global capitalization as possible.
Each of Windward's three investment strategies--diversified conservative, diversified growth and diversified aggressive--have recorded cumulative gains that have comfortably beat their benchmarks for eight years through the end of 2009 (the period during which all three have been in operation). Two of the strategies beat those benchmarks by phenomenal levels.
The company caters to both institutional and high-net-worth individual investors. Windward's assets are held in the client's name in separate accounts at an independent custodian. The investments are liquid securities listed on U.S. exchanges, and there's no lockup, so investors can sell whenever they want. Clients can access their accounts through the custodian's Web site, which gives them full transparency.
Windward's appeal to wealthy investors is that it offers a hedge-fund-like approach without the hedge-fund-like drawbacks. "Windward is an alternative option without the baggage of lack of liquidity and transparency, high fees and tax insensitivity," says David Spungen, the CEO of Hillview Capital Advisors LLC in New York City, a wealth manager for both institutions and high-net-worth individuals. "We find that attractive."
Spungen says Hillview started putting clients into Windward's portfolios about five years ago. "Today, it's a core position in all of our clients' portfolios," he says, adding that he uses all three Windward portfolios in proportions varying according to a client's needs.
"We tend to use the conservative and growth [strategies] about equally, and less so with the aggressive," Spungen says. "There needs to be particular circumstances for aggressive to make sense."