In 2009, Windward's conservative portfolio beat its index, while its growth and aggressive portfolios trailed their indexes. "There will always be times when particular asset classes rally sharply and we have a hard time keeping up with that with our highly diversified portfolio," Cucchiaro says. "But we always hope to catch up with and surpass sharp rallies over time."
Over the long haul, it has. The cumulative eight-year return on the conservative portfolio (net of fees and expenses) was 67.3% versus 52.6% for the benchmark. The growth portfolio gained 86.9% during this period while its index returned 31.1%, and the aggressive portfolio added 113.1% compared with 13.5% for the benchmark.
The Competition
Windward's long-term performance has won it loyal followers and new clients. "When we do asset manager searches, we look at high-octane hedge funds-the Paulsons [Paulson & Co.] of the world," says Albert Holman, founder and managing partner at Chestnut Partners Inc. in Boston. "And when we look at global asset allocators we look at the GMOs of the world. I compare them to what Windward is doing, and in my mind, Steve [Cucchiaro] is the emerging gold standard in global asset allocation modeling and investing. It's a very attractive model, and it's very efficient in that they buy highly liquid indices and ETFs."
Holman's firm does mergers and acquisition work, and part of its repertoire is providing investment advice and monitoring portfolios for clients after they've sold their companies. He has some of his clients' money in Windward portfolios, as well as some of his own money and trust accounts for his family.
As Windward grows, so does its appeal to larger institutional investors. But getting its message through to the consultants who serve as gatekeepers to this world isn't always easy. "One of our challenges is that our strategy isn't a conventional one, and there really isn't a box that pre-describes what we do," says David Cabot, a Windward principal who focuses on the institutional side.
But he notes that some consultants are creating boxes for global asset allocation. Here, Windward competes against a limited number of larger players such as Putnam Investments, BNY Mellon Asset Management, GMO, PIMCO and BlackRock Inc. And the company seems to be holding its own.
"For Windward to win some of those mandates is flattering," Cabot says. Among its recent victories: Doing investment management work for Major League Baseball.
While Windward's investment approach is appealing to some, it's also somewhat limited to others, including some of its customers. "It would be great if they evolve their strategy to include more products," Holman says. He'd like to see them use a product that adds modest leverage or has higher beta asset classes in areas such as emerging markets.
"The Holy Grail for me is I'll tell you my risk profile and you model what my best return can be, given that," Holman says.
Cucchiaro says Windward has indeed conducted numerous tests and simulations with leveraged and more concentrated, tactical versions of its strategies in different market cycles, in different regions and amid extreme economic and geopolitical conditions.