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Schwab Snaps Up ETF Firm

Schwab is expanding its reach into exchange-traded funds.



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Charles Schwab

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is diving deeper into the exchange-traded funds today by acquiring Windward Investment Management for $150 million.

Windward has $3.9 billion in assets under management in three portfolios that primarily consist of ETF securities, according to a company statement.

Schwab is paying both stock and cash for the Boston-based Windward. The deal is expected to close during the fourth quarter. Schwab anticipates that the acquisition will be modestly accretive to earnings in the first year following the deal's completion.

Schwab, which already has an existing relationship with Windward as well as several propriatary ETFs, has been looking to take advantage of the growing interest among retail investors in the asset class, according to the statement.


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," said Schwab president and chief executive officer Walt Bettinger. "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."

Nearly one-third of Windward's assets under management are via Schwab, while the remaining assets are held in custodial accounts at the brokerage firm, according to the release.


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including Schwab,

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are in a good position to gather clients as retail investors become increasingly tech savvy and begin to purchase more sophisticated products.

Exchange-traded funds

in particular have experienced significant growth in recent years.

Schwab cites estimates from Financial Research Corp. stating that ETFs will experience compound annual growth rate of 23.4% over the next four years. Schwab experienced a 38% increase in ETF usage among clients from June 2009 to June 2010, the press statement says.

Following the completion of the deal, Windward's chief investment officer, Stephen Cucchiaro, and the investment team will remain at the firm to maintain and oversee the investment and portfolio management processes in place today, Schwab says.

Schwab shares hit a new 52-week-low on Monday of $13.03 following declines and lows hit by stocks in the broader financial sector this month. The stock is down 34% from its 52-week-high of $19.95, reached on April 26.

--Written by Laurie Kulikowski in New York.

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