Asset mismanagement

DWS slump worries investors and staff

Börsengang DWS
For whom the bell tolls. Source: dpa

Leading a company to an IPO within a year is quite an achievement, especially when the business is a spin off from a parent that is struggling.

So Nicolas Moreau, the CEO of DWS, Deutsche Bank’s old asset management division, had much to be proud of when it floated 20 percent of its stock in March. The problem is, like the price of an asset fund, reputations can fall as well as rise.

Before the IPO, times appeared good. DWS had long been seen as Deutsche Bank’s cash cow and despite its parent’s troubles, made full-bodied promises about its future performance.

What a difference a quarter makes. The firm’s share price is now down by 16 percent, and investors have withdrawn €4.9 billion from the firm’s funds since the IPO alone.

Employees and investors are dejected. Staff complain about bad strategic decisions, painful cash outflows and the sluggish progress in acquiring major new customers. Investors, meanwhile, are miffed at DWS’ failure to live up to the promises it made before the IPO.

Freed from the strict regulations placed on banks and its parent’s baggage, the new DWS could tap into the boom in index funds, it said. That’s now looking a bit rich. “The promises will catch up with it, and this is a disaster. DWS is destroying a lot of trust,” said one major investor.

Analysts are also edgy, with Bloomberg reporting that at least half of the 16 it spoke to have lowered their share price targets. Credit Suisse, for example, believes the stock is now only worth €26.50 instead of €30. It is currently trading at around €27.

Expensive mistakes

DWS’ problems come at a time when the asset management business is already under pressure. The firm is struggling to keep up with strong competitors in the lucrative, actively managed business, and sales of its high margin funds in particular have nosedived. It reported €687 billion in assets under management at the end of the half year, a small rise, but outflows reached almost €13 billion.

Such outflows are not in line with industry trends. DWS’ big rivals all raised fresh capital, with Union Investment, for example, reporting net sales of €11 billion.

Critics blame Mr. Moreau for the slump. They say he was appointed in the hope of winning large mandates from institutional investors, preferably via his network in the insurance world. “But where are the major clients?” asks one.

The man himself has blamed the “unhelpful” situation at Deutsche Bank as well as “market volatility” for DWS’ poor showing. Meanwhile, sales teams say they are not sure whether they should be pushing high-margin active products, which are out of favor among investors, or low-margin index funds, because there is growth there. For its part, Deutsche Bank is busy taking care of its own problems.

Staff are now increasingly concerned about job cuts. But employee motivation is not Mr. Moreau’s strong point. “It doesn’t seem as if he has really arrived,” it’s said in financial circles. After seeing his star rise so high at the time of the IPO, many employees are now asking what would be so different if he were gone.

Yasmin Osman is a financial editor with Handelsblatt’s banking team in Frankfurt. Anke Rezmer covers the investment fund industry for Handelsblatt. To contact the authors:,

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