Deutsche Asset & Wealth Management

Strong net new asset growth and continued transformation

In brief

  • Net new asset growth of €40 billion
  • Focused growth in business with UHNW clients, alternative investments and emerging markets
  • Transformational projects driving operational efficiency

More than €1 trillion

in assets under management

Deutsche Asset & Wealth Management (Deutsche AWM) integrates all of Deutsche Bank’s fiduciary asset management and wealth advisory businesses worldwide. With more than €1.0 trillion in assets under management, Deutsche AWM ranks among the top ten bank-owned global leaders in asset and wealth management.

Deutsche AWM helps individuals and institutions worldwide to protect and grow their wealth, offering traditional active, passive and alternative investments across all major asset classes. Deutsche AWM also provides customized wealth management solutions and private banking services to high net worth and ultra high net worth (UHNW) individuals and family offices. A deeply rooted fiduciary culture, robust investment and risk management capabilities and continuous investment into the business enable Deutsche AWM to deliver lasting value to clients globally.

Although bolstered by the continued recovery of the global economy, Deutsche AWM continues to operate in a highly competitive environment defined by ongoing margin pressure and increased regulatory and compliance costs. Despite these headwinds, as well as the continued costs of executing efficiency and integration programs as part of Strategy 2015+, Deutsche AWM improved its business performance and achieved strong growth of invested assets managed on behalf of clients.

Excerpt from segment reporting (Deutsche Asset & Wealth Management1)

Deutsche Asset & Wealth Management recorded income before income taxes of € 1.0 billion in 2014, compared to € 782 million in the prior year. Revenues were lower in 2014 driven by marked-to-market movements on policyholder positions in Abbey Life which are largely offset in noninterest expenses. Provision for credit losses decreased mainly resulting from lower specific client-related lending provisions and the recovery of prior charges in 2014. Invested assets in Deutsche AWM increased by € 116 billion, mainly driven by foreign currency movements of € 50 billion, market appreciation of € 43 billion and inflows of € 40 billion. The increase was mitigated by divesting non-core business assets from the Deutsche AWM portfolio, resulting in € 21 billion worth of assets under management leaving the platform.

 

 

 

in € m.

2014

2013

Net revenues

4,708

4,735

Total provision for credit losses

(7)

23

Noninterest expenses

3,685

3,929

Income before income taxes

1,027

782

Return on equity (pre-tax) in %

16

13

Risk-weighted assets

16,597

12,553

Assets

81,132

72,613

1 Excerpt from segment reporting. For notes and other detailed information, see Financial Report 2014 (Management Report). Regulatory capital amounts and risk weighted assets are based upon Basel 2.5 rules through Dec 31, 2013 and upon CRR/CRD 4 fully–loaded since Jan 1, 2014.

Deutsche AWM’s income before income taxes (IBIT) came to € 1.0 billion in 2014, a 31 % increase over 2013 results of € 0.8 billion. This robust performance was attributable to higher revenues (excluding the Abbey Life portfolio), driven by the alternative, passive, wealth and lending businesses in all major regions. Costs (excluding the Abbey Life portfolio) were down 2 % as savings from the continued execution of different Operational Excellence (OpEx) initiatives were partially offset by strategic hiring and one-off effects relating to compensation.

Increasing volume of invested assets

Increasing volume of invested assets (bar chart)

Deutsche AWM grew invested assets globally by more than € 100 billion to over € 1.0 trillion, including € 40 billion in net new asset inflows from clients. Thus, 2014 marks a significant turnaround from net outflows in 2013 (€ 13 billion) and 2012 (€ 25 billion). All business areas attracted net inflows. The gross margin remained unchanged at 45 bps (excluding the Abbey Life portfolio).

An integrated, client-centric business

Deutsche AWM’s strategy harnesses the power of a fully integrated business, the strength of its client coverage organization and global investment platform in order to lay the foundation for sustainable growth. All clients have a single point of access to Deutsche AWM through specialized teams, including the Global Client Group focused on institutional and retail clients, and regional relationship managers on Wealth Management teams who provide advice to private individuals and high net worth clients. UHNW clients are supported by a Key Client Partners team.

Deutsche AWM’s global investment platform is led by a Chief Investment Office (CIO) that connects the expertise of about 1,500 investment, research and trading professionals to generate a global investment outlook (Deutsche AWM’s House View) and to set guidelines for equity, fixed income and multi-asset portfolio management teams worldwide. Portfolio managers combine the House View with their own rigorous analyses to implement strategies on behalf of the portfolios and client accounts they manage. Commercially, Deutsche AWM’s investment product offering encompasses six global product businesses: Loans & Deposits, Wealth Management Products, Active Investments, Passive Investments, Alternatives & Real Assets and Alternatives & Fund Solutions.

Deutsche Asset & Wealth Management
Deutsche Asset & Wealth Management (organigram)

Disciplined execution driving efficiency and growth

Product mix by invested assets

Product mix by invested assets (pie chart)

In 2014, Deutsche AWM stayed focused on executing its strategic program to transform and grow the business. Deutsche AWM transformed its operating model and made progress with implementing new applications for both the asset management investment platform and for wealth management client services operations. Once fully implemented, these applications will provide Deutsche AWM with a state-of-the-art IT infrastructure ideally suited to its investment processes.

In 2014, Deutsche AWM actively reviewed its business portfolio and geographical presence, with the aim of focusing on core activities while further reducing complexity and costs. Deutsche AWM continued to focus on its home market, Germany, and on other European markets, while further expanding its business with UHNW and institutional clients in North America, the United Kingdom and in select emerging markets in Asia, the Middle East, Africa and Latin America. At the same time the division shed non-core and sub-scale businesses including asset management activities in Russia and the Philippines, the mass affluent wealth management segment in the United Kingdom and “stable value” investment products in the United States. Additionally, the business expanded outsourcing and moved activities to lower-cost locations.

In parallel, Deutsche AWM pursued growth through significant investments in both client service and product innovation. Through targeted hires, the division increased headcount in private banking and wealth management to serve UHNW clients worldwide. It also added to the coverage teams in the Global Client Group.

The division enhanced its product offering across innovative and high growth sectors, including the expansion of products based on the Cash Return on Capital Invested (CROCI) approach, “physical replication” of exchange-traded funds (ETFs) (i. e. using direct index replication instead of derivatives), and alternative investment fund offerings. Assets in CROCI strategies comprising retail fund and institutional account offerings grew in 2014 to over € 6.0 billion globally (2013: € 4.2 billion). With € 19 billion (2013: € 0.5 billion) in assets under management, Deutsche AWM cemented its position as Europe’s second-largest provider of physical replication ETFs, now offering more than 60 products. Finally, Deutsche AWM continued to bring to market innovative alternative investment products, a key area where individual and institutional clients alike drive growth by seeking enhanced returns.

In 2014, Deutsche AWM grew revenues particularly with UHNW clients, in emerging markets and high-performing investment funds. Deutsche AWM’s UHNW client business volume, comprising invested assets and lending volumes, grew 20 % in 2014. Moreover, the invested assets of Deutsche AWM’s clients based in the emerging market countries of the APAC, MENA and Latin America regions rose 25 % in 2014. Finally, Deutsche AWM’s assets under management in 4 and 5-star (Morningstar) rated funds grew 5 %.

Cooperation across corporate divisions

Regional split of invested assets

Regional split of invested assets (pie chart)

Cross-divisional collaboration remains a top strategic priority. In 2014, Deutsche AWM managed about € 50 billion in assets on behalf of PBC clients, in addition to institutional liquidity assets on behalf of GTB clients. Connectivity with CB & S is paramount to Deutsche AWM’s future growth strategy with UHNW clients. The Key Client Partners advisory centers created in 2013 give professional investors seamless access to cross-asset class and cross-border investment opportunities and financing solutions developed in tandem with CB & S.

Outlook

Deutsche AWM is working towards its ambitious growth objectives. The division intends to leverage the combined capabilities of its integrated franchise as well as connectivity across Deutsche Bank, increase the number of advisors serving UHNW clients and build on the strengths in its domestic market, Germany, while gaining market share globally across institutional and retail asset management. Finally, Deutsche AWM expects focused execution of ongoing transformation projects to further improve efficiency and increase operating margins.

Awards 2014

Euromoney
No. 1 (Germany) – Private Banking and Wealth Management Survey

Asia Risk
Asian Private Bank of the Year

Scope Awards
Best Asset Management Company in Germany

Risk
Hedge Fund Derivatives House of the Year

ETP Awards
Best Provider – Innovation, Exchange-Traded Products

Global ETF Awards
Most Innovative ETF in the Americas

Hedge Fund Journal UCITS Hedge Awards 2014
Best Performing Long/Short Equity Fund

Structured Products
Technology Innovation of the Year

Treasury Management International
Winner – North America, Money Market Fund Awards