Latest posts by Alex Morris (see all)
- Any viable post-Brexit options for the City? - 09 Nov 2016
- Parliament is allowed to vote on EU Brexit deal - 20 Oct 2016
- Loyalty test is top priority at Deutsche Asset Management - 17 Oct 2016
Deutsche Asset Management’s personnel and customer bases are seemingly under pressure of a five-year term of upheaval at the major German investment house.
Staff and customer loyalty have been under observation since Deutsche Bank first decided to conduct a strategic review of the investment division in 2011. The recent news about the bank’s intention to throw out ballast parts of the asset management business has caused turmoil.
The spin-off of the fund business comes at the time when the bank is awaiting a settlement agreement with the US Department of Justice over allegations of mis-selling of mortgage-backed securities.
John Cryan, the CEO of Deutsche Bank, reported the previous month that the investment division would always remain a vital part of the bank’s business model.
However, a former senior Deutsche Asset Management employee, who left the company earlier this year, said the biggest problem the personnel is dealing with is that it does not see eye to eye with the parent company’s governance.
“A lot of people are angry that fund managers do not have a lot of Deutsche stock in their portfolios. They don’t like the company’s governance structure,” he says.
Apparently, as a consequence of morale flagging, the bank has also faced a constant stream of departures from the asset management division over the past twelve months.
Barbara Claus, Frankfurt-based analyst at Morningstar, says: “The investment teams were fairly stable in the past. Recently, more fund managers have left. This could be to do with overall problems at the group. When you talk to the fund managers, they say the outlook is quite bleak for Deutsche.”
Amongst those who fled Deutsche AM’s investment team are Joe Benevento, U.S. chief investment officer; Dodd Kittsley, U.S. head of exchange traded product strategy; Owen Fitzpatrick, U.S. head of equities; and Chris Price, director of insurance asset management.
Is said that the group’s head of equities Henning Gebhardt will have left its position by 2017.
After Faissola had departed, a few senior business executives also left the asset management division, amongst whom are Barbara Rupf Bee, European distribution head; Steffen Leipold, head of retail distribution in Germany and Austria; James Dilworth, head of Deutsche Asset & Wealth Management Germany and Mick McLaughlin, US head of ETF distribution.
Faissola was shortly replaced by Quintin Price, who joined Deutsche from the world’s largest asset manager BlackRock and soon had to resign from the newly assumed post due to ill health.
Despite the problems facing the asset management division is currently dealing with, some of investment experts have expressed their approval of a full or partial spin-off of the unit.
Stephen Ellis, one of the Morningstar’s analysts boasting a buy rating on Deutsche Bank, commented: “An asset management IPO is a good idea. This could raise €2bn-€3bn of capital. That would potentially be quite valuable for Deutsche Bank.”
“The asset management business, as profitable as it is, does not contribute a meaningful proportion to the overall revenues of the business. This is an opportunity to raise capital, without necessarily giving up a significant proportion of profits.”
However, not all of the investment experts share this view. Some say Deutsche is giving up a business bringing stable revenues for the group and diminishing its dependence on investment banking.
Peter Szopo, the chief equity strategist at Vienna-based Erste Asset Management, commented: “A partial float of Deutsche’s asset management arm would be a defensible step to help solve the bank’s capital issue. However, it is obvious that the bank’s long-term appeal would suffer.”