Release Date: April 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DWS Group GmbH & Co KGaA reported strong Q1 2025 results with EUR11.7 billion in long-term net inflows, marking the second highest net inflows in the company's history.
- The company's cost-income ratio improved by 5.7 percentage points year on year to 62.2%, demonstrating effective cost management.
- DWS Group GmbH & Co KGaA's Xtrackers business delivered its ninth consecutive quarter of net flows, totaling EUR12.7 billion in Q1.
- The company launched a strategic partnership with Deutsche Bank to offer private credit investment opportunities, enhancing growth in its private credit unit.
- DWS Group GmbH & Co KGaA's promotion to the MDAX in March increased its visibility among investors, reflecting strong share price performance.
Negative Points
- The company experienced outflows in active equities and multi-assets, as well as in Alternatives, primarily due to technical reasons.
- Market volatility and geopolitical uncertainties, such as US tariffs, pose challenges to the asset management industry, impacting investor sentiment.
- DWS Group GmbH & Co KGaA's active equity strategies underperformed, with only 11% beating benchmarks over the last three years.
- The company's total assets under management remained flat quarter on quarter, affected by unfavorable ForEx movements and market depreciation.
- Institutional clients adopted a 'wait and see' approach, leading to cautious portfolio allocations and impacting institutional net flows.
Q & A Highlights
Q: On the performance fee side, do you expect more to come from the P2 fund given the challenges in private markets? Do you need exits to recognize performance fees?
A: Stefan Hoops, CEO: We expect about EUR100 million from PEF2 in 2025 without additional asset sales. The EUR31 million of performance fees for PEF2 in Q1 is the first installment. We anticipate further performance fees from other asset classes, such as real estate, in 2025.
Q: Has there been a change in tone regarding M&A? What types of deals would you consider?
A: Stefan Hoops, CEO: Our view hasn't changed significantly. We believe some competitors may struggle, leading to more M&A opportunities. We focus on Asia, particularly China and India, and are open to inorganic opportunities that align with our growth strategy.
Q: Can you elaborate on the perceptions of Europe changing and the sustainability of this trend?
A: Stefan Hoops, CEO: We see strong secular tailwinds in Europe due to irreversible changes in fiscal policy, infrastructure, and defense. There's a repatriation of European savings and increased interest from global investors, particularly in infrastructure and private credit.
Q: What is the outlook for alternative net flows in 2025?
A: Stefan Hoops, CEO: We expect positive net new asset contributions from liquid real assets, US real estate, infrastructure, and private credit. European real estate may continue to see slight outflows due to previous notifications, but overall, we are optimistic about alternatives.
Q: How are you addressing the performance of active equity strategies, and what are the flow expectations?
A: Stefan Hoops, CEO: Our equity funds focus on value and defensive strategies, which are performing well in the current environment. We expect improved performance to translate into positive flows, particularly in funds like DWS Top Dividend and Concept Kaldemorgen.
Q: What are the fee margins across the infrastructure range, and what margin do you expect for private credit?
A: Stefan Hoops, CEO: Our PEF series has significant performance fees, with management fees in line with private equity. For private credit, we expect margins in line with the average for our Alternatives business, with potential for higher AUM in institutional mandates.
Q: Are there opportunities to combine private debt capabilities with ETF capabilities?
A: Stefan Hoops, CEO: Conceptually, yes, but I remain skeptical about mixing illiquid private market assets with ETFs due to liquidity requirements. We have the capabilities, but regulatory scrutiny and liquidity challenges make it complex.
Q: How does the evolution of the US dollar impact your AUM and business outlook?
A: Stefan Hoops, CEO: A stronger euro reduces AUM by roughly $4 billion for every cent of euro strengthening. While it negatively impacts net income due to more dollar revenues than costs, our global diversification and European gateway strategy help mitigate risks.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
