DWS Group today announced its refined strategy to grow shareholder value and to tap into the company’s full potential. With the strategy, DWS aims to maintain the company’s leading position in Germany, and to further address upside potential in Europe from building additional partnerships, deploying Xtrackers (Passive) and leveraging its Alternatives capabilities to participate in the European transformation. In the Americas, DWS aims to grow Xtrackers and its Alternatives business and in Asia Pacific, the company wants to focus on strong strategic partnerships. Incremental investments into growth areas of approximately EUR 70 million in the next three years will be self-funded by re-allocation of resources.

As part of the strategy, DWS also announced a new set of financial targets to be achieved during the course of the next years:

Stefan Hoops, CEO of DWS: “In a favorable environment for the Asset Management industry, we have delivered well against our targets since our IPO in 2018. As the environment is becoming increasingly uncertain, we are very well positioned to cater to the evolving needs of our clients for differentiated advice and local expertise, as well as their continuing need for superior investment performance. We will execute a disciplined portfolio optimization by utilizing our capabilities to the full extent, maintaining and growing our areas of strength, and investing in promising future areas. We are committed to self-funding our changes by reallocating financial resources freed up by divestments, delayering and cost initiatives. With our strategy we want to deliver a better DWS with ambitious financial targets, enhanced transparency and an attractive dividend pay-out policy.”

Hoops adds: “We remain fully committed to ESG. It is a top priority for our clients and, as one of the largest asset managers in the world, we owe it to society to stick to our commitments. Our main focus is on climate change, engaging with companies and countries, and, with our European Transformation Funds family, helping to provide finance for the much-needed green transition of the European economy.”

Against the backdrop of an increasingly uncertain environment, DWS expects a renaissance of active asset management with focus on selection capabilities to create alpha and, similarly, targeted or bespoke ETFs to outperform broad index replication. The company also expects private markets to thrive as the secular growth trend in alternatives continues.

To address growth opportunities deriving from these trends, DWS carried out a detailed analysis of its business. Based on both the capabilities and the growth prospects in each market segment, the company categorized its business lines as: Reduce, Value, Growth and Build.

To self-fund investments, DWS intends to reallocate financial resources from other parts of the business. The group identified several levers available, which are not considered to have a negative impact on the franchise but are expected to create total cumulative run rate efficiencies of approximately EUR 100 million by 2025 through gross cost savings and benefits from transformation. Measures include divesting businesses, delayering the organizational structure, reducing the footprint along with other new cost initiatives, and increased cost savings and flexibility through a stand-alone IT platform.

The company announced one example of managing to free up resources already last week with completing the transfer of its digital investment platform to its strategic partner BlackFin. Going forward, DWS holds a stake of 30 percent in the new company MorgenFund, benefiting from the know-how of its partner and being able to profit from the growth opportunities of the platform market.

In business lines such as Equities, Multi Asset & SQI and Fixed Income, where DWS has strong positions in mature markets, the company wants to maintain its leadership positions.

For Equities the goal is to maintain a leadership position by growing thematic equity and expanding the ESG offering. In Multi Asset & SQI DWS intends to grow by building a market leading modular investment platform. In Fixed Income the company will focus its efforts on re-building its multi-sector strategies and improving performance.

The growth category includes business areas where DWS can build on already strong capabilities, matched by attractive growth rates in the respective market segment.

DWS aims to grow its Xtrackers and Passive business globally as the company expects ongoing strong growth of passive products, which can be highly profitable given sufficient scale. In Europe, DWS wants to regain its number two position for ETPs (exchange-traded funds and commodities). In addition, to leverage the strength of its European ETF business, the company has decided to invest in an ambitious growth plan in the US. The focus will be on bespoke passive products and the goal is to grow Passive Assets under Management at an annual compound growth rate of more than 12 percent per year until 2025.

In addition, DWS also wants to grow its Alternatives business. The company sees significant upside potential in the alternatives space in the coming years driven by increased demand from retail investors and higher supply as DWS expects asset managers to step in to replace bank lending in volatile markets. Due to its deep understanding of retail clients and its special relation to majority shareholder Deutsche Bank, which provides excellent access to companies searching for loans, DWS is in a strong position to profit from these trends. Supported by its 50-year heritage of alternative investments and a well-established Infrastructure and Real Estate business, DWS expects to grow its Alternatives Assets under Management of currently EUR 126 billion (as of September 30, 2022) by a CAGR of more than 10 percent over the next three years.

One particular area of growth where DWS will leverage its strong Alternatives capabilities is to organize risk capital for the European transformation, as the company announced this week with plans to mobilizing private capital of up to EUR 20 billion by 2027 through a variety of channels to address the need for transformation across Europe and enabling its clients to invest into changing the continent. The company wants to address the funding need for the European Transformation through a family of investment solutions, and DWS will leverage origination and distribution capabilities from its strong partnership with Deutsche Bank and others.

Taking long-term trends into account, DWS has identified further areas for investments into building capabilities to tackle future growth. The Executive Board has committed to a milestone-based seed-funding approach to ensure tangible progress.

DWS has identified a series of so-called self-help enablers to deliver the strategy laid out in the four areas of Reduce, Value, Growth and Build. The company aims to expand its distribution partnerships and gain further independence from Deutsche Bank while at the same time leveraging the divisional capabilities of the largest shareholder. The company will deploy technology as business enabler and increase focus on further strengthening a high-performance culture with a strong risk-management basis.

Claire Peel, CFO of DWS, said: “Since our IPO in 2018, we have been able to improve our results every year and have very successfully implemented the growth plan we have pursued since then. As a result, we were able to significantly increase our revenues, adjusted profit before tax, net profit and also Assets under Management and achieve record results for all of these figures in our last full year in 2021. At the same time, we maintained a rigorous costs discipline and improved our adjusted Cost-Income Ratio by more than 10 percentage points from 2018 to 2021. In a nutshell: We sustainably increased the profitability of DWS. With our refined strategy, we intend to continue to raise the value for our shareholders. We have increased our dividend every year since our IPO, and we are committed to an attractive payout ratio of 65 percent from 2025 onwards. Subject to pipeline for capital committed to organic and inorganic growth initiatives, we expect to propose an extraordinary dividend of up to EUR 1 billion in 2024.”

DWS Group (DWS) with EUR 833bn of assets under management (as of 30 September 2022) aspires to be one of the world's leading asset managers. Building on more than 60 years of experience, it has a reputation for excellence in Germany, Europe, the Americas and Asia. DWS is recognized by clients globally as a trusted source for integrated investment solutions, stability and innovation across a full spectrum of investment disciplines.
 
We offer individuals and institutions access to our strong investment capabilities across all major liquid and illiquid asset classes as well as solutions aligned to growth trends. Our diverse expertise in Active, Passive and Alternatives asset management – as well as our deep environmental, social and governance focus – complement each other when creating targeted solutions for our clients. Our expertise and on-the-ground knowledge of our economists, research analysts and investment professionals are brought together in one consistent global CIO View, giving strategic guidance to our investment approach. 

DWS wants to innovate and shape the future of investing. We understand that, both as a corporate as well as a trusted advisor to our clients, we have a crucial role in helping navigate the transition to a more sustainable future. With approximately 3,900 employees in offices all over the world, we are local while being one global team. We are committed to acting on behalf of our clients and investing with their best interests at heart so that they can reach their financial goals, no matter what the future holds. With our entrepreneurial, collaborative spirit, we work every day to deliver outstanding investment results, in both good and challenging times to build the best foundation for our clients’ financial future.

This release contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about our beliefs and expectations and the assumptions underlying them. These statements are based on plans, estimates and projections as they are currently available to the management of DWS Group GmbH & Co. KGaA. Forward-looking statements therefore speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.

By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors could therefore cause actual results to differ materially from those contained in any forward-looking statement. Such factors include the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which we derive a substantial portion of our revenues and in which we hold a substantial portion of our assets, the development of asset prices and market volatility, the implementation of our strategic initiatives, the reliability of our risk management policies, procedures and methods, and other risks.

This release contains alternative performance measures (APMs). For a description of these APMs, please refer to the Interim Report, which is available at
https://group.dws.com/ir/reports-and-events/financial-results/.