Deutsche gets solid qual rating, despite integration issues

Research houseMorningstarhas released a qualitative report onDeutsche Asset Managementwhich rates the fund manager with an overall score of four, which means it is in the top 32.5 per cent of its peers in Morningstar’s eyes.

Morningstar says Deutsche is a highly efficient and well organised unit which has improved its service over the last 12 months, particularly to the master trust market.

However, on the negative side, Morningstar says Deutsche could face problems after integrating the funds of strategic allyZurich, which the research house says is “likely to place further pressures on management resources and could create tension between team members”.

Broken down into different areas in its qualitative assessment, Deutsche’s parent support and strategy, and its compliance regime were given the biggest ticks from the research house, both flagged as strong with positive outlooks.

Parent Deutsche AG’s acquisition of Zurich Scudder Investments in April this year should give Deutsche a broader product range in Australia, Morningstar says, although the extra bulk is not necessarily expected to yield adequate returns in the group’s funds management operations.

The research house was also impressed that the parent company has hinted it might let go of its passive funds management business, which would position it more strongly as an active manager.

Morningstar also complemented the fund manager’s compliance regime, and says its high standard of internal auditing was one of its core strengths.

On the negative side, Deutsche’s management team was not given a good wrap by the research house. Morningstar says that at the time of the merger with Zurich Scudder, Deutsche head of equities Andy Fay was given extra duties as chief investment officer for the Australian and Asian operations which could put the Deutsche management team, led by chief executive Brian Scullen, at too great a stretch.

“The integration of the Zurich funds, which are managed as segregated accounts, is likely to place further pressures on a management team that is relatively inexperienced,” the report says.

In other areas of assessment, Deutsche was said to have average strengths in stability and profitability, product development and infrastructure resources, while human resources was assessed as strong.