German giant fires up down under

As a slogan, ‘When traditional thinking is not enough’, might sound a little hackneyed, but when you’re consistently ranked one of the top 10 global retail fund managers, and highly regarded for your product creativity, thought leadership and manager expertise, then perhaps the slogan is apt.

It’s the slogan and statement that German behemoth DWS Investments, the mutual funds arm of Deutsche Bank’s AssetManagement division, will bring to Australia as it officially begins operations on October 8.

This follows a soft launch earlier this year, when the DWS Global Equity Agribusiness Fund was announced in March.

Many financial planners would already be familiar with the DWS name. Founded in 1956, the fund manager celebrated its 50th year of operation last year, and with EUR244 billion (A$393.5 billion) assets worldwide, it is a substantial player in the global retail funds management space.

Rebrand

Coinciding with the October 8 launch of DWS, Deutsche Bank’s retail asset management business will be rebranded as DWS Investments.

However, according to deputy head of asset management Chris Larsen, the rebranding of Deutsche products will not impact investment management teams or investment processes for existing Deutsche-branded products sold in Australia.

“Nothing changes with our business model on the retail asset management side,” Larsen emphasised.

“We’re absolutely focused on the intermediary and platform markets. This is simply a rebrand that allows us to bring more of the innovation that DWS is known for in Europe to Australia. It also allows us to respond to the increasing appetite we’re seeing for structured products in this market.”

As part of DWS Investments’ strategic entry into the local market, Deutsche Bank’s Asset Management division will be organised into four business lines.

Retail will be the responsibility of DWS and cover managed funds and structured products.

Alternatives, covering real estate, infrastructure, private equity and hedge funds will come under RREEF, while insurance and institutional remain with Deutsche Asset Management.

While being responsible for retail funds, DWS will also continue to distribute the RREEF funds, and provide client and adviser servicing in Australia.

“We’re a little different from some of our global asset management competitors. Where they have one brand for all their business units, we’re going to separate the brands to differentiate each business unit,” Larsen said.

The official launch of the DWS brand in Australia will also see the funds manager introduce a range of new products, including a Global Climate Change fund, a Global Small Companies fund, a Global Emerging Markets fund, as well as the RatePlus fund — a capital guaranteed product aiming to deliver cash plus 2 per cent net of all fees.

Larsen, who will officially take on the position of DWS head of asset management — Australia, from Andrew Fay on January 1, 2008, added that a Global Infrastructure and China fund were also in the pipeline.

“DWS Investments brings outstanding expertise in all of the key global markets, which presents Australian investors with the opportunity to participate in the international trends shaping our future,” Larsen said.

Timing

But with Australia the fourth largest pension fund market in the world, some might question the time it has taken for DWS to launch its brand into this country, particularly with DWS having recently moved into Singapore and India.

It’s a concern that DWS head of asset management, Asia Pacific and Middle East Ed Peter — the man responsible for rolling out the DWS brand and strategy in the Asia Pacific region — dismisses, saying it was more important to bed down the rebranding strategy first in less logistically difficult markets, like Singapore, before bringing the global strategy to Australia.

“The roll out of DWS in Australia is part of an encompassing global strategy to bring the retail brand to all markets. The Australian market is very important to DWS. Whenever I talk to regulators in different countries, they always talk about Australia. This market is the benchmark.”

Larsen agreed: “In February last year, I was offered to rebrand to DWS and even prior to this Andrew Fay was also offered this opportunity, but we chose not to rebrand until we got the new retail asset management business up and going. We needed to first convince the market that Deutsche was in the retail asset management business, we were committed to it, we had good funds, and all those sorts of accompanying issues.

“I don’t think it’s right to say that Australia was further down the priority order, being the third country in the Asia Pacific region to rebrand. Instead, it was a matter of getting the business right here first.”

As part of Ed Peter’s mandate to grow the brand throughout Asia Pacific, countries like South Korea, Japan, The Philippines, Malaysia and Taiwan are all slated for DWS rebranding.

Difference

But in a competitive and mature Australian market, how will DWS differentiate its brand and offering?

Larsen turns to the fund manager’s proven expertise in all of the key global markets as a clear point of differentiation with that of competing products. He points to structured products as an example of one of the global mega trends identified by DWS.

“In Europe, about 20-25 per cent of their asset base is in structured products. In Australia, it is significantly less. We’ve recently gone into this space with a couple of DWS funds like the DWS Multi-Manager funds available on the Navigator platform. We’ve launched another structured product called RatePlus, which is a product we have worked with NAB on.

“It’s all that innovation that the Europeans have built around capital protected funds, notes issuances and doing funds with varying degrees of participation rates that we haven’t had access to in Australia before that I believe DWS can offer something genuinely different to planners.”

Peter agreed, adding that by bringing DWS to the local market, Australians will benefit by being able to access funds in emerging mega trend areas, such as climate change, water, renewable energy and agriculture.

“We believe changes to climate will have huge global ramifications, and while it sounds mercenary, by understanding these changes and identifying these trends, we can make money out of it. That’s why we’ve launched the DWS Global Climate Change Fund.”

So, does this mean the Australian market will see a lot more European manufactured products entering the market?

“Not at all,” Larsen said. “While leveraging off the expertise from Europe, we also intend to manufacture some product locally. We will be replenishing the product suite with what we lost through the Aberdeen transaction.”

But Peter quickly added: “At DWS, we have about 1,700 products worldwide. This gives us the scope to take globally manufactured products and where appropriate, repackage them for the Australian market. It’s very exciting.”

One thing Peter is focused on is product innovation, and he is confident that by identifying mega global trends and looking at difficult to access investment spaces, DWS will be recognised by planners as having a distinct and unique offering in the Australian market. “It’s what we do best,” he said.

Citing an example, Peter talked about the suite of Sharia compliant funds launched just under one year ago in the United Arab Emirates and Bahrain.

The five DWS Noor Islamic funds, which are not registered or available in Australia, differ from that of its competitors through the initial application of a Sharia compliant screening process across the entire spectrum of the global universe.

Investors can benefit from the potential to invest in all regions and sectors, including the option to participate in initial public offerings.

Marketing

With 95 per cent of retail fund inflows coming from platforms and planners, DWS will implement a business-to-business strategy for building its brand in the local market.

This strategy means ensuring that research houses, platforms and planners understand what the DWS brand stands for and what the rebranding strategy means for them.

An example is the DWS Future Forum, which kicks off in Sydney on October 8 followed in Melbourne the next day, which will be instrumental in introducing the DWS brand to financial planners.

The forum will feature a range of speakers, including Professor Tim Flannery and leading sector specialists, who will talk about international mega trends and themes shaping the future, while identifying trends that offer sustainable and long-term growth and value.

“It’s an initiative,” said Larsen, “that will help position DWS as a thought leader. It’s definitely a sophisticated educational event, not a product flog.”

And while distribution of DWS remains unchanged from that of retail Deutsche products, Larsen concedes there is still much work ahead for the funds manager in promoting the new brand to the market.

Recent recruitments include former Tyndall head of institutional sales Stephen O’Brien, with Larsen expecting to add an additional five to eight people to service the business’ platform next year.

Expectations

Going forward, Peter has high expectations for the Australian business. He does not shy away from targets.

“Retail is a multi-billion dollar business. I expect over EUR1 billion per year over the next five to 10 years,” he said.

“I believe we have the products, the creativity and flexibility to achieve this. DWS is a company that thinks beyond the norm and looks at spaces that are hard to access. I think Australians are going to like what they see from us.”

Larsen shares his boss’ high expectations. But are they achievable?

“Definitely,” he said. “We’ve had an outstanding year. Last year we probably increased our fund flow fourfold. We think we’ll go even better next year, particularly off the back of the Global Equity Thematic Fund being rated ‘A’ by van Eyk.

“From a branding point of view, I want DWS to be seen as a quality manufacturing house that is innovative and different. From a performance point of view, I want our funds to be consistently good. From our people point of view, I want to develop a successful, pro-active culture within the organisation, with a strong client-focus.

“Together, all these points will make DWS a consistent, reliable and sophisticated brand to do business with.”