Deutsche Asset Management
Deutsche Asset Management (DeAM) is Europe’s largest active manager of segregated pension funds† We invest over US$700bn* on behalf of our clients around the world and employ over 800* investment professionals covering equities, bonds, alternative and property investments across the entire risk/return spectrum. DeAM is geographically divided into three regions – the Americas, Europe and Asia Pacific, providing the full range of investment management products across the risk/return spectrum.
We are fully committed to our clients, with our people, process and products all targeted towards meeting our clients needs.
Deutsche Asset Management Netherlands
Deutsche Asset Management (DeAM) has been working with Dutch institutional clients since 1988. In 1999 an office was opened in Amsterdam as a branch of DeAM UK and since then, the Dutch institutional business has grown to around E5bn assets under management. In 2002 Deutsche Asset Management Netherlands started to introduce DWS Investments products to the Dutch retail market. DWS Investments is the European retail fund manager of Deutsche Asset Management.
DeAM in the Netherlands delivers services and solutions to the Dutch institutional investor base. DeAM is able to deliver not only boutique-like investment solutions to the top end of the Dutch market but also delivers ‘all-in’, multi-product solutions to the smaller end of the market.
Deutsche Asset Management considers itself to be at the forefront of developments in the investment industry. Our involvement in the Hedge Fund business dates back to the 1990s and is growing rapidly for Dutch clients as well. DeAM strongly believes in a new way to tackle traditional asset allocation issues. Below we will outline our new view on tactical asset allocation and our hedge fund platform.
Combining the best individual teams within our extensive global network, we at DeAM have created a unique diversified asset allocation product.
Traditionally, the solution to the problem of how to harness our global expertise on asset allocation would have been to set up a global asset allocation committee, comprising the heads of our various strategy teams around the world.
The problem with this traditional approach is that large committees are not the best decision-making teams. We believe that smaller, more specialised teams yield better investment results through their greater nimbleness and dynamism.
As a consequence we set up the Integrated Global Alpha Platform (iGAP) instead. Our strategy is simple yet effective:
1. We source uncorrelated styles of equity, fixed income, asset allocation and currency management. Our strategy teams around the world operate as independent units.
2. We then combine the views of these teams in a single, risk-controlled environment. The investment views are scaled (to enable a fair comparison between investment views), weighted (according to the performance of the teams and several qualitative factors), combined and then optimised into a single model portfolio. This portfolio is then adjusted for individual client constraints.
3. Lastly, we implement, package and deliver using our global dealing capacity.
Through these three stages we deliver an alpha stream with a low correlation to other asset classes with enhanced risk/return characteristics compared to conventional asset allocation products.
As a result of our process, our asset allocation product is not driven by any single “house” view. Instead, the combination of the investment insights of our strategy teams generates a model portfolio, which represents the amalgamation of the views around DeAM.
We believe that this investment process plays to our strength as a global asset management firm. The breadth and depth of our resources enable us to expand our investment universe without having to spread ourselves too thinly.
We believe that absolute return strategies are the logical next step in the evolution towards more efficient portfolios. Hedge funds are in essence a very heterogeneous group of active asset management strategies. Many of those strategies are already included in traditional active mandates. However, when implemented in hedge funds they are implemented in an unconstrained and highly focussed way often run by people with high financial incentives.
The reason they make sense for institutional portfolios is because they are the natural consequence of new generation asset and liability management studies in combination with better risk budgeting. It is getting increasingly more clear that allocating liability mismatch risk towards market risk (beta) should be seen as a separate decision from allocating to manager risk (alpha). It is also clear that the manager’s active risk budget should be sensibly allocated towards the more inefficient areas where you expect a better alpha for the risk taken.
In practice this means that if you want to allocate to a specific market (eg, large cap equities in the US), you do this because of liability matching features or because you expect a premium from allocating to the market risk. This doesn’t necessarily imply that the active risk budget in the search for alpha should be in the same asset class. You want to separate your alpha from beta decision and you want the alpha decision to be allocated towards very specific and sustainable inefficiencies.
Absolute return strategies are exactly that, a separate alpha stream with their entire risk budget allocated towards inefficiencies. We believe that absolute return strategies can produce very attractive risk/return characteristics because of the unconstrained nature of the mandates, the highly focused strategies and the financial incentives of the managers.
At DeAM we have a truly unique hedge fund platform with our dedicated group named DB ARS. Our experience with hedge funds spans more than 10 years and we have more than US$8bn in assets under management*. We offer almost all of the hedge fund formats: multimanager multistrategy, multimanager single strategy, single manager multistrategy and single manager single strategy.
The deep, long standing and broad involvement in absolute return strategies, also as a single strategy manager, does give us some big advantages when analysing other managers for our fund of funds. Institutional clients can partner with us to speak about how they want to approach their hedge fund portfolio and we can be independent whether they prefer the hedge fund of fund route or the single manager strategies.
Hans Benenga, Head of Institutional Clients
Michel Alofs, Managing Director
† Source: William Mercer European Pension Fund Managers Guide, FT, May 2003. This refers to our segregated pension fund business.
* Source: DeAM, as at 31 December 2003
Issued and approved by Deutsche Asset Management Limited, One Appold Street, London EC2A 2UU.
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