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Deutsche asset strategy queried amid AUM slump

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GERMANY – Deutsche Bank’s asset management strategy has come under scrutiny in the wake of disclosures that its institutional fund arm DeAM lost 13 billion euros in assets in the third quarter.

The news follows reported comments by chairman Rolf Breuer that the bank may be considering a job cull in its investment banking and asset management businesses.

According to Deutsche’s nine-month results, DeAM’s assets under management totalled 308 billion euros at the end of September, down from 321 billion euros at the end of June. At the end of March, DeAM’s AUM stood at 332 billion euros.

Deutsche attributed most of the decline in institutional AUM to outflows from DeAM’s UK business. But analysts told IPE that during a Friday conference call with Clemens Börsig, Deutsche’s chief financial officer, Börsig admitted that DeAM had lost an unspecified amount of assets in the US as well.

The analysts also said Börsig was confident that following the imminent gain of almost 25 billion euros in assets from the insurer Zurich, “the situation at DeAM would stabilise”.

However, WestLB analyst Georg Kanders said that while Börsig may be right, the troubles at DeAM show that Deutsche’s asset management strategy was not yet “convincing”.

“They’re trying to reposition themselves to be more like a UBS by doing more asset management in the UK and the US. Yet since they’re losing assets in these places, one has to ask whether it’s working,” said Kanders.

Kanders also concurred with analysts’ expectations that Deutsche will have to cut more jobs in its investment banking and asset management businesses to meet its profit targets for 2005.

“I think we can definitely expect job cuts, but I personally think the often cited 2,000 figure a bit high,” added Kanders.
Deutsche’s asset management business, which includes DeAM and DWS, the retail fund arm, accounts for around 10% of Deutsche’s earnings.

The bank is expected to make an announcement on further restructuring in early February when it unveils its 2004 results.

Deutsche also said its real estate funds attracted one billion euros in assets, while its hedge funds took in 241 million euros.

Regarding its asset management business as a whole, Deutsche said pre-tax profit declined to 100 million euros in the third quarter from 131 million a year ago. Deutsche Bank itself posted pre-tax profit of one billion euros for the quarter, which was above analysts’ expectations.

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