Exploring Potential Mergers and Acquisitions in Asia by the Head of DWS
Deutsche Asset Management (DWS), a leading global investment firm, is eyeing expansion in Asia, where it currently has a limited organic presence. The company sees potential for growth in alternative investments and its ETF platform, Xtrackers.
In a strategic move, DWS is focusing on Southeast Asian regions, including Indonesia, as a key market for strengthening its position as a provider of alternative investments and via its ETF platform Xtrackers. The company plans further expansion into other Southeast Asian countries such as Bangkok, Manila, and Jakarta.
Xtrackers, DWS's ETF platform, is benefiting significantly from digital distribution, with around a third of ETF inflows now coming from this source.
CEO Stefan Hoops is confident that DWS will become the go-to address for investors in Europe. He emphasizes that the company's focus is on organic earnings growth rather than cost-cutting.
The boom in the ETF segment is attributed to structural causes, with investors becoming more self-responsible, informed, and technologically savvy. They prefer passive products despite thinking 'actively'. Inflows into European equities have risen to around 25%.
AI is a major focus for DWS, currently increasing efficiency but with long-term potential to recognize patterns that humans can't or can't see as quickly. AI could simulate the questions asked by good fund managers, according to Hoops.
DWS aims to improve profitability through operational scaling and strategic growth, not by further cutting structures or personnel. The company is also observing clear regional shifts in the ETF segment.
In 2024, 30% of ETF inflows were in US equities, but this has now decreased to 8%. Consolidation should not be an end in itself for DWS. Instead, the goal is for DWS to overtake competitors.
The goal is for DWS to achieve earnings per share of €4.50 this year, with an annual increase of around 10% in the following two years. Size alone does not bring much if new skills are not added. European private investors are increasingly investing in domestic markets.
DWS has shown international catch-up in recent years, but Hoops is clear that the company's ambitions extend beyond just keeping up. He believes that DWS has the potential to lead the way in the investment sector, leveraging AI and strategic expansion to achieve its goals.
