“In a challenging quarter, we successfully completed our IPO and introduced DWS as our global brand, transitioning into a new era. We are now well positioned to deliver against our targets and have taken a series of important measures to support our cost management and growth initiatives. We are now fully focused on fulfilling our potential as a listed company.”
Chief Executive Officer of DWS
“A volatile market, weak equity market performance, paired with the expected transitional cost increase, outweighed strong flows in the Passive asset class in the first quarter. We kept our management fee margin well above our target and progressed growth and efficiency measures. Looking forward, our overall market outlook remains optimistic over the next months.”
Chief Financial Officer of DWS
The first quarter of 2018 is the first for DWS to report as a stand-alone and listed company. During the first three months of the year we completed the Initial Public Offering and listing on the Frankfurt Stock Exchange on 23 March as well as the global re-brand of the company to DWS, transitioning into a new era for the company.
In a volatile market environment, which included unfavourable currency effects and weak overall market performance, DWS’s Q1 2018 results and overall flows were challenged.
Total adjusted revenues in Q1 2018 were EUR 561m, adjusted profit before tax was EUR 136m.
Assets under Management (AuM) declined by 3 percent compared to Q4 2017 to EUR 676bn in Q1 2018, attributable to the net outflows, FX as well as market effects.
Net flows in Q1 2018 were EUR (7.8)bn, attributed mainly to predominantly lower margin outflows, specifically large redemptions from two clients: a US-based client, repatriating cash equivalent balance sheet investments to the US following the implementation of the US tax reform, and a redemption from a European insurance client. Additionally, we saw outflows in US Cash at the end of March, most of which has already returned in April.
We were able to attract strong inflows in key areas: DWS ranked first in ETP net inflows in the European market in March and second for the entire quarter, with a 16 percent market share and net flows of EUR 3.6bn (source: ETFGI). In our home market, we attracted EUR 2.9bn into our retail funds, more than any other German fund house, until the end of February, according to the most recent statistics of the German fund association BVI.
The management fee margin of 31.1bps in Q1 2018 was above our medium-term target of ≥30bps, increasing by 0.4bp compared to Q4 2017.
With regard to costs, Q1 2018 was – as expected – affected by company set-up costs, as well as by anticipated regulatory-related costs through MiFID II. Investments made into additional hires in Coverage and Digital as well as the launch of the new global brand both added to the cost base. This was partially offset by a significant reduction in Deutsche Bank Group-related service charges, following the separation process, of EUR 11m compared to Q1 2017 and by EUR 23m quarter-on-quarter. In sum, the adjusted CIR in the first quarter remained at 76 percent. We continue to expect 2018 to be a transitional year.
Looking forward, the strong business pipeline we were able to build in Q1 2018, along with a high level of client engagement in the first quarter, supports a positive net flow outlook for the coming quarters.
Following the IPO, we have further advanced our cost efficiency and growth initiatives: DWS appointed a Chief Transformation Officer to coordinate delivery of our cost saving targets and for applying changes where needed to drive organisational efficiency.
DWS has also made investments towards its growth initiatives, with new hires primarily in Coverage and Digital in the first quarter. We expect the majority of the remaining investment spend to materialise in the second half of the year.
Additionally, as announced per release on 24 April, DWS plans to grow its digital fund platform, IKS – already one of the biggest European business-to-business fund management platforms with about EUR 100bn of Assets under Administration – also consolidating key digital offerings of DWS, including its proprietary robo advisory solution, WISE, as well as DWS’s German Investment App, Edison, which launched in March.
Nicolas Moreau, Chief Executive Officer, and Claire Peel, Chief Financial Officer, will elaborate on the Q1 results in an analyst call on 26 April 2018 at 10.30am CEST. The analyst webcast/call will be held in English and broadcasted on https://dws.com/ir/reports-and-events/quarterly-results. It will also be available for replay. Further details will be provided under http://www.dws.com/ir.
About DWS Group
DWS Group GmbH & Co. KGaA (DWS) is one of the world's leading asset managers with EUR676bn of assets under management (as of 31 Mar 2018). Building on more than 60 years of experience and a reputation for excellence in Germany and across Europe, DWS has come to be recognized by clients globally as a trusted source for integrated investment solutions, stability and innovation across a full spectrum of investment disciplines.
We offer individuals and institutions access to our strong investment capabilities across all major asset classes and solutions aligned to growth trends. Our diverse expertise in Active, Passive and Alternatives asset management – as well as our deep environmental, social and governance focus – complement each other when creating targeted solutions for our clients. Our expertise and on-the-ground-knowledge of our economists, research analysts and investment professionals are brought together in one consistent global CIO View, which guides our strategic investment approach.
DWS wants to innovate and shape the future of investing: with staff from 35 nationalities, speaking more than 75 languages rooted in 22 countries, we are local while being one global team.
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This release contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about our beliefs and expectations and the assumptions underlying them. These statements are based on plans, estimates and projections as they are currently available to the management of DWS. Forward-looking statements therefore speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.
By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors could therefore cause actual results to differ materially from those contained in any forward-looking statement. Such factors include the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which we derive a substantial portion of our revenues and in which we hold a substantial portion of our assets, the development of asset prices and market volatility, the implementation of our strategic initiatives, the reliability of our risk management policies, procedures and methods, and other risks.
This document contains non-IFRS financial measures. For a reconciliation to directly comparable figures under IFRS, to the extent not provided herein, please refer to the Financial Data Supplement.