Americas Outflows Drove an Asset Manager's Rough IPO Quarter, But ...
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Friday, April 27, 2018

Americas Outflows Drove an Asset Manager's Rough IPO Quarter, But ...

It was a rough first publicly traded quarter for DWS [profile], with outflows on this side of the pond leading the way. Yet the flows picture for the German multinational asset manager is more complicated than it might seem.

DWS, the freshly spun-off asset management arm of Deutsche Bank, IPOed on the Frankfurt Stock Exchange about a month ago, on March 23. Yesterday DWS CEO Nicolas Moreau and CFO Claire Peel revealed the company's Q1 2018 earnings results, its first ever earnings report as an independent, publicly traded company. P&I also reported on DWS' earnings.

DWS suffered Q1 2018 net outflows of about 7.8 billion euros ($9.42 billion), mostly thanks to about 6 billion euros ($7.24 billion) in net outflows here in the Americas, despite flat flows in the Americas for all of 2017 and net inflows of 16 billion euros ($19.32 billion) for the whole company.

Yet, as laid out in DWS' earnings release, those Q1 2018 net outflows can be "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." DWS also suffered cash outflows in the U.S. in late March, but according to the company most of that money has already returned in April, i.e. after Q1 ended (on March 31).

"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," Peel states. "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."

DWS' AUM slipped three percent in its first publicly traded quarter, to 676 billion euros ($815.38 billion), thanks to rough markets, foreign exchange shifts, and those outflows. Revenue slipped seven percent, both year-over-year and from last quarter, to 561 million euros ($677.6 million). Net income slipped, 42 percent from Q4 2017 and 33 percent year-over-year, to 95 million euros ($114.75 million).

"In a challenging quarter, we successfully completed our IPO and introduced DWS as our global brand, transitioning into a new era," Moreau states. "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."

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