DWS: Hoops courts market with EPS jump and payout slam-dunk
Stefan Hoops, newish chief executive at DWS, trumpets a sales background within parent Deutsche Bank. He came in to clean up a greenwashing scandal, but has notably little record in managing money.
Marketing skills will, however, be needed to persuade investors that the German fund manager can hit ambitious new financial targets. The pledge of a big payout should help with that mission.
The problem for any fund manager setting nominal targets is that income from annual percentage fees rises and falls with fickle asset prices. Hoops is brave to promise earnings per share will hit €4.50 in 2025, almost a fifth above the Visible Alpha analyst consensus.
Hoops’s commitment to a special dividend of up to €1bn in the next 18 months has greater solidity. It would be paid out of excess tangible equity of €1.3bn.
DWS, at one time seen as an also-ran, has high hopes of expanding in the highly competitive US market. The strategy is two-pronged. DWS plans to invest €70mn into its passive products — branded as Xtrackers — and its alternative businesses, primarily in real estate and infrastructure. That would leave net savings of only €30mn from a gross target of €100mn over the next three years.
Passive management requires scale, given low fees. It accounts for just a quarter of assets under management right now. The unit has provided only a tenth of management fees year to date to September. Hoops hopes demand for private capital investment will drive assets towards an alternatives unit with higher fees.
The CEO labels passives plus alternatives as the growth segment, accounting for up 40 per cent of fees. A value sector comprises actively managed fixed income and equity. The most sensitive to market movements, these make up the larger balance of fees.
Right now, investors like the sales pitch. DWS shares have performed well this year against large peers such as Amundi and Schroders. Market risks aside, the promise of a big special dividend — nearly triple that of its normal one — should underpin the stock for the coming months.