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Fitch Affirms Deutsche Asset Management Germany at 'Highest Standards', Outlook Stable
December 14, 2016 / 4:36 PM / in 7 months

Fitch Affirms Deutsche Asset Management Germany at 'Highest Standards', Outlook Stable

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(The following statement was released by the rating agency) LONDON, December 14 (Fitch) Fitch Ratings has affirmed Deutsche Asset Management Germany (Deutsche AM), comprising Deutsche Asset Management International GmbH and Deutsche Asset Management Investment GmbH, at 'Highest Standards'. The Rating Outlook is Stable. KEY RATING DRIVERS The affirmation of Deutsche AM's 'Highest Standards' Asset Manager Rating is driven by the continued strength of the company's investment and operational platform. The Stable Outlook indicates that the rating is unlikely to change over a one-to-two year period. Both the affirmation and the Stable Outlook reflect Fitch's view that Deutsche AM has ample financial resources and that recent staff turnover is neither excessive nor a material risk to the business. This is because of its matrix organisation structure, which allows the company to effectively re-fill vacated positions. Fitch placed Deutsche Bank AG, the parent bank, on Rating Watch Negative on 3 November 2016, citing a sluggish business environment that will make it harder for the bank to improve revenue generation and build capital. Notwithstanding the parent bank's financial condition, Fitch views Deutsche AM's financial resources as strong. Deutsche AM has suffered a series of senior-level departures in 2016. However, Fitch views the staff turnover in the year-to-date as being in line with prior years and, more importantly, senior staff departures have been mitigated by Deutsche AM's matrix organisation structure. Deutsche AM's 'Highest Standards' rating is based on the following (unchanged) category scores: Company: Highest Controls: Highest Investments: Highest Operations: Highest Technology: Highest Asset Manager Ratings are assigned on a descriptive scale based on Fitch's assessment of the manager's investment and operational platform. Asset Managers are rated 'Good Standards', 'High Standards' and 'Highest Standards', relative to the standards applied by institutional investors in international markets. Asset manager operations in the 'Highest Standards' category demonstrate an operational framework that Fitch considers superior relative to international institutional standards. Company Fitch considers Deutsche AM a core part of the Deutsche Bank AG group. The bank identified asset management as one of its four core divisions as detailed in its "Strategy 2020" document, published in October 2015. Furthermore, the new CEO appointed in October 2016 sits on the bank's executive committee - previously the asset management division was represented at only more junior levels in the bank's senior management structures. Deutsche AM is the market leader for retail investment in Germany and third largest for institutional investment. Its operating history dates back to 1956. It saw modest declines in AUM and revenues in 9M16 compared with 9M15. Both however remain both profitable and well-capitalised, with sufficient cash on hand to meet costs for a prolonged period in the event of severe stress. Controls Deutsche AM has a deep and efficient risk and control framework. Risk management and governance provide holistic, multi-level assessment of business and fund risks. Service provider governance and operational risks are strongly covered. Investment risk management is fully embedded in investment processes and quantified through enterprise-wide risk analytics, including liquidity risks and stress testing. Fitch views the fund liquidity risk analysis framework as among the most sophisticated it has seen. In 2016 the risk management engine moved to Aladdin from Risk Metrics, marking one of the final steps in the project to implement Aladdin across the company. Investments Deutsche AM's investment processes are highly formalised and consistently applied globally. Its global investment resources are significant (around 200 analysts) and it shares analysts' views effectively through a dedicated module in Aladdin implemented in 2015 (and replacing a former proprietary tool), the central information-sharing tool. The "CIO View" provides top-down strategic and tactical input to the investment process, communicated via model portfolios that are calibrated to individual fund or mandate objectives by portfolio managers, incorporating research analyst (bottom-up) recommendations. Fitch considers the role and strength of the investment quality management teams a differentiating factor. Operations and Technology Deutsche AM's operations are supported by specialists and effective automated workflows between the manager and State Street Bank and Trust Company, the company's main outsourcing provider for back office functions and custody services. Fitch considers its institutional and retail reporting capabilities to be of high quality. Deutsche AM completed its project to implement Aladdin in 2016, following the transfer of risk management onto the platform and the completion of the roll-out in Asia. The project was both large and complex and the successful delivery of the project, with minimal operational issues, supports Fitch's view of the strength of Deutsche AM's processes. Company Profile The rating covers retail and institutional investment activities in Germany, comprising Deutsche Asset Management International GmbH and Deutsche Asset Management Investment GmbH, which provides advisory and management services for foreign segregated accounts. Deutsche AM had total AUM of approximately EUR715bn globally as of end-3Q16. RATING SENSITIVITIES A material deviation from Fitch's guidelines for any key rating drivers could cause the rating to be downgraded. Specifically, were the bank to sell Deutsche AM Fitch would assess the financial strength of the acquirer(s) and determine whether a rating action is warranted. Should Fitch conclude that the acquirer's financial strength is weaker than that of the bank and that the presence of a weaker shareholder is not mitigated by Deutsche AM's standalone financial strength then it would downgrade the rating. Another rating sensitivity is staff turnover and replacement capability: should Fitch determine that staff turnover levels deviate materially from historical levels for a sustained period of time, notably among senior investment professionals, and Deutsche AM is unable to promptly replace with either internal or external candidates then it may place the rating on Negative Watch while it evaluates the extent to which staff departures undermine its investment and operational capabilities. Contact: Primary Analyst Alastair Sewell, CFA Senior Director +44 20 3530 1147 Fitch Ratings Ltd 30 North Colonnade London E14 5GN Secondary Analyst Evangelia Gkeka Associate Director +44 20 3530 1829 Committee Chairperson Manuel Arrive, CFA Senior Director +33 1 44 29 91 77 Media Relations: Rose Connolly, London, Tel: +44 203 530 1741, Email: rose.connolly@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Asset Manager Rating Criteria (pub. 06 May 2014) here Additional Disclosures Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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