Deutsche Bank AG announced Thursday that it is rebranding its U.S. mutual fund business, Scudder Investments, as part of a global asset management strategy focused on increasing distribution through advisers.
The asset management unit will spend $100 million to establish and position the DWS Scudder brand in the United States, reflecting the inclusion of the German bank's European mutual fund brand, DWS Investments. DWS Scudder will remain part of the bank's Deutsche Asset Management unit, which had $630 billion of assets under management at Dec. 31.
Axel Schwarzer, the head of DWS Scudder, said he hopes to bring to the United States the adviser-focused strategy that helped DWS develop $133.4 billion of assets under management in Europe and a 24% market share in Germany.
"We built DWS in Germany and Europe very successfully based on an innovative and performance-based culture," he said. "We built it in a very structured way to go through advisers. Third-party distribution was key to put DWS in the right position in Europe to be successful."
Scudder, which manages $80 billion of assets, sold its products through all distribution channels, Mr. Schwarzer said, but to "compete in a competitive market in the U.S. we had to decide which area to focus on. The trend in the U.S. is on advice."
As part of the initiative, DWS Scudder will reduce the number of funds and share classes available to U.S. customers in order to focus on products that are "most relevant to advisers," Mr. Schwarzer said. He said he does not know how many funds will be dropped.
Deutsche Bank will start a U.S. branding campaign Monday through print and broadcast media and direct mail. Mr. Schwarzer said the bank would spend $103.1 million to position DWS Scudder in the U.S. market.
Analysts said Deutsche's decision to rebrand was a clear step to deal with the asset management unit's remaining large problem, in the United States.
"DWS is very profitable in Germany and Europe, but Scudder has not performed well in the U.S. and in British markets," said Matthias Engelmayer, an analyst at Independent Research in Frankfurt who covers Deutsche Bank. "What you will see now is that DWS will take the lead in Deutsche's asset management business globally and Scudder will not have the power in that group."
Christopher Wheeler, an analyst at Bear, Stearns & Co. in London who covers Deutsche Bank, said its asset management business has been "hemorrhaging" assets in recent years, forcing it to sell its U.K. institutional asset management unit last year.
Mr. Schwarzer said any notion that Scudder has been hemorrhaging assets is an overstatement. Scudder's fund performance has been positive in the past 18 months, he said, and with a strategy focused on advisers, it could add assets from here.
"Disposing of the U.K. business helped Deutsche get its asset management unit back on track," Mr. Wheeler said, "and now the big focus is Scudder. They want to change their strategy from a geographic approach to a functional approach. They want to get back on track and scrub up the business and make it profitable again by bringing it closer to the vest."
Mr. Engelmayer agreed. "The U.S. is a lot like the U.K. It is a hard market [in which] to gain market share and to keep market share," he said. "Targets were not reached in the past. DWS has done well in every European country except for the U.K." However, Mr. Schwarzer said DWS has started to gain traction in the United Kingdom. Its problem was in the institutional business, he said, not retail mutual funds.
Scudder's asset management business has declined since Deutsche Bank bought it from the Swiss insurer Zurich Financial Services in September 2001 as part of the bank's effort to reach out to wealthy investors in the United States, Mr. Engelmayer said.
"We want to focus on being excellent in one discipline, through one channel," Mr. Schwarzer said. "We want to get the message out that we can succeed in the right channels the right way. I am convinced that we can succeed in the U.S. market."
The U.S. fund industry "is a scattered market," Mr. Schwarzer said, "and in a scattered market there are a lot of opportunities for the firm that offers the best service with the best products to grow."
Mr. Wheeler said he is not certain that the restructuring is over. Deutsche Bank is committed to improving its asset management business, he said, in order to develop its fee-based businesses to balance an investment banking business that produces 65% of its total revenue.
"I wouldn't be surprised to see them buy other parts, sell the parts they have, restructure, or close parts altogether," he said. "They want to do whatever they have to do to get better returns on the asset management business. They are making progress, but this is going to take time."
"We have time to grow this business," Mr. Schwarzer said. "We have milestones established for us over the next three to five years. We want to get the brand out and the message out, and over time we will gain speed and momentum. We don't expect billions of inflows immediately. We have targets in the medium term, and we are positive we will reach those goals."
