Despite continued volatility in the capital markets, including some market corrections, global trade tensions and some heightened uncertainty within the European Union, German asset manager DWS was able to deliver stable performance in a number of key metrics, with slight increases in revenues and profit before tax, an uptick in Assets under Management, an improved cost-income ratio, and a management fee margin that continues to be above medium term target, though slightly down versus the prior quarter.
Q2 2018 also saw the implementation of cost efficiency measures and continued investments into key growth initiatives, including digitalisation, sustainable investing and distribution.
Total adjusted revenues in Q2 2018 were €576m, 3% higher than in Q1 2018 (€559m) driven mainly by stronger performance fees. Adjusted profit before tax was €149m, up 7% quarter-on-quarter (€140m).
Assets under Management (AuM) increased by a total of €22bn compared to the last quarter, adding up to €687bn in Q2 2018, attributable to positive market conditions, €6bn, as well as currency effects, €13bn. Consolidation adjustments, primarily from the integration of Sal. Oppenheim’s asset management business, added €8bn.
The management fee margin of 30.7 basis points in Q2 2018 remained in line with our medium-term target of ≥30 basis points, though it was 0.3 basis points lower than in the previous quarter.
Market volatility, rooted in trade tensions and heightened uncertainty within the European Union, as well as the continued – while smaller – impact of the US tax reform led to net outflows in Q2 2018 of €4.9bn. While the Multi Asset and Strategic Quant segments within our Active Asset Management as well as Alternatives rebounded into positive net flows, fixed income saw outflows, mainly driven by a small number of institutional mandates. Active Equity faced some challenges from ongoing redemptions from retail funds, primarily in the DWS Top Dividend fund, which has shown signs of improvement in its recent performance. Their biggest Multi Asset fund, Concept Kaldemorgen, was able to stabilise its flows over the last month on the back of solid recent performance.
Passive Asset Management business continued to perform well in this environment, continuing the strong performance of the first quarter: During Q2 2018, DWS ranked second in ETP (exchange-traded funds and commodities) net inflows in the European market with a 18.5 percent flow market share. The business in the American region also moved into positive territory during Q2, marking a reversal from outflows in Q1 2018.
The adjusted Cost-Income Ratio (CIR) improved to 74.1% in Q2, 90 basis points lower than in Q1 2018. DWS is on track to meet their gross savings guidance for FY 2018 of 20 to 30% of the medium-term target.