Fund products specializing in alternative investments offer higher margins.
(Photo: REUTERS)
Frankfurt The fund company DWS wants to offer investors more opportunities to invest in risky assets that finance transformation projects in the European Union in various forms. “DWS aims to raise up to 20 billion euros in capital through existing and new investment solutions by 2027,” according to a statement that was previously available to the Handelsblatt.
The fund subsidiary of Deutsche Bank is primarily concerned with mobilizing investor funds for risky investments, for which there is usually no financing from banks. The communication speaks of a “wide range of financing products”: “These will range from equity investments to mezzanine financing and venture capital,” it says.
Such financing predominantly falls into the area of alternative asset classes. These products are attractive to fund providers because they generate higher margins than money market funds, for example. The data provider Prequin, which specializes in these asset classes, forecasts average growth of 14.8 percent per year for the segment up to 2026.
DWS recently signaled that it wants to strengthen this area by hiring Blackstone manager Paul M. Kelly, who will have global responsibility for the alternatives area and report to DWS boss Stefan Hoops.
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The spectrum of possible investment goals, which DWS summarizes under the keyword “European transformation”, is broad. It ranges from “strategic areas, sectors and companies” that are involved in the green transformation of the economy, through infrastructure investments to real estate investments. According to reports, investments that reduce dependence on certain supply chains would also fall into the definition. The first investment solutions are planned for the coming year.
In the search for suitable investment properties, DWS wants to work closely with its parent company Deutsche Bank, among others. DWS supervisory board chairman Karl von Rohr, who is also deputy head of Deutsche Bank, outlined what this cooperation could look like: The transformation is being driven to a large extent by small and medium-sized companies that have no direct access to the capital markets or other sources of financing and depend on credit.
Deutsche Bank can close this gap: “We can finance projects through our established customer relationships in the corporate bank and the investment bank, offer direct access to the capital markets or work with our asset manager DWS to make this financing investable for our private and institutional customers”. said von Rohr.
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However, the constellation also harbors conflicts of interest: if DWS makes risk capital available to a Deutsche Bank customer, this possibly secures existing loans from Deutsche Bank to this customer. As a trustee, DWS must therefore take particular care to ensure that Deutsche Bank does not sell its problem customers to it.
In the Notice, Deutsche Bank and DWS do not address how such potential conflicts will be managed. In capital market circles it is only said that DWS is very aware of its fiduciary responsibility, has no “acceptance obligations” towards Deutsche Bank and will only launch funds that have sufficiently qualified staff to assess such investments.
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