DWS Group is looking to add to its already well-diversified portfolio and move into areas like U.S. real estate debt and European private credit as it puts its U.S. greenwashing allegations behind it.
Stefan Hoops, who became CEO of DWS Group after the June 2022 resignation of Asoka Woehrmann amid the greenwashing allegations, said in a Nov. 9 interview in Chicago they are happy to have U.S. matters behind them.
The SEC announced on Sept. 25 it had charged DWS Group a $19 million penalty for misstatements regarding the firm's ESG investments.
Before succeeding Woehrmann, Hoops had been the head of the corporate bank at Deutsche Bank since July 2019.
"There was exuberant marketing, no question about it," said Hoops. "And, in the beginning of us doing ESG investments, the processes, controls were probably, you know, immature. And that's something that we have addressed (and) changed. We have a very different setup now. And that gives us confidence to be able to do investments in the ESG space."
Aside from the SEC settlement in September, another notable event for DWS Group this year was the arrival in February of Paul Kelly, senior managing director at Blackstone and chief operating officer of its credit division, as global head of DWS Group's alternatives franchise.
"He loves what he found, but then two things he's building out," said Hoops. "One is real estate debt in the U.S., and the other is private credit in Europe."
Hoops said the idea is to be quite specific about new areas that they enter, so rather than go all-in on a global private credit strategy, the focus will remain in Europe where they have competitive strength.
"In terms of product capabilities, real estate debt U.S. and private credit Europe, both we will do organically," Hoops said. They have the personnel that can begin to build out those strategies.
Moving into other areas, however, will require acquisitions.
"Then, for infrastructure debt, if we did it, we would have to do it inorganically," Hoops said, "because it's just too different from the way that you approach infrastructure equity. Then we're looking at a couple of potential targets in Europe. But it, you know, just takes time, right?"
Hoops noted that many infrastructure debt funds have a limited history of five to seven years.
"You're willing to pay for the annuities created, but it's always difficult to pay somebody for growth that may or may not come," said Hoops.
Hoops also said adding new businesses also means adding new countries, and they are spending quite a bit of time looking at India.
He noted that the mutual fund business in India is tiny and highly concentrated among a small number of managers with a total of $500 billion in assets under management, and would be "impossible to break into, and we wouldn't even try."
However, Hoops said the country has what they call alternative investment funds targeting wealthier individuals, not "the alternative definition that we would follow for alternatives, real estate and whatever. But long/short equities and total return fixed income would fall into that segment."
As of Sept. 30, DWS Group had €860 billion in assets under management.
