Deutsche Bank has carved out a new business called Global Investment Solutions that brings its hedge fund managed account platform, its retail structured products unit db-X Markets and alternative Ucits out of the asset management unit and into the investment bank, where they will sit alongside the dealer’s expanding risk premia operations.
The new division, which has around 150 employees, is headed by Tarun Nagpal, former head of alternatives and fund solutions at the bank.
GIS will operate along four product lines: quant solutions, multi-asset third-party products, multi-asset solutions and retail structured products.
“Bringing these businesses together unlocks enormous synergies,” said Nagpal. “This is all part of realignment across client lines and responds to what’s happening with our clients.”
He said a changing macro environment has left investors grappling with negative rates and rising idiosyncratic risk. Pension funds face new challenges associated with an ageing demographic, while insurers are being forced to reassess their investment choices under new Solvency II rules.
“The regulatory paradigm is changing dramatically and we’re finding insurers and other buyside clients need new solutions to key problems they are facing,” said Nagpal.
At the core of the new business is the bank’s US$13bn risk premia business, which continues to grow rapidly. Risk premia strategies, which see investors shift away from the asset class approach in favour of allocation to individual risk factors such as momentum, quality and value, has gained traction as part of a bid to generate more stable returns.
Deutsche Bank has established itself as market leader in the risk premia business, having worked on multi-billion dollar portfolio overhauls by early adopters including Danish pension fund PKA and the Second Swedish National Pension Fund.
Creation of the GIS unit is part of the bank’s wider strategic goals to improve capitalisation and efficiency while reducing complexity and risk.
The transfer of businesses from the Deutsche AM unit reverses a decision made four years ago. Those operations were moved out of the investment bank in 2012 with the creation of Deutsche Asset & Wealth Management, which was initially run by former DB rates head Michele Faissola.
DeAWM was split into separate asset and wealth businesses last year with Faissola’s departure. Wealth clients are now served by Deutsche Private Wealth Management in the bank’s private and business clients division.
The asset management arm is currently at the centre of speculation regarding a potential flotation as the bank aims to bolster its capital position.
