DWS Group GmbH & Co. KGaA (DWS) Earnings Call Transcript

Ladies and gentlemen, welcome to Q3 2026 results with investor and analyst conference call and live webcast. I'm Sargen, the Chorus Call operator. I would like to remind you that all participants will be in this only mode and the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] At this time, it's my pleasure to hand over to Oliver Flade. Please go ahead.

Thank you very much, operator, and good morning to everybody from Frankfurt. This is Oliver Flade from Investor Relations, and a warm welcome to everybody to our earnings call for the third quarter of 2026. Before we start, I would like to remind you that the upcoming Deutsche Bank analyst call will outline the asset management segment results, which have a different parameter basis to the DWS results we are presenting now. . I'm joined by Stefan Hoops, our CEO; and Markus Kobler, our CFO. Stefan will start with some opening as well as closing remarks, and Makcus will take you through the main part of the presentation. For the Q&A afterwards, please could you limit yourself to the two most important questions so that we can give as many people a chance to participate as possible. I would also like to remind you that the presentation may contain forward-looking statements, which may not develop as we currently expect. I therefore ask you to take note of the disclaimer and the precautionary warning on the forward-looking statements at the end of our materials. And with that, I will now pass on to Stefan.

Thank you, Oliver. Good morning, ladies and gentlemen, and welcome to our Q3 2026 earnings call. Greetings from Abu Dhabi, where I'm joining you from today. As many of you know, we consider ourselves paranoid optimists. We are confident in the direction of our business, but we are never complacent about where we stand or what still needs to improve. This mindset also shapes how we look at our third quarter. I could spend time dwelling on our record inflows, record assets under management and our best ever 9 months financial performance. But to be fair, we are operating in a growing market where almost everyone seems to post about new records. So today, rather than adding to this concept of records, I want to give you an honest assessment of what we like about the quarter we were not yet satisfied in what we're doing about it. Let me start with the numbers. Client momentum does look strong. Our total net flows were, in fact, our best ever. Total net flows reached EUR 30.9 billion, and assets under management rose to around EUR 1.22 trillion. We generated EUR 16.6 billion of long-term net flows, up from EUR 11.6 billion in the second quarter. Revenues amounted to EUR 784 million, with management fees increasing by 5% quarter-on-quarter. Total costs were EUR 459 million, down 2% quarter-on-quarter, reflecting our continued cost discipline. Overall, this translated into profit before tax of EUR 325 million, up 6% quarter-on-quarter, and earnings per share of EUR 1.15. This brings EPS to EUR 3.66 for the first 3 quarters of the year and moves us closer to our short-term target of 10% to 15% EPS growth per year. Those are solid numbers, but headline figures alone do not provide the full picture. The more relevant question is what sits behind these numbers and how much they reflect our own execution. We'd like to think of this as a more distinct assessment of where we stand and where we believe we need to do better. You may recall that at the beginning of the year, we mentioned continuing to grow revenues and improving the composition of our fees is our key challenges for this year. This meant that our recurring management fees needed to grow strongly to offset performance fees normalizing from last year's elevated level. With an increase of management fees by 14% year-on-year to EUR 745 million, we demonstrated the strength of our core business enabling us to grow revenues despite the as expected lower performance fee contribution. We are also encouraged by the continued strong investment performance of several of our flagship active equity strategies. This positions us well to capture future retail flows, particularly in the German market, where long-term investment performance remains a key driver of client demand. Turning to Xtrackers, we are pleased with the business's continued growth. While some may say that we simply benefited from a growing market, let me offer a different perspective. The European ETF market continues to grow and attract new providers. Yet despite this increasing competition, we have maintained our high market share. In an increasingly crowded market, holding your position is not a given, which we see as evidence of the strength of the Xtrackers platform. We are also pleased with our continued cost discipline. Our cost/income ratio improved by 1.9 percentage points quarter-on-quarter to 58.6%. And as I said last quarter, our controllable costs remained flat despite continued investment in our strategic growth initiatives. This means that we remain on a good path towards our 2027 goal of a cost/income ratio below 55%. Turning to areas where we are not yet satisfied, our Institutional and Alternatives businesses continue to punch below their weight. We have strong capabilities in both areas but we're not yet translating them into the scale and growth, we believe should be possible. We're working hard to change that, and the actions we took this quarter show how we are addressing both areas. From November, Deutsche Asset Management will become our new global brand identity. The new brand has immediate international recognition and clearly reflects what we want to be. the gateway to Europe for global investors. This is particularly important as we continue to expand our international and institutional business, while DWS, Xtrackers and [ Reef ] remain our established product brands that our clients know and trust. As an important step in strengthening our Alternatives platform, we announced the acquisition of [ Peak sight ] Capital Advisors earlier this month. [ Peak side ] manages EUR 1.7 billion and it expands our value add and opportunistic real estate capabilities, particularly in Germany and Central and Eastern Europe. Its founders and senior team will remain with the business, and we expect the transaction to close by the end of the year, subject to regulatory approvals. We will also support [ Frankfurt Leben's ] planned acquisition of [ Athora ], Germany. The transaction would create a growing insurance platform with around EUR 17 billion in assets and provide an opportunity to become the preferred partner for managing the group's alternative investments. The strategic collaboration is another concrete step towards strengthening both our institutional insurance business and expanding our presence in alternatives, an area where, as I said, we are not yet where we want to be. These are concrete steps in the right direction, but we know there's more work to do. After Markus has taken you through the financial results, I will come back to where we see further opportunities for growth and how we intend to capture them. But first, let me hand over to Markus in Frankfurt for a closer look at the numbers.

Thank you, Stefan, and I hope all is well in Abu Dhabi. And also, good morning from my side, ladies and gentlemen. Highlighted the headline figures tell only part of the story. Let me turn to our financial snapshot and walk you through the key drivers of our third quarter results and the opportunities we see across our business. . Total assets under management increased by 16% year-on-year and 3% quarter-on-quarter to EUR 1,221 million. Total revenues stood at EUR 784 million, representing a 4% increase year-on-year and 1% increase quarter-on-quarter. Total costs were EUR 459 million, up 6% year-on-year and down 2% quarter-on-quarter. This resulted in a cost-income ratio of 58.6% for the third quarter of 2026. Our net income reached EUR 230 million, up 5% year-on-year and down 3% quarter-on-quarter. The sequential decline reflects the positive one-off tax effect recorded in the second quarter. Our underlying operating performance improved with profit before tax increasing by 6% quarter-on-quarter. Moving to our client dynamics during Q3. The third quarter was characterized by strong underlying client activities across the platform. We generated total net flows of EUR 30.9 billion, including EUR 16.6 billion of long-term net flows, making another strong quarter for DWS. We are particularly encouraged by the breadth of these flows as client demand became more diversified. Looking at our client segments. Private Wealth contributed net flows of EUR 21.9 billion, continuing its strong development. extractors remains the key growth driver Digital distribution continue to scale as an important channel with cash solutions also gaining traction through digital platforms. Institutional clients contributed EUR 8.9 billion of net flows with momentum improving compared with previous quarters. Mandate wins across insurance clients and renewed demand for fixed income was partly offset by anticipated redemptions. The client sentiment remained constructive, supported by ongoing demand for liquidity and income-oriented solutions. Clients remain selective and decision-making cycle stayed extended. At the same time, discussions around strategic asset allocation increased. Turning to the regional picture. Germany, U.K. and EMEA reported net flows of EUR 18.2 billion. Private wealth remains the main source of growth with strong ETF momentum more than offsetting outflows in the institutional business. Americas contributed EUR 10.5 billion of net inflows. Flows were driven by institutional clients with particularly strong allocation to cash solutions alongside continued interest in passive and alternative strategies. APAC delivered net flows of EUR 2.2 billion, supported by sustained ETF net flows across both client segments and continued institutional commitments to alternative investment capabilities. Moving to the quarterly highlights within our active business. Active assets under management decreased to EUR 484 million, mainly reflecting adverse market movements in fixed income. Flow trends were mixed across asset classes. SQI maintained its momentum, generating net flows of EUR 1.1 billion. Flows remained primarily driven by retail-oriented products, including DWS for [ aged ] premium and step in global high conviction, while institutional demand benefited from several mandate wins across Europe and the U.S. Multi Asset generated net flows of EUR 0.2 billion. mandate wins across Europe were the main driver alongside continued demand for [ Concept Kaldemorgen ]. Fixed income reported net outflows of EUR 0.3 billion including EUR 1 billion of anticipated client redemptions. Excluding these redemptions, client demand was positive, particularly in private wealth where DWS floating rate notes attracted around EUR 0.9 billion of net inflows. Active equity net outflows amounted to EUR 1 billion. The underlying business remained resilient, with continued inflows into retail products in Germany, supported by good investment performance. This was more than offset by a specific institutional mandate redemption and moderate outflows in U.S. private wealth. Moving to our extractors business. Xtrackers has delivered another record quarter with net flows of EUR 15.8 billion and assets under management increasing to EUR 475 billion. One observation at the current growth pace, Xtrackers is approaching active in terms of assets under management. This demonstrates the successful scaling of the platform and increasingly balanced composition of our business. Turning to our flow picture. Starting with our European ETP business, which generated net flows of EUR 13 billion, Demand remained high for core portfolio building blocks. Clients allocated to broad equity exposures such as the S&P 500 world ex U.S. and emerging markets while demand for euro overnight products remain strong. Within mandates and Solutions, which generated solid inflows of EUR 1.4 billion from both new and existing mandates. This business line is complemented by ETF as a service, which is an important growth area for us. We continue to see interest from partners across both institutional and private wealth channels. Our current pipeline also reflects the opportunities we see from the upcoming implementation of the German pension reform. Our U.S. domiciled ETFs delivered another positive quarter with EUR 1.2 billion of inflows. Demand was primarily driven by high yield and ESG products. We continued to build our active ETF franchise. It still remains a relatively small part of the business with around EUR 3 billion of assets under management and EUR 0.2 billion of inflows. However, targeted distribution initiatives and a broader product range are supporting its development. We further expanded our digital distribution partnerships across EMEA, strengthening our access to European retail investors. The digital distribution channel is already a meaningful contribute to the flows and continues to grow in importance. We now have 46 partnerships and a strong pipeline to support further growth through the remainder of the year. At the same time, we defended our position as the #3 provider in the highly competitive European ETP market where we maintained a market share of 10.1%. Record inflows demonstrate the strength of the Xtrackers franchise and the relevance of our product range. Let me turn to our Q3 highlights for our Alternatives platform. In the third quarter, assets under management remained stable at EUR 105 billion the business generated net flows of EUR 0.8 billion. Looking at the asset classes in more detail. Infrastructure generated net flows of EUR 1.3 billion, reflecting strong demand across both equity and debt strategies. Fundraising for P4 is progressing well and continues to target the final close in Q4, On the debt side, we continue to see strong interest in our infrastructure debt opportunities fund franchise, particularly in the U.S., highlighting the breadth and attractiveness of our infrastructure debt offering. The interest rate environment continued to weigh on liquid real assets and real estate. Liquid real assets recorded net outflows of EUR 0.1 billion with outflows from our real estate products being partly offset by allocations into more defensive products, including precious metals. Real estate reported net outflows of EUR 0.4 billion, primarily driven by the [ Gomes ] funds. The interest rate environment continued to weigh on real estate transaction activity and investor demand. For one of the [ Gomes ] funds, [ Rumba ], we have decided to implement a temporary redemption restriction. While this was not a decision taken lightly, we believe this measure is necessary to support orderly portfolio management and to safeguard investors' interests over the longer term. At the same time, we are mindful of the impact this measure can have on investors. On the other hand, we continue to see attractive opportunities in selected parts of the market. Our value-add strategy remains well positioned supported by continued interest in our affordable housing focused direct real estate strategy. The recently announced [ Peak site ] acquisition is intended to strengthen our capabilities and broaden our offering in this market segment. In private credit, our focus remains on fundraising, and we expect the first closings and deployment of capital in the fourth quarter. With that, let me now move on to our revenue development. Total revenues reached EUR 784 million, up 4% year-on-year and up 1% quarter-on-quarter. Management fees increased to EUR 745 million, representing a 5% increase quarter-on-quarter and a 14% increase year-on-year, mainly driven by higher average assets under management and strong organic growth. Performance and transaction fees amounted to EUR 7 million. This reflects the anticipated cyclicality as well as lower transaction volumes in real estate. Let me reiterate some key statements around our performance fees. For 2026, we continue to expect performance fees at the upper end of our 4% to 8% guidance. The main fourth quarter contribution is expected from [ Concept Kaldemorgen ]. As of Q3, [ Concept Kaldemorgen ] had accrued approximately EUR 50 million in performance fees. For 2027, we expect performance fees to be at the low to mid end of our guidance range. This reflects the maturity profile of our infrastructure fund cycle, including the last asset sale of PFI. Other revenues contributed EUR 32 million. The quarter-on-quarter decline mainly reflects the elevated harvest contribution recorded in the second quarter. While share price development remained positive in Q3, the increase was less pronounced than in the strong second quarter, leading to a lower contribution from the share price hedge. Before moving to costs, let me highlight a crucial development in our revenue mix. In 2025, Total revenues benefited from record performance fees and exceptionally strong other revenues as contributions from our infrastructure fund family and fair value of guarantees are not expected to repeat at the same level in 2026 and 2027. Growth in recurring management fees becomes increasingly important. We delivered management fee growth of 5% quarter-on-quarter and 14% year-on-year, supported by strong organic growth and market depreciation. This growth helped us further expand our overall revenue base and demonstrates our ability to drive earnings growth from more predictable revenue sources and this supports our ambition to deliver annual EPS growth of 10% to 15%. Let me move on to our cost development. In the third quarter, total costs were EUR 459 million, down 2% quarter-on-quarter and up 6% year-on-year. Compensation and benefits decreased to EUR 229 million, down 1% quarter-on-quarter, mainly reflecting lower share price related retention costs. General and administrative expenses were EUR 230 million, down 2% quarter-on-quarter. I am particularly pleased that our general and administrative expenses declined despite higher volume-related costs. This reflects our ongoing efforts to proactively manage disciplined based costs. At the same time, these efforts helped fund investments in our growth areas while maintaining strong cost discipline and efficiency. This supports our expectation that the full year 2026 cost base will remain broadly in line with 2025. Our cost income ratio improved to 58.6% in Q3 and and amounted to 57.7% for the first 9 months. Therefore, we continue to target the cost-income ratio between 55% and 57% in 2026. With that, let me hand over to Stefan.

Thank you, Markus. Let me provide with an update on one of our core growth levers and certainly the one most within our own control. Our partnership with Deutsche Bank is already a significant source of value creation. Today, we collaborate successfully across a range of areas, including the Private Bank's role as our #1 distribution partner and joint product initiatives related to Germany's pension reform agenda. . At the same time, we should be candid. For a number of years, much of our focus was on establishing DWS as a stand-alone asset manager. As a result, we have not yet fully leveraged the unique strengths that come from being part of Deutsche Bank Group. Looking ahead, we have an opportunity to combine the strength of a leading European asset manager with the capabilities of one of Europe's premier banking franchises. We have all the key ingredients in place, a leading European asset manager a leading European corporate bank with a global network, the leading European [ FICC ] franchise globally and the largest global private bank in the Eurozone. Taken together, these strengths provide a powerful foundation to deepen collaboration, close capability gaps and unlock additional growth opportunities across Deutsche Bank Group and specifically for DWS. We are already actively progressing on several opportunities. Firstly, creating a more integrated institutional client coverage model combining DWS and Deutsche Bank capabilities to deliver a coordinated approach for key client segments such as insurance companies, pension funds and sovereign wealth funds. Second is building a Deutsche Bank private markets hub, bringing together origination capabilities, investment expertise and distribution strength across the group to provide [indiscernible] with enhanced access to private market opportunities while improving the scale and reach of our Alternatives platform. This is where we are most advanced and are expecting our first fund closings in Q4. A third opportunity is the creation of a portfolio solutions platform within DWS. By bringing together portfolio construction, product capabilities and investment solutions from across DWS and the private bank, we are building a single investment and product engine for Deutsche Bank Group while enabling the private bank to fully focus on client relationships, advisory and distribution. We are also exploring a centralized fiduciary overlay solutions capability, bringing together expertise from DWS, the private bank and the [ FICC ] franchise to deliver institutional-grade fiduciary overlay solutions for clients. Collectively, these initiatives have the potential to expand our addressable market enhance our product offering and strengthen our competitive positioning across key client segments. By broadening our solutions capabilities, providing institutional clients a more comprehensive product offering and creating a much closer link between the Private Bank and DWS, we can generate additional client flows, support revenue growth and create long-term value for both DWS and Deutsche Bank. Importantly, the opportunity today is different from the period prior to the IPO. The increasing relevance of private markets, portfolio solutions and overlay management has made the benefits of closer collaboration between asset management and banking more compelling than in the past. At the same time, our history demonstrates that combining capabilities across Deutsche Bank and Asset Management can create substantial value. Example is Xtrackers, which originated within Deutsche Bank's equities franchise before evolving into one of Europe's leading ETF platforms. The opportunity is significant. Deutsche Bank already possesses a number of highly competitive businesses. By connecting these strengths more closely, we can create a powerful growth flywheel that benefits clients, DWS and Deutsche Bank alike. To conclude, the key message from the third quarter is straightforward. Our record total net flows, growing management fees and continued cost discipline demonstrate the strength and momentum of our core business. At the same time, we see many opportunities for additional growth. One of the most significant is the closer connection between DWS and Deutsche Bank. As paranoid optimists, we remain fully focused on creating long-term value for clients and shareholders alike. Thank you. We're now happy to take your questions.

Thank you very much, Stefan. And operator, we are ready for Q&A now. May I please remind everybody to limit yourself to 2 questions, please? Thank you very much.

[Operator Instructions] And you have the first question coming from with Lam from Bank of America.

I've got two of them. Firstly, can you give us your latest thoughts on the German pension reform opportunity, especially now that we've seen the pricing of new pension -- new private pension products at the platforms where fees are seem to be pretty low? So how should we think about the potential revenue contribution from this? Second question is on passives. Stefan, you mentioned that flows have picked up dramatically over the last couple of quarters, which is showing strong momentum. Like what have you done differently? Have there been any changes on the sales process, teams, use of rebates or discounts? So what's changed since the start of the year?

Perfect. Thank you, Hubert. Hopefully, everyone can probably hear as you've heard Abu Dhabi. So I see a long lytic the market way for me that's hopefully going to be okay. On your two questions, so starting with the [ Pintreform.n ] our view hasn't changed that it's going to be substantial from a volume perspective. but less I'm clear how this is going to translate into revenues in the first couple of years. So what you will have seen is that for the standard offering, where you simply have two funds, there's really a race to the bottom. So that's where the new brokers, the platforms are fully focused. People have been offering it at 0 fees, at least in the beginning of the first few years. And I would imagine that this is going to lead to substantial inflows and potentially revenues down the line, but not in the first [ 5 ] years. Now there is also what people call comfort or more advisory related to insurance [ rent ]. Not everyone just wants to have ETF. But there's plenty of people that also want to have the insurance riper. And we will also contribute to that market. You may have seen that we just expanded our partnership with Zurich until 2042, so for quite some time. And we will also be a product provider for Zurich and other insurance companies. So I think that we will be contributing quite broadly to the whole pension really across channels and across types of products. But unfortunately, it's too early to really be specific on revenue contribution. Again, I'm worried that this is not worth. I expect this to be substantial from flow, but not initially substantial from a revenue perspective. Now in [ taxes ], a couple of things, and thank you for raising our improved flows. We've actually just grown with the market in Q3. So I just want to be honest fact-based. But a couple of observations that I found interesting. So when you look at the market, the market has been growing substantially. So last year, we had, I think, about EUR 330 billion in the European users -- market. So that's can EUR 30 billion -- just under EUR 30 billion a month. And this year, it has been EUR 40 million to EUR 50 million a month. So it's a substantially broad market. At the same time, you have a bunch of new entrants. So year-to-date, it seems that we have about 25 new providers. So it's a great market growth better than the past, but also more competition. Now when you look at the like top 7, so those providers with more than 5% of market share, our share has dropped from about 82% to 80%. So that means that there's a 2%, let's say, leakage or a flow from the larger providers to some of the new entrants. Now when you look at within the top 7, there are some -- let me just mention the 1 that's not publicly traded Vanguard, which is phenomenal in FTSE oil world, which has been a big success last couple of months. So within the top 7, there's always a little bit of, I wouldn't call it rentees, but company-specific strength that then contributed to relative flows. So that's just market backlog. Now when you look at our performance, we grew with market in Q3 much better than market in July, sort of in line with the market in [ bol ] a bit slower in September. And some of that is simply like the what respective campaigns work on better than others. In some cases, it was improvement, some fee cuts that we spoke about last quarter that played out than early Q3. So it's a variety of things. But I think as I said in my prepared remarks, I'm actually quite pleased that we've been able to keep our market share in a massively growing market, meaning that the new market entrants are sort of growing at the expense of other folks. And so therefore, quite with our position and full confidence in the team continuing to deliver.

The next question comes from Oliver Caritas from Goldman Sachs.

And I've got two questions, please. So I guess first question, just broadly on capital allocation, including the potential return of excess capital through the extraordinary dividend next year. Just how are you thinking about that? Also alongside any opportunities for inorganic growth here, any kind of larger opportunities that you're thinking about in this context? And then the second question ready to pick up on the comment that you made Markus and in your prepared remarks, you talked about how Cash Solutions were gaining traction in digital platforms. I think this is a really interesting development. Broadly in the market, I think there's quite a strong debate at the moment as to just the future of how retail investors are behaving with rising rates, but also as financial literacy improve with AI, what they're going to do with some of their deposits and invested balances. So could you maybe -- I don't know if you've got any more color around kind of what particular cash solutions that you're seeing kind of a pickup in traction with -- I noticed the flows strong in 3Q. But just any more color on that remark that you made would be very helpful?

Perfect. Thank you, Oliver. I suspect you're asking the first question on behalf of the excellent banker at Goldman Sachs that are showing interesting opportunities. However, so far, nothing which is, let's say, transformative and therefore, we deplete our excess capital. . I think you've seen us do pretty much exactly what we've outlined, meaning is there capabilities that we think would be able to fit and would be credible for us to have them. And we cannot do it organically, then we are adding it inorganically. So there was the acquisition of [ Peak side ]. If anyone has questions, happily want to detail, you would potentially see us do similar things will we add capabilities. But these are acquisitions, which don't also bring the bank. I think when it comes to transformative, I just don't see massive consolidation in the market. I mean this is speculating but I don't see anything substantial. And it seems that everyone of a certain size would potentially be willing to combine but wouldn't want to sell. So I cannot see any insurance companies selling. I cannot see any bank selling, meaning when it comes to what potentially transformative things. I don't think that it would actually cost capital would just be some sort of other structure, which is why, I think, so far, we remain committed to potentially have an extraordinary dividend unless we see better use over the next few months. Now secondly, on cash. That is an interesting question that we spent quite some time over the last couple of weeks. I will say that there is probably three key observations. Number one, I think that we will have structurally higher [ inflows ] and cash balances because folks that obviously would have put deposits into banks and are leading deposits with new brokers and platforms, but they don't just keep it on their balance sheet. They put it into money market funds because there's sort of nothing else they can do with it, right, because they're not in the lending business. So therefore, a portion of [ nominal ] deposits were folks think, well, I'm leading the product with somebody is now showing up in money market funds, and that's structurally higher. And I think that this will continue. Second, there are certain aspects which I would say are cyclical. Right now, the yield is actually quite attractive. Therefore, I think people -- if there is a choice between buying fixed income and just putting it to money market fund, given the curve isn't that steep, it is cyclically interesting, which I think is also going to prevail for some time. And then thirdly, we will also have people that are just parking it waiting to deploy for which you probably need some market rent or some of the pieces and some of the more problematic parts of this were plant, which I think you've always said maybe more now because there's some nervousness than in the past. But I testing the structural and cyclical increases because of what just described, will lead to hire money market balances for us in the future. By the way, it's a great scale in the [ FSA 5 ] basis points. So obviously, most of the lowest part of our product offering but highly scalable. So the marginal cost income ratio is very close to zero, which is why we still view it as a good business, and we'll try to grow as much as we can.

The next question comes from Jacques Henry Goa from Kepler Cheuvreux.

I had many questions, but I'll limit myself to two. It's the -- I get the message on the flows, and it's indeed remarkable, but it's the second quarter in a row, you're missing on earnings versus consensus really. And obviously, the market was not exactly there on your 10%, 15% EPS growth. it's unlikely it's going to be there further on the back of the results you published this morning. Is it really the flows and the sheer volume of assets, making you confident that you will basically get there essentially? Or if you can run you why you really feel that comfortable so that you have Slide 10 to show for it? First question. And the second question, I was actually quite surprised and actually pleased because they are great professional people about your love letter to your parent company. And hearing you, Stefan, I was really wondering whether it made sense to keep DWS or Deutsche Asset Management as a stand-alone listed company, considering also the fact that the, I would say, the free float is also one of the big impediments when you want to broke the stock. So I know I might as well ask at your parents, but is there a very strong pitch to keep DWS as a stand-alone listed entity?

Thank you, Jacques. I think I will spend more time answering the first and then the second question for obvious reasons. So look, I think everyone likes to read headlines, which are great of you beat consensus. So obviously, that's preferred to missing consensus headlines. However, to some extent, when you look at what we can control, what we cannot control, I'm quite pleased with us delivering on the stuff we can control, right? So on cost, we have absolute cost discipline. I think we can reconfirm that we expect costs to be flat to last year, which I don't think you guys are leading us yet, but you will see it is 3 months, right? So on cost, we hit consensus and I'm more optimistic and consensus for the full year. or management fees, which we can solve control because that's momentum and inflows. Obviously, there's some market appreciation. But that's also something which we view as controllable we are paying on consensus and quite pleased with the growth, and I'll come back to how we look at it in a second. Now the things which are more difficult to control are other revenues because it includes stuff like accounting items for our restart product hedges, which are exposed to swap spread. And it's very difficult for us to influence the spread between third-year wounds and tier swaps. So there's some randomness in the other income. And performance fees, I think we've been consistent in saying that this year, we would expect substantial performance fees and but not in 2 and 3. And I think you saw that low teens is very low. It was still higher than what we ultimately delivered. But I think when you look at where we missed and where we hit what we promised, hopefully, you would agree that everything in our control and the more substantial numbers, meaning management fees and costs, we sort of have done exactly what we've told you. Now on EPS, I don't know on what level of detail I should go at this point in time. So maybe I will just leave it with what I just said, if one of you has more specific questions on our outlook for next year, and please ask the question, but I don't want to be accused also like while I have time by taking a lot of time to answer questions. So if there's a question on next year, then then please ask us but it would be minus on the missed earnings or of headlines. Now the second question, it's my 17th earnings call, and I don't want it to be my last. So therefore, this is obviously a question which Deutsche Bank would have to answer if there's any answer. There's nothing at all that would lead me to believe that we will change our status as a listed company. But that's probably all I can say. Otherwise, it's a question for the majority have. Thanks,

The next question comes from Arnaud Giblat from BNP Paribas.

So two questions, please. Firstly, if we focus on management fees, there's the 20 to 30 basis points reduction quarter-on-quarter. I'm just wondering, I mean, clearly, there's a bit of a mix shift. But even if I look at constant constant mix. There seems to be a bit of a decline within categories. So I'm just wondering if there are specific categories to call out here where you're seeing a bit of margin pressure. Second question is, you've highlighted during the call your capital raising efforts happening in private credit. Just any more color you can give around that in terms of like fund launches and then potential sizing.

Thanks, Arnaud. So the reduction in average margin is entirely because of flowing. So if you dig in, so if you actually go through asset classes, then in equities, fixed income and alternatives, the margin is flat, right? There's been no dilution. When you look at equities, for example, we've had EUR 600 million of inflows year-to-date on top dividend, one of our highest fee product. And also when you look at equity flows in Q3, we had outflows in lower margin and in force higher margin. So therefore, for equities, fixed income alternatives, it's completely flat. For multi-asset, and SQI, we've actually seen an increase in average margin because we've had some outflows in lower margin institutional mandates. But for example, they have seen EUR 400 million of inflows year-to-date into concept multi-asset SQI up in average margin. [indiscernible] is flattish by between 15 and 16 basis points. But therefore, when you look at our long-term and the average fee is solely because of the dilution of strong extra inflows but not because of any market reduction in the other asset parts. And then I just made a comment about more inflows in money markets. That is obviously they're leading to the overall than when you look at total assets. But again, we don't see, at this point in time, margin pressure with the exception of some ETF asset class, which we covered last quarter, but otherwise, I don't see margin pressure in the other underlying asset classes.

Just since you bring up money market, I'm a bit surprised. I mean, when I look at the mix in regions, it seems like a lot of the money market flows from German retail. I would have expected that to be at a slightly higher margin actually. And actually, if you could also talk about the fundraising efforts in private credit. .

Yes. Sorry, I just wanted to see if there was official in the first one. Yes. I mean, you will always see some mix in between the regions. But really, when you break it down by asset class, we didn't see -- I mean where we see outflows is fortunately in the U.S. retail, but this is not fee or margin related, but just because of shift from active into pesos. But again, for the underlying asset classes, very little compression is really more the dilution because of inflows into extractors and cash. Now for private credit. We expect the closings of 2 funds in -- one is a direct lending collaboration with Deutsche Bank Investment Bank, our European Lending Fund II, and that's looking very promising. So we expect first close in November. And then something which I'm actually quite excited about, which is a growth debt fund, which is German companies, German mid-caps that have developed like first the kind technology and it scaled enough that after Series A and B, they now need proper growth capital. So we're setting up a fund in collaboration with KFW, where we're lending, essentially growth capital, so mezzanine financing with warrants, to German mid-caps that Germany considers the champions of tomorrow. And it is in collaboration with Deutsche Bank, Corporate Banking and Investment Bank. So first [ two ]. On asset-based finance, that's something which I would expect the first close maybe for more Q2 than Q1, so -- but before the summer next year. So overall, the thesis, which all took us some time, right, collaborate Deutsche and getting people over having agreements do fundraising and so on. took a while, but it looks promising part of the reason why we're here in Abu Dhabi is because of a bunch of meetings on these funds and P4 and other things. And feedback is quite promising because people are still optimistic on lease Germany and parts of Continental Europe and feel that we have pretty differentiating origination capabilities in that region.

The next question comes from Pierre Chedeville from CIC.

Yes. First question, ask for asked by a French analyst and banking industry. We can see that French banks and particularly create [ Agricole ] and BNP are very aggressive regarding on markets in the future and particularly on the savings side, we have say that there are a lot of opportunities in Germany to capture some savings which are unemployed in this market. And I wanted to know, how do you see this new competition? And if you feel that it could be something that you have to consider or if it's just anecdotical? First question. Second question is, I would like to come back a little bit on [ pigside ], even if you have already talking a little bit. But we can be quite surprised by your increase in the real estate activity considering the global environment on this. And arguably, we could have seen that you wanted to develop in private debt, which is a little bit more private equity, which is probably also more challenging, but we can see that we have a jumbo funds that are working very well, I think, of invest for France index, for instance, or on that are very successful. So I wanted to know a little bit better what is your reason why increasing your share in real estate business for the current times.

Thank you, Pierre. So I did have high school French. I have always liked France. And therefore, I think we in Germany, we welcome any French competitors doing business in Germany. So like the more products, the better for the German client base. Look, I would say that BNP has been in Germany for a long period of time. I won't be as a strong spending in Germany, if you refer to the as management arms of both. So therefore, I don't think that they have just woken up to the opportunity set in Germany. But there are some other foreigners that are new to the market. I don't see it applies to the 2 of them, and they are formidable competitors just like we are trying to compete with them in France, they do intraop in Germany, and I think that's good for the German funding...

Stefan, if I may. I was not talking about Amundi or of BNP AM. I was talking about the banks and not in the asset management business, but in the term deposit business. And I wanted to know if the competition from term deposit business in which they want to develop is something that you see I was not talking about the competition from other asset managers. But from banks trying to capture term deposits

Understood. Okay, now I get it. And is to retain, I suspect, because both -- I mean, DNP has a really strong corporate bank where they obviously also compete for term deposits. Look, I'm not quite as familiar with essentially how private banks think about it. What I noticed is that people seem more worried about [ Chase ] market interest, what the new brokers are doing. I think the French are viewed as pretty sensible experienced folks that are not trying to buy market share with like an unprofitable offering. But otherwise, my suggestion would be clear that we get back to you via Investor Relations after having spoken to the right focus on is quite big. I want to go on record with heavy like big picture, knowledge only. On [ peak side ], look, when we look at the real estate market, it is quite interesting because you actually have quite strong fundamentals meaning you have big demand for West overall and very little new supply for a variety of reasons. But then at the same time, it is a complete bias market, which we suffered from in our open-ended retail funds. -- but at the same time we're benefiting from for institutional mandates. But on an anecdote or 1 point in a case point is that when you look at our outflows in real estate they entirely because of the open and the retail funds we've actually seen inflows in some institutional lending. Now when you look at passive specifically, they are a great addition. They are very complementary skills. We didn't have a value-add and like opportunistic capabilities to the same extent they have. So there's great complement for our European real estate platform. They're really good in Germany in Central East. We've known the following partners for a while, they've been doing for 20 years. And I think, as I mentioned in prior calls, for a few quarters, we assessed how we can build those capabilities organically, hiring teams, buying somebody. But in the end, we find the market so attractive. -- that we really want to compete for the playoffs from day 1, which you can only do if you buy somebody and benefit from their track record. And that's why we've done it. Again, we like the fundamentals in the market. And I think it's a great buying opportunity for specifically institutional clients that are putting money to work.