German Portfolios Cloned for U.S. Market
Fraser, Katharine, American Banker
As other European banks establish or buy U.S. investment managers, Deutsche Bank is relying on a German import to serve the American investor market.
All but two of the bank's 10 Deutsche Funds are clones of portfolios managed by DWS, a Frankfurt-based subsidiary of Deutsche Bank that has $68 billion of assets under management and two million shareholders. The U.S. funds, which mark their first anniversary Oct. 31, have $375 million of assets under management.
By repackaging its German portfolios for the U.S. market, Deutsche Bank wants to demonstrate "our management ability as opposed to our acquisition capability," said Brian Lee, president of Deutsche Fund Management Inc. Rather than buy a U.S. fund business or build one from scratch, Deutsche Bank decided to go with "what we know is good quality," he said.
The bank is also determined to bounce back from an earlier, failed attempt to crack the U.S. retail investment market. Nine index funds it launched in 1995 - each one linked to a country's stock market - were liquidated last year after sales failed to take off. The funds, dubbed CountryBaskets, ran into tough competition from Morgan Stanley, which had a similar product line.
To offer the new portfolios, Deutsche Fund Management, New York, uses a patented hub-and-spoke accounting system from Signature Financial Group in Boston. The arrangement allows "spoke" funds to share a "hub" investment manager but to be sold with different fee structures.
Deutsche Fund Management is marketing the funds to U.S. retail investors through brokers, financial planners, and registered advisers.
The sales effort got a big boost in September 1997 when the Securities and Exchange Commission gave Deutsche Fund Management a green light to publicize in the United States track records established in another country. The Deutsche unit was the first investment company to receive such permission.
Deutsche elected to cite past performance of parent hubs in two of the new funds: Deutsche European Mid-Cap Fund and German Equity Fund, which are clones of the DWS Provesta and Investa, respectively. Provesta has a five- year annual return rate of 18.67%; Investa, 19.54%.
Two other funds are managed in New York, the Top 50 U.S. fund and the U.S. money market fund. The Top 50 U.S. fund, managed by James E. Moltz, chief investment officer of Deutsche Morgan Grenfell in New York, is one of four funds in the family that invest in a maximum of 50 stocks. The other funds have a global, Asian, or European focus.
Rounding out the menu are global bond, Japanese equity, and European bond funds.
In addition to pitching the funds to brokers and other intermediaries, Deutsche Bank is marketing them to corporations that want to add international investments to their 401(k) retirement plans. …