Asset Management Kevin Parker Head of Asset Management London, 5-6 October 2006
Contents 1 2 3 4 Record results Our business today Mega Trends Key takeaways Investor Relations 10/06 2
Asset Management on track to generate higher results in 2006 for the second straight year Asset Management, underlying pre-tax profit 51% 68% 2004 2005 1H2005 1H2006 Investor Relations 10/06 3
The 2005/2006 record results occurred during a period of unprecedented change in the business model Investor Relations 10/06 4
Management has successfully executed the bulk of its restructuring plan Record revenues since 2004 Underlying cost / income ratio 24% (8)ppt (8)ppt 11% 2004 2005 1H2005 1H2006 2004 2005 1H2005 1H2006 Reduced headcount Stabilized asset flows At period end 4,456 (15)% 3,783 In EUR bn (6) 1 2004 2005 (42) 2004 2005 1H2006 Investor Relations 10/06 5
Contents 1 2 3 4 Record results Our business today Mega Trends Key takeaways Investor Relations 10/06 6
We are organized around four global business lines Retail Alternatives Insurance Institutional Clients: Retail Institutional Products: Mutual Funds Structured Products Clients: Institutional High Net Worth Products: Real Estate Infrastructure Hedge Fund of Funds Private Equity Fund of Funds Clients: General account assets of 130 insurance companies worldwide Products: Fixed Income Alternatives Quant Clients: Pension Funds Endowments Corporates Products: Equity Fixed Income Quant Specialty FI Cash 223 55 109 131 Invested assets as of 30 June 2006, in EUR bn Total: 518 Note: Invested assets have been restated to properly reflect movement of RREEF and Insurance funds between channels Investor Relations 10/06 7
We are very diversified by asset class Invested assets by class, 30 June 2006 Total: EUR 518 bn SFI (1) IGFI (2), (3) Structured / higher fee 48% Equity (3) 28% 6% 15% 21% Insurance Lower fee 52% Quant 2% Structured 1% 10% 16% (1) Specialty Fixed Income (2) Investment Grade Fixed Income (3) Multi Asset split 50/50 between Equity and IGFI Note: Figures may not add up due to rounding Investor Relations 10/06 8 Real Estate 1% Hedge Funds Cash
Our higher margin businesses drive 81% of revenues Underlying revenues, FY2005 Invested assets, 31 Dec 2005 In EUR m Total*: EUR 2,497 m In EUR bn Total: EUR 535 bn Retail 1,253 224 59 bps 81% Alternatives 775 57 144 bps Insurance 63 120 5 bps Institutional 222 135 17 bps Return on average assets * Including other revenues and revenues from discontinued businesses of EUR 184 m Note: All data except total underlying revenues exclude discontinued businesses; revenues have been restated to properly reflect results of discontinued, EAFE (Europe, Australasia, and Far East) and Insurance businesses; invested assets have been restated to properly reflect movement of RREEF and Insurance funds between channels Investor Relations 10/06 9 bps
DWS is positioned to become a Top 5 global player Retail Largest global mutual fund companies Invested assets (1), in EUR bn Top 5 924 770 687 Gap 40 bn 300 276 258 236 Fidelity Vanguard Capital JPMorgan Allianz Franklin Templeton DWS (2) (1) All data as of 30 June 2006; excluding FoFs (2) DWS number according to FERI data, which include other DB fund products Source: Strategic Insight, FERI FMI, ITA, AAM Investor Relations 10/06 10
The DWS franchise is driven by consistent outperformance Retail S&P star distribution of DWS Europe equity funds As of 30 June 2006 DWS Market (S&P funds RFS Germany ex DWS) 25.0% 20.6% 21.1% 21.0% 25.0% 25.3% 19.5% 24.2% 9.4% 8.8% S&P best performing mutual fund company in Germany 12 years in a row Investor Relations 10/06 11
The DWS Scudder rebuilding project is on track Retail Investment management Product management Marketing Sales & distribution Client services Enhance performance; more effectively market investment capabilities Streamline funds and share classes; launch new products Rebranding Refocus on intermediary channels and grow retirement mid-tolarge plans Upgrade / Streamline service offering Current status Completed On track Off track Investor Relations 10/06 12
Asset Management ranks #1 in alternatives by AuM Alternatives Alternative assets under management Includes Real Estate, Private Equity, HFoF, Single Mgr HF and commodity assets, in EUR bn 56.1 55.8 50.0 49.4 47.0 42.9 41.2 36.5 32.4 30.9 DB UBS GAM JPM Man ING Goldman Sachs Hamilton Lane Credit Suisse Morley AXA... and is investing in growing the business Developing private equity fund of funds business Exploring ways to enhance hedge fund of funds business Expanding infrastructure business already gathering assets Note: Assets as of 31 December 2005; assumes exchange rate as of 31 December 2005: $1 = EUR 0.84441 Source: Compendium of Watson Wyatt/Global Investor, InvestHedge, and Institutional Investor Alpha Survey DB figure incl. Real Estate (EUR 52.5 bn) and HFoF (EUR 3.6 bn) businesses only; methodology detailed in supporting information section Investor Relations 10/06 13
RREEF is the #1 global manager of real estate assets Alternatives Assets as of 31 December 2005, in EUR bn Real estate assets under management 60 #1 50 40 30 20 10 RREEF ING Real Estate Morgan Stanley Morley Fund Management AXA REIM Prologis IXIS AEW (formerly CDC IXIS) UBS Global Asset Management LaSalle Investment Management Hines Pramerica Real Estate Investors JP Morgan Henderson Global Investors IVG Immobilien Standard Life Source: Europroperty / INREV, May 2006 Investor Relations 10/06 14
Our Alternatives platform has over 800 professionals in 20 locations around the world Alternatives San Francisco Dallas Chicago New York London Paris Madrid Frankfurt Munich Milan Seoul Shanghai Tokyo Mexico City Mumbai Bangkok Hong Kong Manila Sydney Melbourne Investor Relations 10/06 15
Asset Management is the world s largest manager of non-affiliated insurance assets Insurance Assets as of 31 December 2005, in EUR bn Top managers of non-affiliated insurance assets 120 77 45 42 38 36 21 19 18 13 DeAM BlackRock Conning Wellington General Re GE Western AM Evergreen Alliance Bernstein Standish Mellon Note: Assumes exchange rate as of 31 December 2005: $1 = EUR 0.84441 Non-affiliated General Account Assets; sub-advised and Affiliated Accounts excluded Source: Insurance Asset Manager, Year-end Survey 2005 Investor Relations 10/06 16
The Institutional business is concentrated in Germany and underscale everywhere else Institutional As of 30 June 2006 Assets by region (ex cash) Germany 66% Asia 8% Americas 15% Rest of Europe 11% Global business is loss making Subscale everywhere outside Germany High dependency on a few major clients Low fee asset mix Historically poor consultant relations Total assets: EUR 95 bn Investor Relations 10/06 17
Contents 1 2 3 4 Record results Our business today Mega Trends Key takeaways Investor Relations 10/06 18
We believe five Mega Trends are shaping the industry 1 Institutionalization of the alternatives business 2 Insurance outsourcing 3 New packaging and innovation (separation of Alpha / Beta) 4 Growth of the pension market in Europe 5 Wealth creation in emerging markets Investor Relations 10/06 19
Institutional demand for alternatives is transforming the industry 1 Institutionalization of the alternatives business Expected asset allocation changes over next three years % of respondents that expect to increase / decrease their allocations Expect to increase 41% 34% 32% 30% Expect to decrease 37% 19% 21% 15% 11% 12% 23% 24% 11% 4% 2% 6% 4% 4% European equities - active European equities - passive North American equities Japanese equities Emerging market equities Other int'l equities Real estate Private Equity Hedge funds Note: Based on interviews of large financial institutions in Europe (including corporate and public pension plans, insurance, financial institutions and foundations / endowments / churches); 2005 data collected between April and May of 2005 Source: Greenwich Associates Investor Relations 10/06 20
We are positioning Asset Management to capture this trend 1 Institutionalization of the alternatives business Real Estate RREEF is globalizing and expanding product depth and breadth (retail) Infrastructure Capitalizing on our growing momentum Private Equity Developing private equity fund of fund business Hedge Funds Exploring growth options Investor Relations 10/06 21
Insurance outsourcing will be a multi-trillion Euro business dominated by a few huge scale players 2 Insurance outsourcing Only ~5% of insurance assets are currently outsourced* In USD bn 11,000 Drivers of outsourcing trends Need for specialized expertise Challenging investment environment Increased industry regulation Competitive pressures Industry consolidation Cost / expense management 500 Think of IT outsourcing circa 1990... * Insurance Asset Manager (Year-End Survey 2005) Investor Relations 10/06 22
Asset Management is in pole position to capture the growth in this business 2 Insurance outsourcing World s largest insurance asset manager today 90 dedicated insurance professionals Global research platform Sophisticated fixed income products DeAM positioning Manufacturing / service capabilities in all major markets We are the industry s natural consolidator Investor Relations 10/06 23
New packaging and innovation will drive future sales 3 New packaging and innovation In Germany, the certificates market is expected to grow at a 16% CAGR through 2010, compared with 9% for the mutual fund industry AuM MFs, in EUR bn 800 600 400 200 491 110 2006E MFs 9% CAGR Certificates 16% CAGR 693 200 2010P 250 150 50 AuM Certificates, in EUR bn In the U.S., the ETF market is projected to grow almost 3x as fast as the long-term MF market AuM MFs, in EUR bn 8,000 6,000 4,000 2,000 MFs 10% CAGR 7,151 5,343 672 314 ETFs 29% CAGR 800 600 400 200 AuM ETFs, in EUR bn 2006E 2009P Note: Based on internal estimates; MF = Mutual Fund; ETF = Exchange Traded Fund Investor Relations 10/06 24
Innovation is core to the DWS value proposition 3 New packaging and innovation DWS FlexPension 2003 DWS Top Dividende 2003 DWS Vola Strategy 2002 DWS Invest SICAV 2002 2001 DWS TopRente 2000 Exchange traded funds 2000 DWS-CBO 2000 Europe Convergence funds 1999 DWS BestSelect 1997 DWS Investmentrente (2) 1995 DWS Top 50 funds 1994 Typ O-Fonds (1) 1992 Tax optimized funds 1991 Concept funds 1988 Money market related funds 1983 Sector funds Development of the product range DWS FlexProfit 2006 DWS Brazil 2006 DWS Bonuszertifikate 2006 DWS ZukunftsPlan 2005 DWS Invest BRIC Plus 2005 DWS Invest Commodity Plus 2005 DWS Hedge Invest Dynamic 2004 (1) No-load funds (2) Innovative approach for private pension plans based on equity funds; with market oriented switch mechanism from equity to bond funds Investor Relations 10/06 25
PCAM is well positioned to capture the growth in the European retirement market 4 Growth of the pension market in Europe Rising proportion of pensioners (65+) to gainfully employed (15-64) Percent of assets Italy 28.1% 58.1% Spain 25.3% 55.3% Germany 26.6% 50.5% Austria 22.8% 48.9% France 24.4% 46.1% UK 24.3% 43.7% Sweden 26.3% 41.2% Netherlands 20.6% 40.6% 2050 2004 Source: Eurostat Investor Relations 10/06 26
Western European pension assets are expected to more than double in the next 10 years to over EUR 16 tn 4 Growth of the pension market in Europe In EUR bn Projection of pension AuM* % Estimated CAGR through 2015 2004 2015E 5,000 6.5% 4,000 3,000 2,000 1,000 9.6% 6.5% 6.2% 10.7% 6.5% 10.4% 8.2% UK France Germany Netherlands Italy Switzerland Spain Belgium * Incl. pension investment assets (occupational pensions schemes) and pension insurance assets (assets of life insurance companies) Source: Allianz Global Investors (Western European pensions study) Investor Relations 10/06 27
Building our institutional business in Europe is crucial to capturing the retirement trend 4 Growth of the pension market in Europe The market is shifting from Defined Benefit to Defined Contribution Asset / Liability Management (ALM) advisory services are required Rebuild and strengthen distribution to clients Build world class consulting relationships Improve operational efficiency Build thought leadership Considering strategic growth options Investor Relations 10/06 28
Asia Pac and MENA offer enormous long-term growth potential 5 Wealth creation in emerging markets Estimated near-term growth rates (1) by country/region: MENA: 15% Australia: 12% Asia ex Japan: 11% Japan: 9% MENA ex-ksa (2) EUR 720 bn KSA (2) EUR 480 bn Asia / Pacific & MENA ~ EUR 4.4 trillion India EUR 35 bn China EUR 46 bn Korea EUR 252 bn Taiwan EUR 110 bn Rest of Asia (3) EUR 620 bn Japan EUR 1,300 bn Australia & NZ EUR 796 bn 2005 managed assets by country / region (1) Based on DeAM estimates (2) Kingdom of Saudi Arabia (3) Includes Malaysia, Thailand, Philippines, Indonesia, Singapore & Hong Kong; data reflects onshore & offshore assets Source: Market figures: Middle East: Mercer Oliver Wyman; Asia, Japan & Australia: Cerulli Associates Investor Relations 10/06 29
Asset Management is focusing on key emerging markets 5 Wealth creation in emerging markets China Ownership stake in Harvest Fund Management a Top 5 Chinese mutual fund company India Exploring expansion opportunities Middle East Distribution through Riyadh branch; expanding into Dubai and Bahrain Launching Sharia compliant product range (Equities / Fixed Income) LatAm Building on successful expansion into Chile in partnership with PWM Russia / EE Exploring acquisitions / JVs Investor Relations 10/06 30
Contents 1 2 3 4 Record results Our business today Mega Trends Key takeaways Investor Relations 10/06 31
Key takeaways Asset Management adds a substantial, stable and growing contribution to the Bank s bottom line Three of our four business lines are market leaders, and we are in the process of addressing the Institutional business We have identified the Mega Trends shaping our industry and have developed strategies to capitalize on each of them Asset Management s contribution to Group Vision 2008 is EUR 800 m underlying pre-tax profit Investor Relations 10/06 32
Additional information
Invested assets (1) report: reconciled to new split in Asset Management In EUR bn, at period end 31 Dec 2004 31 Dec 2005 31 Mar 2006 30 Jun 2006 Net new money 1Q2006 2Q2006 Asset and Wealth Management Asset Management Institutional 206 136 137 131 1 (2) Insurance 87 120 114 109 (2) (1) Retail 193 224 236 223 7 (2) Alternatives 50 57 56 55 (1) 0 Therein: business sold / held for sale (2) 78 1 - - (1) - Private Wealth Management PWM excl. PCS Private Client Services (PCS) Private & Business Clients Securities Deposits excl. sight deposits Insurance (3) Corporate Banking & Securities Total invested assets (1) Assets held by Deutsche Bank on behalf of customers for investment purposes and / or managed by Deutsche Bank on a discretionary or advisory basis or deposited with Deutsche Bank (2) Invested assets within Asset Management which were sold to Aberdeen AM PLC (3) Life insurance surrender value Note: Figures may not add up due to rounding differences; invested assets have been restated to properly reflect movement of RREEF and Insurance funds between channels Investor Relations 10/06 34 679 536 143 106 36 150 101 41 8 72 901 704 536 168 128 40 163 113 41 9 59 926 716 544 172 130 42 169 118 42 9 57 942 687 518 169 130 39 165 113 42 9 57 909 10 5 4 3 1 2 1 0 0 (0) 11 (1) (5) 3 3 0 1 0 1 (0) 0 0
Reconciliation of underlying Asset Management revenues FY2005, in EUR m Asset and Wealth Management (AWM) total net revenues less: Private Wealth Management net revenues (PWM) Asset Management (AM) net revenues Net gains from businesses sold Policyholder benefits and claims AM underlying revenues 3,880 1,266 2,614 (68) (49) 2,497 AM Retail net revenues Net gains from businesses sold Policyholder benefits and claims Retail Channel revenues transferred to Insurance AM Retail underlying revenues AM Institutional net revenues Net gains from businesses sold Policyholder benefits and claims Institutional Channel revenues transferred to Insurance AM Institutional underlying revenues AM Alternatives net revenues Net gains from businesses sold Policyholder benefits and claims 1,308 - (49) (6) 1,253 280 - - (57) 222 775 - - AM Insurance net revenues Net gains from businesses sold Policyholder benefits and claims Insurance revenues from Retail Channel Insurance revenues from Institutional Channel AM Insurance underlying revenues AM other net revenues incl. discontinued businesses Net gains from businesses sold Policyholder benefits and claims AM other underlying revenues incl. discontinued businesses 0 - - 6 57 63 252 (68) - 184 AM Alternatives underlying revenues 775 Investor Relations 10/06 35
Supporting information regarding slide 13 Compendium of Watson Wyatt/Global Investor (WW/GI), InvestHedge, and Institutional Investor Alpha Survey Methodology: WW/GI ranking includes separate entries for each asset class (Real Estate, Private Equity, HFoF, Commodities). The chart aggregates these for each parent firm and includes single manager HF assets from Institutional Investor's Alpha ranking. UBS GAM and Citigroup figures adjusted upwards to include HFoF assets omitted by WW/GI survey these assets were sourced from InvestHedge. DB figure includes RREEF and Topiary business only. Investor Relations 10/06 36
Cautionary statement regarding forward-looking statements and non-u.s. GAAP financial measures This presentation contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about our beliefs and expectations. Any statement in this presentation that states our intentions, beliefs, expectations or predictions (and the assumptions underlying them) is a forward-looking statement. These statements are based on plans, estimates and projections as they are currently available to the management of Deutsche Bank. Forward-looking statements therefore speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events. By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors could therefore cause actual results to differ materially from those contained in any forward-looking statement. Such factors include the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which we derive a substantial portion of our trading revenues, potential defaults of borrowers or trading counterparties, the implementation of our management agenda, the reliability of our risk management policies, procedures and methods, and other risks referenced in our filings with the U.S. Securities and Exchange Commission. Such factors are described in detail in our SEC Form 20-F of 23 March 2006 on pages 7 through 13 under the heading "Risk Factors." Copies of this document are readily available upon request or can be downloaded from www.deutsche-bank.com/ir. This presentation contains non-u.s. GAAP financial measures. For a reconciliation to directly comparable figures reported under U.S. GAAP refer to the 2Q2006 Financial Data Supplement, which is accompanying this presentation and available on our Investor Relations website at www.deutsche-bank.com/ir. Investor Relations 10/06 37