At Deutsche Asset & Wealth Management (AWM), knowledge is power. A sophisticated understanding of local and global investors has enabled the firm to respond to changing client demands with an ever-increasing range of innovative products. Deutsche AWM is also committed to sharing its knowledge with prospective institutional and retail investors.
This has proven a durable combination, allowing the firm to withstand a year of febrile equity markets and growing rivalry between providers.
"We are not afraid of competition," says Marco Montanari, head of passive asset management, Asia-Pacific at Deutsche AWM. "We are well positioned. Not just in China Renminbi Qualified Foreign Institutional Investor (RQFII) ETFs, but when you look at South-east Asian markets such as Malaysia, Indonesia, the Philippines and Vietnam, we are among the few providers offering ETFs linked to these underlyings."
With 35 ETFs listed in Hong Kong and 48 in Singapore, the firm is the largest provider in Asia in terms of product offering. Its focus on scale and product range is part of a conscious effort to be recognised as a product ‘supermarket' in the region.
It is a strategy that is paying off. One client at a Korean brokerage says: "They have a lot of products, and the underlyings and access [they provide] are unique. They [also] have a very good service in the capital markets, so they provide liquidity very well. In addition, their spread is very tight compared to the other ETF asset managers."
The firm is also leading the way in offering global clients access to China, boasting around 70% market share in RQFII ETFs sold in Europe and the US. Deutsche AWM sees plenty of opportunity for growth - Montanari says that less than 2% of ETF assets invested by European and US clients are linked to China at present, offering room for expansion.
Deutsche AWM has the second-largest currency hedged ETF in total assets year-to-date, with total flows of over $10 billion - a product linked to the MSCI EAFE that includes global developed markets, excluding North America. This is proving popular among Asian clients, even more so than ETF provider WisdomTree's successful HEDJ product, a dollar-hedged ETF tracking European equities.
"A lot of clients want to trade the Deutsche AWM product because, although the HEDJ is similar, its weak point is WidomTree uses its own index. Deutsche AWM uses the MSCI Europe, which many institutional clients prefer," says the Korean-based broker.
Deutsche AWM has a footprint in Pakistan, Bangladesh and Vietnam in the equity ETF space, and is nurturing a family of fixed-income products in Indonesia, Australia and Korea - countries and asset classes where its competitors are yet to tread.
In July this year, the firm broke new ground with the issue of the first physical replicating China sovereign bond Ucits ETF for European clients, launched in partnership with long-running co-provider Harvest Global Investors. As of July 14, the fund had more than $28 million of assets under management - what Montanari describes as a "blockbuster" launch.
"The number of products linked to Asia fixed-income is small but the potential is huge, with this market becoming more liquid and more countries and corporates achieving higher credit ratings. We believe there will be much more demand, not just coming from Asian investors but also global investors."
Deutsche AWM's product range and commitment to innovation are two of the qualities the firm ascribes to its success. The third is client education. In March 2015, it launched an educational roadshow on ETFs across 10 cities in Asia in partnership with Bloomberg, EY, ETFGI, Morningstar and MSCI - reaching more than 800 institutions. Deutsche AWM also continues to sponsor Structured Products' sister publication Asia Risk's Asian ETFs survey, now in its fifth year, which gathers the views of more than 300 institutions on the ETF market.
A Thailand-based broker says: "Deutsche provides us with economics updates in both conference calls and in meetings with our firm. Furthermore, when we do a dinner talk or a seminar, Deutsche AWM provides us with a speaker to enlighten our customers."
The bank also withstood the two great shocks to affect the region over the past 12 months - the launch of Stock Connect in November 2014 and the collapse in A-shares in July this year - without skipping a beat.
"Going through this stress-test situation, where ETFs keep trading, shows they are efficient tools and can aid price discovery when the underlying markets are not trading," Montanari says.
The week on Risk.net, July 7-13, 2018Receive this by email