Deutsche’s discretionary portfolio business versus its advisory business in Asia is in the low single digits, said Tuan, who is also CIO for APAC. The bank aims to increase discretionary in Asia to “a low double-digit” percentage in five years.
One part of the strategy is broadening the client base focus, Tuan said. Deutsche has traditionally focused on the ultra high net worth client base in Asia, he explained.
But that base is limited. In UHNW (above $25m), Deutsche not only competes with Swiss banks but also with family offices, which most UHNW individuals have. Because of the large assets these family offices manage, they often have direct access to, for example, hedge funds and private equity managers.
In Asia, Deutsche is therefore expanding the discretionary mandate target to high net worth, which Tuan describes as clients with $5m-$25m in investible assets.
In Asia, China is the key market and for Southeast Asia, Indonesia, where the government has offered a tax amnesty for repatriated wealth, he said. “Indonesian clients are still thinking about how to reallocate overall assets.”
Another part of the expansion strategy involves product offerings. As an example, Tuan mentioned a product that wraps various fixed income strategies into a fund structure, managed by DB, and offered in smaller denominations to clients. A discretionary client would not face the typical $5m-$10m investment in a fixed income product, but a minimum that is substantially lower.
He added that the bank, which has corporate and investment banking divisions, has been traditionally recognised as a transactional house.
“The challenge for us is to change the mindset of the relationship manager and also from the clients perspective.”
Parent bank impact
Last year, the IMF called Deutsche Bank AG the greatest risk to the global financial system. Dwindling revenues and a series of regulatory fines and lawsuits led to speculation about a German government bailout. But the bank had a profitable first quarter and the hope is that DB’s restructuring plan — which includes shrinking the workforce and selling assets — has set it on the right track.
When DB’s troubles made the headlines, some investors initially reacted by leaving, Tuan said. However, in Q1, he said the same money has come back. “In talking to clients I haven’t received any questions about this issue.”
He believes that the bank’s restructuring goals will not limit the growth plans of its Asia wealth management business.
“The bank has the ambition to increase managed investment penetration to generate more stable returns. That’s what every bank is trying to do. Others might be a little ahead of us, especially our Swiss peers. But we are slowly going to catch up.”