DWS’s reported sale of its secondaries business swims against the tide

In a market that is seeing a war for talent, an institution looking to offload its secondaries unit is an unusual move.

When it comes to talent management in the secondaries space, the past two years have been coloured by heightened competition for a finite resource: talent.

This week’s news goes against the grain. DWS Group, the asset management arm of Deutsche Bank, is considering a sale of its private equity secondaries business as part of a wider review culminating in the decision to streamline the services it offers. Bloomberg first reported the news on Wednesday. DWS declined to comment when approached by Secondaries Investor.

On opportunities, DWS chief executive Stefan Hoops told listeners on its 2022 Capital Markets Day held on Wednesday the review focused on where the asset manager could be “world class”, rather than being “everything to everyone”.

While alternatives remains a key pillar for DWS, its strength in commercial real estate and infrastructure was at the forefront of Hoops’s pitch as its building blocks for future growth in the asset class, telling those who tuned in to its Wednesday event that he had high hopes for future expansion in private debt. Neither private equity nor secondaries received a mention.

According to Hoops, DWS is looking to cut loose businesses defined in two different areas: those in which it believes it has a strong footprint yet where there is no growing market behind its strength. The next are those businesses where there is a growing market, but where DWS hasn’t been able to build scale.

The DWS team has seen some choppy waters in recent months, partially because of this ongoing war for talent. The firm lost senior principal Rodrigo Patino to Jefferies Financial Group, moving over to the investment bank in October to lead European GP-led secondaries deals. His departure followed that of Kumber Husain, DWS’s head of private equity Americas, and Daniel Green, its head of PE EMEA, who left and joined Audax Group to build a secondaries strategy this year.

Change is important in the ever-evolving economic landscape, which is being disrupted daily, and slow movers are often the culprits of their own conservatism. “One of the biggest challenges in large organisations is that people want to have all bases covered,” Hoops said, adding that it had been “very disciplined, very fact-based, sometimes pretty ruthless” in its review.

For an area where DWS might believe it hasn’t been able to achieve scale, another market participant could see an opportunity. For those who have lamented the fact they haven’t been able to find talent to fit their ambitions, DWS’s decision to sell off its private equity arm could present an opportunity.

Indeed, in Hoops’s pitch for alternatives, he noted add that private debt is “the one part which we’ve sort of missed in the 2010s” and now enters a packed market as a result. (He did note DWS had already been making debt investments in real estate and infrastructure.)

With estimates that the secondaries market could have its second-biggest ever year by deal volume in 2022, let’s hope for DWS’s sake the asset manager won’t have seller’s remorse in the years to come.

Write to the author: madeleine.f@peimedia.com

Article updated to clarify Rodrigo Patino’s last role at DWS