In a strategic move to enhance its alternatives unit, Deutsche Bank AG has entered into a private credit partnership with DWS Group, granting the asset manager first refusal rights on loans initiated by the bank.
This collaboration will allow DWS to have ‘preferred access to certain asset-based finance, direct lending, and other private credit asset opportunities’ generated by Deutsche Bank. This was disclosed in a joint statement released on Tuesday.
As part of this initiative, Patrick Connors, Deutsche Bank’s European head of credit financing and solutions, will transition to DWS to serve as the global head of private credit. Connors will be reporting directly to Chief Executive Officer Stefan Hoops, joining the leadership alongside other heads of alternatives business lines like real estate, infrastructure, and liquid real assets. Hoops sees the partnership as a chance to capitalize on the close relationship with Deutsche Bank to grow DWS’ private debt business, a crucial part of its growth strategy that has not yet reached its full potential.
DWS, which was spun off from Deutsche Bank in 2018, has faced challenges in expanding its platform within the competitive market. The recent departure of alternatives head Paul Kelly from DWS after just two years underscores the difficulties faced by the company in defining and scaling its investment strategies within the €110 billion division.
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Hoops emphasized the importance of origination for alternative asset managers, especially in asset-based finance. This method bundles loans or assets to generate cash, allowing lending against these recurring cash flows. Leaders in the market such as Blackstone Inc. and KKR & Co. have successfully expanded their asset-based finance operations, while others are vying for a piece of the extensive investment opportunities valued at up to $40 trillion, as noted by Apollo Global Management.
This move by Deutsche Bank and DWS mirrors similar strategies by other financial institutions. For example, Citigroup has partnered with Apollo to strengthen its position in the private credit sector. Banks are increasingly collaborating with major asset managers to secure a competitive edge against direct lenders who threaten to divert business from traditional corporate loans.
Deutsche Bank’s financing and credit trading operations, managed by Chetankumar Shah from Singapore, remain a pivotal source of revenue for its investment banking division.
The partnership between Deutsche Bank and DWS marks a significant attempt to leverage synergies within their private credit offerings, aiming to enhance DWS’ market position amidst rising competition and evolving financial landscapes.
