RREEF sale possible amid Deutsche review

Deutsche Bank is conducting a strategic review of its €516bn global Asset Management group, which could lead to a sale of RREEF’s global real estate arm, DB Private Equity, and RREEF Infrastructure. An MBO for the latter ‘would make sense,’ insiders say.

Deutsche Bank has raised the prospect of selling all or part of its €516 billon global asset management group, meaning RREEF could be sold.

The German bank has launched a strategic review into the structure of its asset management business, citing regulatory changes and associated costs as the reason.

The strategic review means some or all of its global business could be sold, which includes its alternatives businesses – RREEF, the real estate business, RREEF Infrastructure, and DB Private Equity. The review of the asset management group also involves DB Advisors, which manages assets for clients such as pension funds, corporations, sovereign wealth funds and governments, and Insurance, in which Deutsche Insurance Asset Management provides investment and advisory services to insurance companies.

It is understood that no final decision has been made about any part of Deutsch Bank’s global asset management businesses, and all options remain on the table, including the retention of the whole or various parts of it.

Deutsche Bank’s alternatives arm is a significant part of Deutsche Bank global asset management, with some €46.35 billion under management as of September 2011.

John McCarthy is leading RREEF Infrastructure, Pierre Cherki is global head of RREEF Real Estate and Chris Minter is head of DB Private Equity. It is understood that none of those global leaders is preparing to leave the business.

Though no official comment has been made on which regulatory aspect is the reason for the review, sources suggested that rules on co-investments that are forthcoming with the so-called Volcker Rule is a factor.

RREEF’s infrastructure business has approximately €8 billion in assets under management globally as of March 31, 2011, with some €5.2 billion of assets under management in Europe alone. The unit employs 35 people worldwide, with 19 people in Europe.

While insiders say it’s still early to discuss the future of RREEF Infrastructure, sources said that a managed buyout (MBO) could be a possibility.

“An MBO is always a recurrent theme – everybody thinks about it. It’s a possibility that makes more and more sense,” one source said, before adding that an MBO is not officially on the table and has not been seriously considered in the past.

RREEF raised €2.1 billion for its first European infrastructure fund, which it closed in 2007. It is currently raising money for a second infrastructure vehicle, which it hopes to close in 2012 with between €2 billion and €3 billion. Presently, RREEF has raised over €620 million for its second fund.

Deutsche Bank has owned RREEF since 2002 when it paid $440 million to Anglo-Dutch property company Haslemere, Rodamco Europe, Rodamco North America, and Robeco Groep for the operating business and $50 million for co-investment assets. At the time, RREEF managed $16.2 billion of assets. Following the transaction, Deutsche Bank retained DB Real Estate, which had $21 billion at the time.

In a statement, Deutsche Bank said the bank remained committed to asset management, and that the review was “part of its continual effort to maintain an optimal business mix and be among the market leaders in each of its businesses.”

It continued: “The strategic review of the asset management division is focusing in particular on how recent regulatory changes and associated costs and changes in the competitive landscape are impacting the business and its growth prospects on a bank platform. All strategic options are being considered. The review covers all of the Asset Management division globally except for the DWS franchise in Germany, Europe and Asia, which the Bank has already determined is a core part of its retail offering in those markets.”

Kevin Parker, global head of asset management and a member of the Deutsche Bank Group Executive Committee, said: “The outcome of this review will be driven first and foremost by our fiduciary duty to, and the interests of, our clients. Our aim is to find the best strategic option to maximize the performance and potential of the Asset Management division.”

* Bruno Alves contributed reporting for this story.