OREANDA-NEWS. Fitch Ratings has affirmed Deutsche Asset & Wealth Management Germany (Deutsche AWM, comprising Deutsche Asset & Wealth Management International GmbH and Deutsche Asset & Wealth Management Investment GmbH) at 'Highest Standards'. It has simultaneously assigned a Stable Outlook.

KEY RATING DRIVERS
The affirmation of Deutsche AWM's 'Highest Standards' Asset Manager Rating is driven by the stability of the company's core operations and processes. It benefits from the continued strategic commitment of its shareholder Deutsche Bank AG (A/Negative/F1). The rating is also driven by Deutsche AWM's broadly stable investment staff, sophisticated risk management processes and the implementation of Aladdin as the company's core fund management operating system.

The recently announced re-organisation of Deutsche Bank AG, specifically the forthcoming separation of the wealth- and asset-management divisions, creates some uncertainty. However, the impact on the rating is limited as the bank has identified asset management as a core division and wealth management activities fall outside the rating scope. There have also been some senior level changes announced - notably a change of CEO and CIO - although this has only a limited impact on the rating given the depth, and to date, relative stability, of other senior staff at the asset manager.

Consequently, a challenge for Deutsche AWM will be implementing its new overall organisation structure and separating wealth management activities, which have begun to be integrated with the asset management business from 2012. Another challenge is the completion of the implementation of Aladdin (provided by BlackRock Solutions), notably for risk management and as the core operating system in Asia, replacing Charles River.

Deutsche AWM's 'Highest Standards' rating is based on the following category scores:
Company: Highest
Controls: Highest
Investments: Highest
Operations: Highest (revised from High)
Technology: Highest

Asset Manager Ratings are assigned on a descriptive scale based on Fitch's assessment of the manager's investment and operational platform. Asset Managers are rated 'Good Standards', 'High Standards' and 'Highest Standards', relative to the standards applied by institutional investors in international markets.

Asset manager operations in the 'Highest Standards' category demonstrate an operational framework that Fitch considers superior relative to international institutional standards.

COMPANY
Deutsche AWM benefits from the commitment of its main shareholder, Deutsche Bank AG and forms one of the bank's four core divisions as detailed in its "Strategy 2020" document, published in October 2015. Deutsche AWM is the market leader for retail investment in Germany and second for institutional investment. Its operating history dates back to 1967. Its financial performance is sound, supported by the robust performance of its funds.

Assets under management have grown, notably in multi-asset. Deutsche AWM has a high degree of staff breadth and depth across the organisation with good levels of stability, despite the recently announced change of CEO and CIO. They have been replaced, respectively, by an external and internal candidate.

CONTROLS
Deutsche AWM has a deep and efficient risk and control framework. Risk management and governance provide holistic, multi-level assessment of business and fund risks. Service provider governance and operational risks are strongly covered. Investment risk management is fully embedded in investment processes and quantified through enterprise-wide risk analytics including liquidity risks and stress testing. The governance of the project to implement Aladdin has been strong, as evidenced by the minimal level of operational losses relating to the project implementation to date.

INVESTMENTS
Deutsche AWM's investment processes are highly formalised and consistently applied globally. Its global investment resources are significant (around 200 analysts) and it shares analysts' views effectively through "G-Cube" (which will eventually be replaced with a dedicated module in Aladdin), the central information sharing tool. The "CIO View" provides top-down strategic and tactical input to the investment process, communicated via model portfolios which are calibrated to individual fund or mandate objectives by portfolio managers, incorporating research analyst (bottom-up) recommendations. Fitch considers the role and strength of the investment quality management teams a differentiating factor.

OPERATIONS AND TECHNOLOGY
Deutsche AWM's operations are supported by specialists and effective automated workflows between the manager and State Street Bank and Trust Company, the company's main outsourcing provider for back office functions and custody services. Fitch considers its institutional and retail reporting capabilities to be of high quality.

The project to implement Aladdin is largely complete in EMEA and the Americas. The implementation process will start in Asia in 1Q16. The completion of this major project materially reduces implementation risk, which drives the improvement in score in the "Operations" category.

COMPANY PROFILE
The rating covers retail and institutional investment activities in Germany (comprising Deutsche Asset & Wealth Management International GmbH and Deutsche Asset & Wealth Management Investment GmbH, which provides advisory and management services for foreign segregated accounts). At end-3Q15, Deutsche AWM had total assets under management of approximately EUR1.1trn globally.

RATING SENSITIVITIES
The rating may be sensitive to material adverse changes to any of the rating drivers, notably through heightened staff turnover, operational issues resulting from the separation of the wealth- and asset-management divisions or weakened financial conditions. Specifically, Fitch would downgrade the rating if there is additional senior level staff turnover resulting in a material attrition of the company's investment knowledge or experience.

The rating would also be sensitive to a proposed sale of the asset management division (last considered by the bank in 2012). A material deviation from Fitch's guidelines for any key rating driver could cause the rating to be downgraded. For additional information about Fitch's asset manager ratings guidelines, see the criteria referenced below.