Ladies and gentlemen, thank you for standing by. I'm Andre, your Chorus Call operator. Welcome, and thank you for joining DWS Group Q2 2023 Results with Investor and Analyst Conference Call. Throughout today's presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press Star followed by one on your touchtone telephone. Please press the Star key followed by zero for operator assistance. I would now like to turn the conference over to Oliver Flade. Please go ahead.
Thank you, Operator. Good morning, everybody from Frankfurt. This is Oliver from Investor Relations, and I would like to welcome everybody to our earnings call for Q2 of 2023. Before we start, I would like to remind everybody that the upcoming Deutsche Bank analyst call will outline the asset management segments results, which has a different parameter basis to the DWS results we're presenting today. I'm, as always, joined by Stefan Hoops, our CEO, and Claire Peel, our CFO, unfortunately for the last time. Stefan will start with some opening remarks, and Claire will take you through the presentation. For the Q&A afterwards, please could you limit yourself to the two most important questions so that we can give as many people a chance to participate as possible.
I would also like to remind you that the presentation may contain forward-looking statements which may not develop as we currently expect, and hence, I therefore ask you to take note of the disclaimer and the precautionary warning on the forward-looking statements at the end of our materials. With that, I would like to pass on to Stefan
Thank you, Oliver. Good morning, ladies and gentlemen, welcome to our Q2 2023 earnings call. A good year after the on site visit by the prosecutor and the abrupt CEO change that followed, many of you view DWS as a show me case. You respect that we prevented a downward spiral last summer, seem to like what you heard in the Capital Markets Day last December, and agree with our approach of taking restructuring pain decisively and early. You also remain cautious about the outlook for our firm, which I find completely understandable. Therefore, I will not waste any time summarizing markets or giving my view on AI. Instead, let me give you an update on the positive momentum shift we are observing across our franchise, which we believe is the result from the sense of urgency and discipline with which we implemented our strategy.
Our financial results in Q2 are a good indication of this positive momentum shift. Excluding cash, total net inflows increased to EUR 10.4 billion in the Q2 and to almost EUR 20 billion in the H1 of the year, reinforcing the strong client trust in our diversified investment offerings. Adjusted cost income ratio improved to 61%, keeping us firmly on track to deliver our full year guidance for 2023. Adjusted profit before tax was up 27% quarter on quarter, supported by stronger revenue growth. While some of the revenue growth stems from performance fees, which can be lumpy and therefore perceived as lower quality than management fees, even when taking these figures out, revenues are still up and costs are broadly flat.
These numbers are a testament to the efforts we have made to achieve disciplined portfolio optimization in our four key categories of reduce, value, growth, and build. Over the last few months, we put a lot of focus on the reduce part of our strategy because we wanted to take necessary pain early. The internal restructuring program and organizational streamlining are now broadly complete. By taking active action on our cost base, we created savings that we will now invest into growth and that have also helped us to offset inflationary pressures. With this difficult phase behind us, we feel we have earned the right to focus on disciplined, profitable growth. For the value part of our franchise, active fixed income, equity, and multi-asset, we are able to attract net inflows overall, which compares favorably with the industry trend.
In the growth part of our strategy, the positive momentum shift is most visible. Xtrackers reported even stronger inflows in Q2, with net inflows across all regions and into both passive mandates and ETPs. More recently, we expanded our platform of thematic ETFs in the US with offerings in green infrastructure, semiconductors, and cybersecurity. Despite the less favorable conditions for alternatives so far this year, we won a significant real estate mandate in the US in the Q2, highlighting our deep knowledge and expertise in the asset class. Finally, in the build component of our strategy, we've hit the ground running since announcing our strategic alliance with Galaxy Digital in April, which I will discuss later in the strategic outlook. Before we move on, I would like to briefly update you on another topic that remains a top priority for the Executive Board, the greenwashing allegations.
As we've said before, we continue to work closely, actively and transparently with the authorities to close these matters. With the investigations still ongoing, we cannot predict precisely when and how they will conclude. However, in our Interim Report released today, we disclosed that we are in advanced discussions on one matter. We cannot exclude that the outcomes of the investigations may be adverse and could involve financial penalties, which is why we've adjusted our provisions accordingly. In short, we are moving forward in the right direction and hopefully with a timely conclusion in sight. Another important priority is our ongoing transformation to become a standalone asset manager. In the first half of 2023, we executed the first technical migrations as part of the ongoing implementation phase of our multi-year project to develop our own infrastructure platform.
As you would expect, we do this while closely monitoring for transformation risks to protect our clients and our firm. In other developments, I am pleased to say that DWS's efforts to operate as a listed asset manager are being recognized externally. Earlier this month, we received an A2 long-term issuer rating from Moody's with a stable outlook. This is an important achievement to acknowledge our robust financial flexibility, which we've continued to demonstrate in the Q2 and first half of 2023. With that, I'll now hand over for the last time to Claire for the details.
Thank you, and welcome, everyone. Today, I'll present the results and activities for the Q2 of 2023, starting with the key financial highlights. Quarterly net flows remained positive at EUR 9.3 billion and EUR 10.4 billion excluding cash, driven by our targeted growth areas of passive Xtrackers and alternatives. Adjusted cost income ratio improved to 61% in the Q2, keeping us on track to achieve our guided ratio of below 65% for full year 2023. Adjusted profit before tax increased to EUR 260 million in Q2, supported by stronger revenue growth in Q2 . Moving on to the financial performance snapshot. Starting at the top left, AUM increased to EUR 859 billion, up 2% quarter-on-quarter, and 3% year on year, driven by positive markets and stronger net inflows.
On the top right, adjusted revenues grew to EUR 668 million, up 10% from Q1, with increases reported across all revenue categories in the Q2 . On the bottom left, adjusted costs increased slightly to EUR 408 million, mainly due to higher variable compensation related to the DWS share price development in Q2. Despite this, the adjusted cost-income ratio improved to 61%, and the adjusted profit for tax grew to EUR 260 million, up 27% quarter on quarter. Let's recap on the market environment in Q2 market volatility slowed to the lowest levels reported since before the pandemic, while investor risk appetite continued to improve. All major equity indices sustained their positive momentum from Q1 as the US economy showed signs of resilience amidst the higher interest rate environment.
In Q2, both US government bond yields and European rates rose steadily as central banks continued their hikes. At the end of the Q2, the US dollar remained relatively unchanged against the euro. Collectively, these developments were constructive for the asset management industry as well as for DWS, which we can see in our quarterly AUM development, which I will now outline. Assets under management increased to EUR 859 billion in the Q2, up 2% from Q1. This quarterly asset increase was driven by positive market impact and strong net inflows, which more than offset unfavorable FX movements in the Q2. Looking more closely at net flows. DWS sustained its positive flow momentum in the Q2, reporting total net inflows of EUR 9.3 billion and EUR 10.4 billion excluding cash.
This includes inflows across all three regions of EMEA, APAC, and the Americas, and with contributions from both retail and institutional clients, indicating an improvement in investor risk appetite. This is most evident in our targeted growth areas of passive Xtrackers and alternatives. Passive reinforced its strategic importance, delivering EUR 6.2 billion of Q2 net inflows. This included a significant institutional mandate win in Asia Pacific and passive ESG inflows, which were split almost equally between ETPs and mandates. Once again, Xtrackers ETPs remained a key flow driver, accounting for the majority of our passive inflows in the Q2, with positive contributions across all regions. In our home market in EMEA, Xtrackers ranked number two by ETP inflows in Q2 and in the H1 of the year, with net flow growth outpacing our AUM market share.
Alternatives reported EUR 3.9 billion of net inflows in the Q2, marking a reversal from Q1 net outflows. This was primarily driven by an institutional real estate mandate in the US, which was a significant win for our business in the region. The mandate is a diversified, open-ended real estate fund comprising currently of 43 properties and with over 230 investors, which DWS has selected to manage because of its overall strength, capabilities, and capacities in private real estate. In addition, our Q2 inflows in alternatives were supported by infrastructure funds in EMEA. Beyond our growth areas of passive Xtrackers and alternatives. We also attracted positive flows into several of our actively managed value asset classes. Active multi-asset reported net inflows for the Q2 in a row, mainly driven by an institutional mandate win and inflows into our flagship retail fund, Concept Kaldemorgen.
Institutional demand was also a key driver of Q2 net inflows in active fixed income. Building on the progress we made in Q1, we won and strengthened insurance fixed income mandates in EMEA in Q2, reflecting our ongoing commitment to continually review and improve our performance in the asset class. Collectively, inflows into these actively managed asset classes more than offset quarterly outflows in active equity and cash, and contributed positively to our overall flow performance for the Q2 in a row. In the first half of 2023, net inflows totaled EUR 15 billion and EUR 19.2 billion excluding cash. This included net inflows into growth asset classes, passive, Xtrackers, and alternatives, giving us confidence that we remain on track to achieve our AUM targets in both asset classes by 2025, as committed.
In addition, our ESG products remain an important flow driver, with EUR 1.9 billion of net inflows in Q2 and EUR 3.4 billion of net inflows year to date. These reflect strong inflows into passive ESG mandates and ETCs, as well as continued demand for active equity ESG products. To ensure DWS sustains this positive flow performance, we will continue to strengthen our investment offering through product innovation and new launches, which I will now outline in more detail. Since our IPO in Q1 2018, new product launches have attracted EUR 53 billion of cumulative net inflows and an overall management fee margin of 35 basis points. This includes EUR 1.9 billion of net inflows in the Q2, mainly driven by new ESG products.
Sustainability remains a key feature of our portfolio, with the expansion of our Xtrackers climate solutions and ongoing European transformation efforts in H1 of the year. Looking ahead to H2 of 2023, we remain focused on this topic while continuing to target growth areas, both existing and new. In passive Xtrackers, we plan to launch the MSCI World Momentum ESG UCITS ETF, and by the end of the year, we aim to take our first steps into the digital asset space with our new cryptocurrency ETCs. In alternatives, we will launch a US logistics strategy, which has been developed in response to growing demand for German institutional clients for such solutions. To help sustain flow momentum in our actively managed asset classes, we will strengthen our value proposition in active fixed income with the upcoming DWS Invest Conservative Sustainable Bonds Fund.
Collectively, these product launches are key to ensuring that DWS continues to attract net inflows and to sustain top-line revenue growth and overall profitability. Moving on to revenues. Total adjusted revenues grew to EUR 668 million in Q2, up 10% from Q1, with increases reported across all revenue categories in the Q2. The largest contributions came from performance and transaction fees, which grew by EUR 36 million in Q2, mainly due to the recognition of alternatives performance fees in the Q2. Management fees and other recurring revenue were also up, increasing by EUR 9 million quarter on quarter, supported by higher average AUM, and this resulted in a management fee margin of 27.4 basis points. Other revenues increased to EUR 41 million in Q2, supported by higher net interest income, together with a EUR 16 million contribution from our Chinese investment Harvest.
In the H1 of 2023, adjusted revenues totaled EUR 1.3 billion, down 6% compared to the same period in 2022, mainly due to lower average AUM year on year. Moving on to costs. Total adjusted costs were slightly higher in Q2, reflecting an increase in total adjusted compensation and benefits costs, which includes higher variable compensation related to the DWS share price development. Total adjusted general and admin expenses were essentially flat quarter-on-quarter, as operational efficiencies were offset by ongoing efforts to invest into growth. In H2 of the year, we will benefit from cost efficiency actions taken at the end of 2022 and the beginning of 2023, and these efficiencies enable investment into growth strategies, as outlined at our Capital Markets Day last December.
As a result, we continue to guide towards an adjusted cost income ratio of below 65% for 2023. As a reminder, total adjusted cost base excludes EUR 25 million investments into our infrastructure platform transformation in Q2, in addition to other non-recurring expenses. Moving on to our financial outlook. Looking ahead, I'm pleased to reconfirm the financial outlook for 2023. As guided, adjusted cost income ratio is expected to increase year on year, but will remain below 65% as we continue to take active action on our cost base while investing into growth. Adjusted revenues are expected to remain essentially flat compared to 2022, supported by positive flow momentum, especially into our targeted growth areas of passive Xtrackers and high-margin alternatives. Before I hand over to Stefan, I would like to say a few words. This will be my final earnings call with DWS.
It's been an honor and a privilege to serve as the CFO and to be part of the company's journey from IPO to its mature and competitive position today. The Moody's A2 long-term issuer rating received this month acknowledges this status, and I give my huge thanks to everyone. I will now hand over to Stefan for the strategic outlook.
Thank you, Claire. Not only for the presentation today, but also for the dedication and service you have selflessly given to DWS and Deutsche Bank over the years. We will certainly miss having you on these calls. I know I will. Your confident and calm presence, and of course, deep knowledge of the franchise, helped me immensely during my first analyst call almost one year ago, not to mention the countless times we've presented together and met with investors. A big thank you. We look forward to H2 of the year, DWS is well positioned to continue its positive momentum shift. We've earned the right to intensify our efforts in the value, growth, and build categories of our strategy, and we will do this without compromising our diligent and disciplined focus on cost.
In the value part of our strategy, we continue to firmly believe in the future of active portfolio management. In this ever-complex world, the number of factors impacting asset prices is a lot higher than in the past. Asset managers have to connect the dots between geopolitics, divergence of central bank policies, real economy data, investor sentiment, impact of AI, and much more. The breadth of our platform with experts across all asset classes, a presence in the US, Europe, and seven markets in Asia-Pacific, and deep knowledge of retail and institutional client behavior, gives us a competitive edge to drive outperformance for our clients. Cultivating an even stronger collaboration across the entire investment platform is one of my top priorities, which is why we've implemented a variety of initiatives, such as the Global Insurance Council and firm-wide CIO calls.
In the growth category, we remain committed to expanding our capabilities in our targeted areas of alternatives and Xtrackers. In alternatives, we are progressing forward with supporting the European transformation, and outside of Europe, we are strengthening our profile and capabilities in alternatives across the world. Specifically in the US, where our recent real estate mandate win, lays the foundation for more of these special situations and large client solutions in the future. In Xtrackers, we are also continuing to expand internationally so that we can build on the positive flow momentum we have attracted so far in all regions. We aim to achieve this by extending our range of thematic and ESG ETFs, as well as by exploring new opportunities in the digital asset space. This leads me nicely onto the build part of our strategy.
As outlined at our Capital Markets Day, we want to grow in the digital asset space as we expect significant parts of the financial economy to be tokenized in the future. Since forming our strategic alliance with Galaxy in April, we already have plans under development to launch our first cryptocurrency ETCs in the fourth quarter. To prepare for this, we are setting up a cryptocurrency ETC platform in Switzerland, and we've started to engage with clients on the upcoming products during first client meetings and roadshows, which have been well received so far. In addition, we are working on education and thought leadership initiatives such as a DWS Digital Assets Academy. These efforts will also lay the foundation for the next phase of our digital asset strategy to issue a euro stablecoin, whereby we finalized a feasibility study that evaluates potential roles that DWS could play in this space.
We expect to communicate more in the coming quarters. For now, allow me to come back to the positive momentum shift. To be clear, I am not declaring victory. It would be a shame if we lost our focus because things are getting better, as clearly there's still plenty of work to do. We are through the worst. We made tough but necessary restructurings. We maintained our clients trust, and our investment performance in focus areas such as fixed income, is picking back up. The strategic initiatives I've just outlined are designed to help us to remain firmly on a positive growth trajectory and ensure that DWS creates shareholder value. As we aim to grow our dividend, we would also like to remind you of the potential extraordinary dividend commitment we outlined during our Capital Markets Day in December.
Given that we are currently not conducting advanced due diligence on potential targets, it seems more likely than not that the Executive Board will recommend a potential extraordinary dividend for our shareholders in 2024. To summarize, a solid Q2 and a productive H1 of the year, but with plenty of work ahead. We will not lose focus, and we will never be complacent. We believe we can be front-footed and be confident, because we have visibly shifted momentum and are on the right path. Thank you for listening. I will now pass over to Oliver for Q&A.
Yeah, thank you, Stefan. Operator, we're ready for Q&A now.
Ladies and gentlemen, at this time, we'll begin the question and answer session. Anyone who wishes to ask a question may press star, followed by one on their touchtone telephone. To withdraw your question, you may press star, followed by two. Anyone who has a question may press star, followed by one at this time. One moment for the first question, please. The first question comes from the line of Jacques-Henri Gaulard with Kepler Cheuvreux. Please go ahead.
Yes, good morning. Can you hear me?
Hey, yes, Jacques-Henri, good morning.
Good morning, everybody. First of all, Claire, thank you so much for everything. You've been a beacon of consistency throughout. It's not been easy. It was great to have your calm, anchor-type voice leading us through the progress of the company. Fantastic, and again, you'll be missed. Two questions from me. I would like to come back a little bit on the progress in the US I remember during the Investor Day, you said that you lamented, Stefan, the fact that the company was fifth largest asset manager in the US not that long ago. You had ambitious growth plans. You're mentioning the real estate mandates, your progress on ESG. Are you happy about where you are in the US now? Do you think there is more scope for growth?
It is turning into the second largest region of the group. On the independent front, which is interesting, have you been able to actually pass to your shareholder the potential change in KGaA, or considering where you are right now, potentially increasing the free float of the company? Thank you very much.
Hey, Jacques-Henri. I don't know if it's like happy is the right term, but I think that we are seeing the, like, early fruits of the restructurings we've done, right? I mean, just to remind on a couple of changes we've made. Dirk Goergen as CEO, is actually the, you know, first time in a while that we actually have the US CEO, who also runs global coverage, sit in the US. I think that definitely had a positive impact on morale. If you look at the various asset classes, we made a bunch of changes. I think in alternatives it was mostly investments, Paul Kelly coming in as Global Head of Alternatives from Blackstone Credit.
In Xtrackers, so passive, we actually, so for the first time in a while, fully funded their growth requests, so what they wanted to have. In the active asset management side, we made a bunch of changes, right? I think most notably was fixed income, where we essentially, well, taking out is always such a tough word, but we changed the person running it and the, like, top four or five people. It was a pretty major restructuring. We implemented a true culture carrier, so the person that previously ran trading. This was something that I think people had wanted to do for 10 years. People were always worried about what would happen to flows, to performance.
You know, I think strong collaboration between coverage and product and investment division, we actually did all of that at once. So far, so good, right? I mean, I think it's too early to, whatever, take credit or be happy about fixed income performance after a couple of quarters, but performance looks better. We haven't lost any AUM in fixed income, so some of the things that people thought would happen didn't happen. I would say, so far, so good. I think what we like is that our alternatives franchise is picking up. I mean, I think that significant win was not random, right? I mean, I think it shows that , in, like, good weather, when the sun shines, it almost doesn't matter who's managing your assets.
When it rains, you want to have somebody who's competent. Actually, you know, we take some pride in having been selected for such a large mandate. In Xtrackers, we always spoke about launching thematic ETFs as our strategy in the US, and we have done that. I think, Jacques-Henri, to conclude, I think at least you see that all the things we said we would do, we have done, by coming back to the theme of a show me case. I mean, I think we're doing what we've said, and I would say, so far, so good. Maybe the one negative, when you look at equities, so active equities, we actually had the outflows in the US, right? We actually had outflows, percentage-wise, a little bit higher than the market.
I mean, the market overall, lost in active equities, but we lost a bit more. There are always things that remain to be optimized. Work is not done, but I would say, so far, so good. Now, on the second question, on free float and KGaA, every time I say something about that, I get in trouble with our majority shareholder, but Claire's probably less conflicted, given that she's leaving soon. I will hand over to Claire for the second question.
Thank you, Stefan. Thank you, Jacques-Henri, for your comments. Really very much appreciated. On the corporate structure, we've been a KGaA structure for five and a half years, since the IPO, and that's how we continue to operate. No indications that we are changing that, but we continually assess what the appropriate structure is, which is, of course, determined by the majority shareholder. Similarly, the position that we have in the shareholding by the majority shareholder is also determined by themselves. No additional comments to add to that. I can just also add on the US position, that we have AUM of EUR 209 billion, as at the end of the H1 of the year, which is almost 25% of our total AUM position.
A really kind of sound and solid holding that we have in the Americas.
Thank you.
The next question comes from the line of Hubert Lam with Bank of America. Please go ahead.
Hi, good morning. Thanks for taking my questions, and also like to thank Claire for all her hard work and help over the years. It's always been a pleasure interacting with you, and also good luck in the future. I've got two questions. Firstly for Stefan, again, thanks for the update on the ESG investigation. I've seen that you've added EUR 21 million of litigation provisions. Just wondering if this is a good indicator on a possible settlement, and what this is based on? A lso assuming a reasonable outcome that you get, what will this change for you? Like, will this allow you to engage with clients that you otherwise you couldn't? Just wondering what a resolution means on the business side of things. Second question is on NII.
Claire, can you give us a breakdown in terms of the other revenues, how much of it came from NII in the Q2? What's the balance, cash balance to look at, and what rates should we think applies to it? Should we think about the ECB rate or what are the rate to think about going forward? Thank you.
Thank you, Hubert. Your first question had two parts, and I choose to spend more time on the second part. As on the first part, 21, does it cover it? I will not be able to say more than we shared in the script or the Interim Report. The 21 is for a few items we don't split out for which items, but as we said, we are in advanced discussions on one matter, which we've also disclosed in the Interim Report. We remain hopeful that while we operate on the timeline of the authorities, remain hopeful that we can conclude one matter in due course. I think the second part of your question was interesting. I mean, what does it mean in the future?
I would say that when you look at flows, we don't feel that we are negatively discriminated because of any overhang, right? I mean, I think we had solid inflows in ESG, actually throughout the last couple of quarters, and again, in the Q2. You know, so far it seems that our flows into ex cash, I mean, I think with decent flows across, but when you look at the longer term revenue generating asset classes, we seem to have been doing fairly well compared to the industry. I don't think that there's any overhang. However, imagine a panel where, you know, CEO of another asset manager and I discuss the future of sustainability and what we want companies to do.
I think even a neutral, fact-based person like you, would in the back of your head probably say, "Look, man, I mean, you know, get done with your own investigations before you come out swinging," right? I feel that our ability to take a more active stance on that super important topic and properly engage, and therefore be more of a thought leader, again, not saying we're the best, not saying we are the brightest or the most green, but to take an active stance, I think that ability will go up. Right, probably second point before I hand over to Claire. When you think about the amount of work that our competent people spent on the past versus the future, obviously that's going to swing, right?
I think that's going to be, you know, also a positive momentum shift in the minds of people if we can actually focus on the future of sustainability and not, you know, deal with the legacy. Thank you, Hubert.
Hi, thank you for the comments, Hubert. Coming back to the question on net interest income. For Q2, the other revenues accounted for EUR 41 million, and within that, we had EUR 23 million, which was directly related to net interest income. In addition, separately, with other revenues, of course, we have our Harvest investment, which whereby we recognize EUR 16 million in Q2. Those are the predominant revenue items that we have within the other category. On the question of the liquidity balances that we carry, it's approximately EUR 3.5 billion in total, EUR 3.4 billion more precisely, of liquidity balances that we hold on our balance sheet, entirely covering all HQLA-type assets.
Within that, we have closer to EUR 1.7 billion of bank deposits and EUR 2.7 billion with more highly liquid assets that we are generating net interest income from. They're predominantly euro-denominated. We also have US-denominated. In terms of rates to be looking at, the overnight rates and other rates, more euro-oriented would be the core area in terms of modeling. Hopefully that helps.
Great. Thank you both.
The next question comes from the line of Arnaud Giblat with BNP Paribas. Please go ahead.
Yeah, good morning. Similar comment for Claire. It's been great working with you over the past five years, it's been extremely helpful. I just had two questions. First on costs, and second, on alternative flows. On the costs, in the outlook statement, you talk about costs being only slightly ahead in 2023 versus 2022 for the adjusted costs. Should we interpret that as low single-digit growth? I was just wondering if you could update us a bit on the outlook for cost evolution in 2023 and beyond, since you seem to be slightly in advance on your restructuring plan, how do costs evolve and what exceptional costs remain to be taken?
Secondly, on the flows, I think last quarter you talked about the launch of an infra fund. How is that panning out? What sort of flows or closings should we be expecting in the coming quarters? Have you made any progress on your private credits offering? Thank you.
Hi, Arno, thank you very much for the comments. I'll take the first question initially on costs. For 2023, we are guiding to a cost income ratio of below 65%, and that compares to a cost income ratio last year of 60.6%. Increasing year on year in terms of cost income ratio, but staying below 65% is the precise guidance that we're giving. On the adjusted cost base, when we did our annual reporting, we guided that our adjusted costs would be higher year on year, and we slightly refined that to now say slightly higher year on year. That represents that the pace of restructuring, the pace of investment into growth, and to a lesser degree, obviously FX fluctuations, inflation, and other factors that we see in the cost base. year on year, we expect slightly higher costs, no material movements overall.
As we look forward, as you say, to guidance beyond 2023, we're working towards a cost income ratio of below 59% by 2025. We need to go through our strategic planning more deeply to give more specific guidance for next year, but obviously, we're ensuring that we are on a guide path to move in that direction by 2025. I would say so far, in terms of the restructuring actions that we've taken and the investments that we're taking, that looks to be on track. On your questions on the other cost adjustments, we have in there, of course, the transformation project, where we can see for Q2, EUR 25 million of expenses, and for Q1, EUR 18 million of expenses. Those costs do pick up pace in 2023 compared to last year.
We indicated in the Capital Markets Day that 2023 would be the peak of the investment period in transformation expenses, and that's obviously continually under review and assessment. Within that, we have approximately half of that, which is related to dual platform license costs as we do the transition from platform that we currently are hosted with Deutsche Bank to a more self-managed platform. We see that expense in our adjustments for this year. We have litigation expenses and legal fee expenses related to exceptional matters. We have seen an increase in those expenses also in the Q2 and in the H1 of the year. Beyond 2023, of course, we expect such other expenses to decline as we look to bring such matters to a resolution.
Similarly, we have restructuring and severance costs, and again, we expect that we have hit the peak of those already in the H1 of the year, and we should see those declining going forward. Hopefully, that clarifies.
Hey, Arno, on the question on alternatives. Firstly, on the infrastructure fund for retail, I think that's going well. We raised a little over EUR 200 million in the first six, eight weeks, I think that's probably, to be honest, ahead of what the coverage folks had promised and probably slightly below what I'd hoped. I think we are, I would say, in good shape versus like similar launch when new strategies are being launched. I would imagine this continuing to grow quite nicely, right? I mean, you almost don't have to do any marketing for it because people can read in the press every day that there are significant investments in infrastructure. It seems to be a good zeitgeist and, you know, plenty of interest.
Again, a little over EUR 200 million in the first six to eight weeks. On private credit, we spend a ton of time on it, right? If you recall, Paul Kelly was hired, obviously, to oversee all of alternatives, he has distinct knowledge on how to build, run, oversee, compensate, and so on, a private credit business. You know, sometimes, you spend a lot of time on something, then conclude it's probably not for you, that happened to some extent. I think the US, for example, we probably treat more opportunistically. I think there were interesting ways to grow the US, quite honestly, I know I fear that we would be a tourist in the US, where you would see risk after other people have passed over, that risk.
You know, I simply don't wanna be a tourist in any asset class. Therefore, I think that I know that we'll focus on building that in Europe. In Europe, the question is then, do you grow by organically, by hiring people and then setting up your own investing guidelines and risk committees and so on? Do you buy somebody, right? Build versus buy. I think we are still undecided in the sense that we are spending quite some time in looking at potential targets. I mean, when you think about the European private credit space and then, like, specifically direct lending, there would be asset managers, maybe EUR 3 billion to 10 billion AUM. From a cost perspective, certainly not breaking the bank.
You know, you have certain advantages, time to market, you have a track record and so on. At the same time, you know, there are always some risks that you buy, and there will always be some sort of like cultural elements that you need to be quite convinced you can manage. I think the building, you know, it's longer term. It simply takes a bit longer, but, you know, we're obviously long-term ambitious. Right now, I think it's probably still 50/50 which direction we go. I think we're quite close to deciding on who our number one person would be, so we just need somebody to oversee it, and then that person can decide whether you want to buy, to build, and so on. I think making decent progress.
I think the opportunity to collaborate with Deutsche Bank's corporate bank and investment bank or other banks, that remains quite high, and it's definitely a selling point when we speak to people in the market. Maybe one more comment, because some, actually most of you, when you looked at our numbers, they commented on the performance fee, right? Which, and I said it myself in the script is obviously of lower quality than management fees, which is well understood. However, I would urge you to really just have a, you know, distinct difference in your mind between random one-off or targeted, but , lumpy. As we grow alternatives, obviously we want to grow performance fees, right? In our outlook, we've said that as a percentage of total revenues, it should grow.
I appreciate that we will only be able to get any credit for, you know, some stickiness value of performance fees if we do it over and over. Just like this is the Q2 in which we had a significant large win, last quarter in multi-asset, this time in real estate. I appreciate it will take a couple of quarters for you guys to give us, you know, some credit for that, for, you know, that being repeatable. Therefore, alternatives remains definitely on a, on a growth trajectory and private credit, probably the number one area which we want to build. Thank you, Arnold.
Great. Thank you.
The next question comes from the line of Haley Tam with Credit Suisse. Please go ahead.
Good morning. Thank you for the presentation and for taking the question, and congratulations on a strong, successful result. A great note for close to passcode, and I guess I can add my thanks as well to everybody expressed in terms of her consistency and knowledge over the course of the last five and a half years.
Hayley, I'm sorry.
Hi.
You are very difficult to understand. Sorry, can you get closer to the mic? We really hardly can understand you.
Okay, hang on one second. Let me see if I can fix this quickly. Sorry. Please bear with me while I just fix.
We, but like you do it now, is much better already.
Okay.
If you just speak up a little bit, I think that would help.
Great. Thank you. I want to say thank you again. Thank you again to Claire for her consistency and her knowledge over the last five and a half years. I think she will be greatly missed by the analyst community. If I can have two questions, please. The first one on the costs. Not costs, on fund flows. The cost question already answered. Question on fund flows. With alternative investments, clearly you saw a significant US real estate mandate win in Q2, which did offset the outflows from the liquid alternatives. Could you give us some color, please, on the fee margins on this versus the 50 basis points you have for the asset class? Also, given the positive comments you've made about this, opening doors for future similar mandates, could you maybe give us some visibility into the pipeline?
The second question, really on your A2 Long-Term credit rating. You've clearly said you have no intention to issue debt in the near term, but could you tell us under what circumstances you might consider this? Is this M&A only, or would you consider it maybe when interest rates come down just to give yourself a more efficient balance sheet? Thank you.
Hi, Hayley. Thanks again for the comments, much appreciated. Picking up on the alternative significant mandate that we won in Q2, I can't give precise fee margin on that, but I can confirm that it is very much in line with the average that we see for the asset class overall. Could be slightly higher or lower, but it's very much in line with that. You know, supportive, I would say, of the asset class overall. On the pipeline, maybe we come onto that in a moment, to comment on the A2 long-term credit rating from Moody's, the purpose of that initially, as of now, is really to provide security that's required for insurance clients in particular, you know, in terms of questions that they have to ask and validate their providers as they go through RFPs and so on.
It's very supportive in that process. Of course, it is also an enabler for future funding for M&A, if required. That's not the primary purpose, but it's certainly an enabler for the future as well.
Hayley, just to add, and I will try to keep it short because Oliver told me there are many people that want to ask questions. Allow us to have a couple more quarters with these types of large mandates, and then I will try to explain, or then I'll explain what we've done, right? Because there's no secret behind it. You just need to be slightly more targeted in identifying, and then, you know, once there are situations where you compete, being pre-organized in how to win, right? Which comes with a combination of ensuring that there are adequate resources, the right sequence in pushing for it. Frankly, to some extent, giving the people fighting for the mandates confidence that it can actually be implemented, right?
I feel people now have the confidence, but allow us to do it for a couple more quarters, and then we talk more about it. I think the pipeline overall for real estate looks quite promising. Focus on logistics in Q3 . Our European Real Estate Transformation Fund will, you know, properly raise capital in the third quarter. I think the pipeline is decent, but I think those one-offs, want to do it for a couple more quarters, and then we'll spend more time talking about it. Thank you, Hayley.
Thank you.
The next question comes from the line of Tom Mills with Jefferies. Please go ahead.
Hi, good morning. Thanks for taking my question. I'd also like to pass my congratulations to Claire. Many thanks and best wishes for the future. I appreciate it's quite a new development, but I'd seen that earlier this month there's been a regulatory mandate in China to limit fees for asset management products to 1.2%. Do you have any sense as to whether that's gonna have much of an impact for Harvest AUM base? That would be, that'd be great. Thanks very much.
Hey, Tom, I can take that. It will definitely have a negative impact, there's no question about it. As you correctly say, there's essentially a cap on fees, and when you look at Harvest, there were a number of funds which they haven't disclosed, therefore, we won't disclose it, but a number of funds which were above that cap. Therefore it will have a negative impact. I don't think it's going to be significant, but we're working with the Harvest team to go through it. I think one update which, like, happy to share in the circle of trust, I will actually join the supervisory board of Harvest, which is the first time that a DWS or Deutsche Asset Management CEO sits on it.
Simply because when you think about the value of our Harvest stake, 30% in now the seventh largest asset manager in China, I think valuation for Harvest would probably be not far away from our valuation, and I was maybe too low, but it would be EUR 4 billion to 5 billion for Harvest. That stake represents, you know, EUR 1.2 billion to 1.5 billion in value. Just to make sure we get the most out of that stake, I will sit on the supervisory board going forward. Happy to give, you know, more precise answer on your question in the next quarterly call.
Thanks, Stefan, and happy to be in the circle of trust.
The next question comes from the line of Michael Werner with UBS. Please go ahead.
Thank you very much. Also want to extend my congrats to Claire, and wish you the best in the next stages of your career. It's been a pleasure. Just two questions for me, please. One, can you just please remind me, you talked about the SEC investigation. Can you just remind me what other investigations, what are the counterparties of those investigations, Boston prosecutors, you are dealing with the ongoing greenwashing investigations? Second, maybe just to circle back and maybe try to get a, you know, another answer.
you know, when you did say, you know, you expect AUMs and the adjusted cost base to increase, quote, unquote, "Only slightly this year," is there any way you can provide a bit of a range on that, what only slightly, you know, means from a more quantitative perspective? Thank you.
Hi, Michael. Thank you again for the comments. Much appreciated. On the first question around allegations and matters and investigations that we are addressing, it's best that I refer you to the statement that we've got in the Interim Report on that, which is under Opportunities and Risks, and it's page 14, just to save everyone some time, because there is a number of matters, obviously, that are always going on with any global organization, global asset management firm. These span Europe and the US, and, you know, a number of items that I don't want to miss anything. For completeness, I would refer you to that note. It does address Germany, Europe, and the US, and provisions accommodate all of those accordingly.
On the second question on year on year movements in costs, I can't give you a specific percentage because then I'm giving you a precise guidance on a number. Slightly higher just means that we see some uptick movement in the cost base year on year, slightly lower than we had originally expected. That's on the adjusted cost base, and, you know, the cost base is split broadly 50/50 between comp and var and non-comp. There is a mixed effect there of the efficiency gains and the growth in investments that is resulting in a slightly higher cost base year on year. Hopefully that helps.
Excellent. It does. Thank you very much, Claire.
The next question comes from the line of Nicholas Herman with Citi. Please go ahead.
Yes, good morning. Thank you for taking my questions. First of all, can I just to echo the previous sentiments and offer my best wishes to you in your next chapter. The two questions I had is one on alts and one on Harvest. On the alt side, two consecutive quarters of negative performance, despite broader positive markets. Is that real estate or is it also other asset classes as well? It looks like your direct real estate outperformance versus benchmark has really noticeably declined recently. Just curious, what's driven that decrease in that performance? I was under the impression that you are mostly in core real estate, which is relatively more immune. That's the first one. The second question is on Harvest.
interesting to hear that you're joining the board of Harvest, Stefan, is that evidence of just even greater cooperation between the two businesses and just any goals or aims that you would hope to achieve as part of that? I guess more broadly also, do you see an opportunity to potentially acquire or buy out either the two partners in Harvest over the medium term? Thank you.
Hey, hey, Nicholas. I will start with the second and then hand over to Claire. I mean, we like Harvest, obviously, having been a 30% shareholder for 20 years. They actually have 140 million retail clients. The way that when you think about embedded asset management, so what we call asset management as a service, that is something that they have been doing for quite some time, right? When it comes to what can we learn, it's actually quite interesting how they integrated in, you know, the big apps that you have in China. Obviously, quite different market environment than Europe, but there's definitely something to be learned on that front.
I think secondly, when you think about artificial intelligence, and this is not going to be Colin, which I spent a lot of time on it, but they're also significantly ahead, I think, for obvious reasons. I mean, I think a different approach to data and data privacy and so on, but significantly ahead, of, I think, any Western asset manager. I think also there's something to learn, and I visited them twice over the last couple of months. I think when it comes to potentially increasing our stake, wouldn't want to comment on it. Obviously, we're not in any advanced discussions otherwise, I wouldn't have said what I said earlier, about us not being in advanced, discussions on any large M&A, and therefore, recommending an extraordinary dividend be more likely than not.
When you look at the other two shareholders, you know, one is essentially the state at 40%, and one is a group of individuals. Talking to them, but, you know, I think by joining the board, I think it will also helps us to have more confidence in whatever like, direction we end up going.
Taking the second question on, I think this is specifically on fund performance within alternatives. Firstly, I would comment on liquid real assets. In liquid real assets, we have seen an improvement in the one year and the three year performance quarter on quarter. That is something that we spotlighted in the Q1 as being slightly weaker on our performance in Q1. We have seen an improvement in LRA in Q2. We've seen a slowing down of the outflows thereafter. That's an area that we watch very closely. On direct real estate, you're right, that on the one year measure, we have seen a decline in the performance metric within the year, with a more limited composition of assets that sits within that measurement bucket.
That is one I think we'll have to come back with more details on, just to explain the movement there, which I think has some more unique aspects to it. Generally speaking, on fund performance, I would also just want to comment on fixed income. We did spotlight fixed income as an area of attention, requiring an improvement in performance, which we have indeed seen again in the one-year results, quarter on quarter for Q2. We're pleased with that result.
Thank you. I appreciate it.
The next question comes from the line of Roland Fender with ODDO BHF. Please go ahead.
Yes, good morning. Two questions from my side, please. Firstly, I would like to come back to your active fixed income franchise. What do you really need to improve on this product to make it more attractive for investors? Do you have all the capabilities you needed, or do you need to engage, maybe additionally in M&A transactions? Second question, looking at the increased interest rates in the market, what effects could that have on the demand side of your alternative assets, which you are selling, increasingly to investors? Is there a trade-off, looking at the higher interest rates in demand, or how do you see it there? Thank you.
Hey, thank you, Roland. On active fixed income, I think we have all of the ingredients for the more traditional fixed income. I think we are actually quite strong in credit. I mean, I don't want to go through all of the ingredients of fixed income. What we don't have is a proper total return setup. When you look at our insurance efforts, for example, where we, you know, are still one of the largest third-party insurance asset managers. Unfortunately, most of the insurance companies only trust us for the bread and butter, right? Govies, credit, and the more interesting total return fixed income mandates go to competitors. That is something which we want to build. It's something which is not that easy to train, right?
If you have done govies or credit for all your life, it's tough to then, and benchmark oriented, it's tough to completely change. I think we probably need to bring in some talent, and this is essentially new efforts. I don't think that you would do M&A for that. I don't think that you would need to do that, because I think we have access to clients. I think we just need to then have the competence and be able to point to, "Look, this is the approach, these are the people." That is something which we're working on, actually, both in Europe and in the US
On the second questions on alternatives demand in the rate environment, I would expect as we start to see the rate environment now stabilize, well, our business is expecting that we should start to see looking forward transaction activity picking up. This has obviously been very muted in the H1 of the year. We haven't seen much activity at all when it comes to real estate transactions, but perhaps more opportunity in the outlook looking forward. Similarly, on capital raising, new capital raising, again, has been muted in the H1 of the year, and some of the fund launches, capital raises, we've seen move out in our pipeline, but the demand is still very much there. I think it's been more of a timing event.
as rates are stabilizing, we're starting to see that interest resurfacing. I think it's been more of a timeline impact rather than an absolute impact on capital raising capacity.
One tiny thing to add, I think the, you know, what I think all of you call the denominator effect, is also going to, you know, slow down or like, have less of a slowdown factor going forward, right? If rates stabilize or go down, and equities continues to go up and maybe fixed income, goes up, if rates go down, that obviously has a, let's say, positive impact on denominator effect. That is something that probably slowed down alternatives and will be less of a slowdown factor going forward.
Okay. Thank you.
Thanks, Roland.
The next question comes from the line of Angelik i Bairaktari with JP Morgan. Please go ahead.
Good morning, and thanks for taking my questions. I would also like to say thank you to Claire for all the help in the previous years, and all the best for the future. Two questions on my side, please. First of all, you have set a target at the Capital Markets Day to grow your passive AUM by 12% by 2025, and clearly the passive net flows year to date have been quite strong. I was just wondering, with regards to sort of your market share in ETFs, if I remember correctly, you used to be number two, following the merger or the acquisition of Lyxor by Amundi, you fell down to number three in terms of, like, ETF market share in Europe.
Do you feel that you can reclaim your number two position given the strong flows? Also, I would be interested to hear whether you see the gap with BlackRock's iShares narrowing at all or not really. Second question, what are your thoughts about the European Commission's retail investment strategy package which came out at the end of May? My interpretation is that the Commission wants distributors to offer passive funds as an alternative to active funds within bank networks, also bring down management fee rates across the industry as part of the Value for Money Proposal. Do you agree that this could be quite onerous for the industry if it goes ahead as proposed at the moment? Thank you very much.
Hi, Angelik i, Thank you for the comments. Maybe I start with the second question on the commission's report that came out, because I know that's something that we've been discussing and speculating on more recently. I think your observations are correct. I think we observed that there will be a longer timeframe on some of the changes that will come into effect. I think there will generally be more of an impact on transparency, on fee compression, and on relationships with distributors. I think we anticipate all of that in the future, and it's something that we take into account.
I think given that we can offer asset classes across passive as well as active and alternatives, but passive in particular, we are well positioned with our distributors in terms of offering them retail clients, all of those solutions. We do anticipate, over time, continued management fee compression as of course, we've indeed seen in the past as well. We're very mindful and open to the changes that are in the pipeline and working with distributors to put those into effect.
Angelik i , on your first question, which is like more longer term, so I will take it. Whenever you do a plan, some things work out better, some less good as planned. I think that's always the nature of these things. Right now, alternatives a bit tougher to raise capital, I think passive a bit easier, so we are ahead of what we had planned. Look, there's no point in changing any of the outlook so far. We continue to commit that we want to grow by 12% KGaA until 2025. Secondly, when you look at your questions like market share and flows we've seen, I think we are pleased so far.
I think when you look at usage, we've been growing ahead of our typical market share, so market share was always around 10%. Year to date, we've grown at little over 11. Q2 was specifically nice, I mean, based on what we see, we are growing market share, which is nice. There are always some pluses, some minuses. You know, I was happy with fixed income Q1, not so happy in Q2. Quite happy with what we've done in equities, quite happy with ESG. We're spending a lot of time on all of the, let's say, ingredients of passive. I think in the US, probably more we have to do. I mean, we just launched those thematic ETFs that I referred to in my initial comments.
That will continue being our strategy. Would imagine that our cryptocurrency ETCs that we'll launch in Q4 will also show that we are quite innovative when it comes to having thematic ETFs. All of that, and that was your, like, also part of your question, I think should allow us to catch up to the current number two and be number two. Now, you know, catching up to iShares is slightly more ambitious. I'm only 43, have another 20 years at DWS. So I think I remain hopeful that we can, you know, catch up to iShares, but it's a longer term project. I think becoming number two in Europe is something which we want to do over the next couple of years.
Thank you.
The next question comes from the line of Pierre Schulze with CIC. Please go ahead.
Yes, good morning. One question regarding the evolution of fee margin, which is decreasing by one point since last week. I was just wondering, how do you see the evolution of this fee margin in the future due to the development of passive management? Do you feel that you will balance that with a parallel shift of the decrease of your cost-income ratio, or do you think this is a temporary decrease in the fee margin due to external factors? My second question is regarding retail. We know that retail is more profitable than institutional, generally, institutional mandates. I was wondering, how do you see the evolution of your retail franchise?
In the coming months, because we feel that in Q2, particularly, institutional is leading the path for net inflows. Last question, just a clarification. You mentioned an extraordinary dividend in 2024, but do you mean 2024 on the net income of 2023, or an extraordinary dividend in 2025 based on net income in 2024? Thank you. I also thank Claire for its very clear comments during the time I covered DWS. Thank you very much.
Thank you, Pierre. I think you also just had your one year anniversary, similar to me, in covering, and following DWS.
Yeah.
Quickly in reverse order, the extraordinary dividend would be paid at the AGM 2024, essentially for 2023, paid, you know, in nine, 10 months, if we end up recommending it. As we said, as of today, it appears more likely than not that we'll, you know, recommend paying up to EUR 5 a share, in addition to the normal dividend that we intend to pay for 2023. I think on retail, I think the way I would suggest or ask you to look at it, I think in the institutional space, we simply had more catch up to do.
I think that DWS, which is a phenomenal franchise, but has been more retail-oriented over the last couple of years, and most of the senior folks have more of a retail DNA. That's why we focused more on institutional over the last couple of quarters, and I think people quite liked it. That obviously was a combination of new type of product offerings. In many cases, what institutions care about, the way that they receive valuations or how to respond to RFPs is a bit different to retail. I think those investments we've made actually in 2022 for the institutional franchise, they seem to be paying off. That's why we had more inflows. However, retail, to the point you've made, very profitable and obviously remains a key focus for us.
I think on your first question, I will hand over to Claire, but just one thing to keep in mind, our number one target for DWS is earnings per share, right? We want to grow what we can distribute to all of you. Therefore, if we can grow a lot more in passive and it's profitable and increases earnings per share, even if it dilutes our management fee, our average management fee, that's fine, right? Because it's growing earnings per share. Second target we have out there is cost-income ratio and then specific growth in alternatives and Xtrackers. Therefore, I think we've set the right incentives to really push for EPS, and not try to optimize other numbers. Handing over to Claire for more detail.
Thank you, and thank you again for the comments. Yes, to recap on the fee margin questions, at the end of Q2, we stood at 27.4 basis points. At the end of Q2, 2022, we were at 28.4 basis points, indeed one full basis point over those periods year on year. For the full year of 2022, the average management fee was 28.1 basis points. Our guidance for the full year for year on year is still around one basis point of dilution that we anticipate across all asset classes, and we think it will be slightly less than that overall if we look at the full year effect. We're starting to see the pace of management fee margin dilution slow down.
Within passive specifically, we have guided to around two basis points of dilution per year, but we are running below that. Currently, we finished year 2022 with 18 basis points in passive. We wouldn't see that currently diluting by two basis points. I would stick to avoid any confusion, the total average fee margin overall to be slightly below one basis point overall, taking into account all of those effects. Thank you.
Okay, thank you very much. Very clear once again.
The last question for today comes from the line of Bruce Hamilton with Morgan Stanley. Please go ahead.
Thanks. Morning. Thanks for taking my questions. Actually, most of mine have been asked, so I'll keep this brief. I'll start by saying thank you very much indeed, Claire, and congratulations on a terrific stint at DWS and all the very best for the future. Just a follow-up question on M&A. I think, Stefan, you've been, you know, pretty clear around, you know, nothing imminent, hence the comment around distribution, which I think are great. Also in terms of where you could be interested, I think you said that sort of direct lending, private credit, it was kind of 50/50 between whether you could buy or whether you build.
Are there any other sort of areas that look particularly interesting in terms of M&A opportunities that are out there, or in terms of, you know, content or technology or other, that you think would be a good sort of infill versus the current sort of setup with the company? Thank you.
Bruce, thank you again for the comments. Much appreciated. This is the last question. Thank you to everyone for that. I'll hand over to Stefan.
Bruce, on M&A. High level, I would love for any of you or your bankers to challenge me on that view. I think, could you just check, if you could go on mute, if I could ask you, Bruce, because a bit of background noise. Apologies. Please challenge those assumptions, but I feel that any super huge transformational targets appear less likely because when you think about what insurance companies are doing, they seem to have refound love for asset management when you look at Generali's takeover, for example. I wouldn't imagine any of the insurance companies to part ways with their asset management arm. Secondly, because of retail regulation, I think buying somebody's captive distribution, like, you know, some competitors have done, is probably also less interesting at this point in time.
I think some of the standalone asset managers that had cost income ratios, you know, in the mid to high 80s, last year, I think given that markets have been nicer than I think any of us had hoped, I think there's probably also less pressure for them to, you know, be open to any discussions. When you really look at large scale M&A, which we scan and we spend enough time with, you know, all of you bankers and so on, but I think it just appears less likely that something, you know, which represents value for our shareholders, comes to market. Therefore, what we continue to focus on is to the point you made, anything tech-related, digital assets-related, but that's not going to break the bank from a cost perspective.
remain focused on alternative asset managers, primarily for private credits, for direct lending. You know, when it comes to infrastructure or real estate debt, that's also something which you already have, but could probably do more of. That's probably also an area in which, you know, I could imagine some inorganic growth. Again, from a, from a, pure so like, you know, price tag perspective, these are all, you know, not in a, in a sphere that would deplete the excess cash we have. If any of you feel that I'm missing something, you know, please reach out, because obviously, while you should do M&A, not talk about it, obviously we wanna look at all options, that's the current view we have of the opportunity set out there.
Thank you, Bruce.
Perfect. Very helpful. Thank you.
Ladies and gentlemen, that was the last question. We will hand over back to DWS for any closing remarks.
Thank you very much, everybody. I can only offer you to reach out to the IR team if there are any other questions appearing. Otherwise, I wish you a fantastic day. Thank you very much, and bye.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.