DWS Group GmbH & Co. KGaA

Ladies and gentlemen, welcome to the DVS Group Q3 2025 results with Investor and Analyst Conference Call. I'm Sergan, the Chorus Call Operator. I'd like to remind you that all participants will be in listen-only mode and the conference being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and then 1 on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Oliver Flade. Please go ahead.

Operator, thank you very much and good morning to everybody from Frankfurt. This is Oliver Flade from Investor Relations and I would like to welcome everybody to our earnings call for the third quarter of 2025. So before we start, I would like to remind you, as usual, that the upcoming Deutsche Bank analyst call will outline the asset management segments results, which have a different parameter basis to the DWS results that we're presenting now. I'm joined, as usual, by Stefan Hobbs, our CEO, and Markus Kobler, our CFO. Stefan will start with some opening remarks, as well as the deep dive on digital developments, and Markus will take you through the main part of 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. And I would also like to remind you that the presentation may contain forward-looking statements which may not develop as we currently expect. I therefore ask you to take note of the disclaimer and the precautionary warning on forward-looking statements at the end of our materials. And with that, I will now pass on to Stefan.

Thank you, Oliver. Good morning, ladies and gentlemen, and welcome to our Q3 2025 earnings call. As this is last quarterly update before concluding our three-year plan, I hope you can see the progress we've made over the past quarters, not only in our strategic initiatives, but also clearly demonstrated in our numbers. We said we would deliver on our long-term financial targets, and we're now on the final sprint to the finish. At the same time, we continue to invest for the long-term. something you will see reflected in today's digital deep dive. But before we get to that, let me start with the numbers. Our earnings per share came in at €1.10 this quarter. Assuming a similar EPS in Q4, we'll get to an EPS in the 420s by year end, exactly in line with our bridge from last quarter. On top of that, the seasonal performance fees from our flagship fund, Concept Kaldemorgen, are expected to contribute meaningfully in Q4. With this seasonal uplift still to come, we have a clear path towards our €4.50 EPS target. Turning to the highlights from the quarter. Long-term net flows were €10.3 billion, reflecting a solid quarter and continued investor confidence. Reported revenues came in at 754 million euros, up 10% year-on-year and 1% quarter-on-quarter. Net income rose to 219 million euros, an increase of 30% year-on-year and 2% quarter-on-quarter. Our cost-income ratio improved to 57.7%, a reduction of 6.6 percentage points year-on-year and 1.5 percentage points quarter-on-quarter. We also marked an important milestone with receiving the necessary licenses to open our new office in Abu Dhabi. Strengthening our regional presence and client engagement in the Middle East reinforces our position as the preferred gateway to Europe for global investors. With that, I will hand over to Markus, who will take you through the details of our financial performance.

Thank you, Stefan, and good morning, ladies and gentlemen. Let me start by saying that we delivered an improvement across all, and I would like to reiterate, all key financials in the third quarter, which is something we are very proud of. Starting at the top left, long-term assets under management totalled €935 billion, up 5% quarter-on-quarter, predominantly driven by net flows and market appreciation. Total assets under management stood at 1 trillion and 54 billion euros, which is a 4% increase quarter-on-quarter. Moving to the top right, revenues increased to 754 million euros, a slight increase from Q2, and 10% higher compared to the third quarter of 2024. On the bottom left, costs amounted to 435 million euros, down 2% quarter on quarter. Thanks to our active cost management approach, the cost income ratio improved to 57.7%, down 1.5% each point quarter on quarter, and 6.6% each point year on year. As a consequence of operating leverage, we report a 30% net income increase versus Q3 2024, reaching 219 million euros. This was achieved despite a higher tax rate this quarter, reflecting the remeasurement of deferred tax assets following Germany's corporate tax reform starting in 2028. Let me now share some insights into the client dynamics during Q3. In Q3, we saw strong business momentum with clients increasing their market exposure to more liquid offerings while remaining cautious overall. This shift reflects confidence in our product range and adaptability to market conditions. Overall, we reported net flows of 12.1 billion euros and long-term net flows of 10.3 billion euros, underscoring the enduring strength and resilience of our diversified product suite. We were able to retain positive flow momentum across all client segments, capturing our clients' demand for risk management and diversified strategies. Long-term retail flows stood out, with €9.3 billion of net flows marking the 11th consecutive quarter of positive flows. We also saw growing demand for discretionary portfolio mandate solutions and ongoing industry transformation and high market volatility. Long-term institutional flows were positive at €1 billion, mainly focused on high-margin strategies, including infrastructure and LRA. These were partially offset by two large runoff redemptions. Key themes for investors are cost efficiency, customization, and capturing illiquidity premiums in times of decreasing rates. Furthermore, we achieved positive long-term net flows across all regions except APEC, reflecting the strength of our global franchise. In APEC, the flow picture was impacted by one client's corporate decision to insource their investment capabilities. EMEA, including Germany, accounted for more than 10 billion euros of long-term flows, demonstrating strong client engagement across the region as clients are increasingly receptive to European investment opportunities. The U.S. region recorded 0.3 billion euros in long-term net flows. Client demand further shifted toward highly liquid short-duration products, especially in U.S. fixed income. Moving to the quarterly highlights within our active business. In the third quarter, our active assets under management stood at 453 billion euros a 2% increase quarter-on-quarter, primarily driven by positive market impact, particularly within active equity and fixed income. While the flow picture in active remains challenging, it has been a quarter of gradual improvement with €0.3 billion in net outflows, which outlines encouraging underlying momentum, particularly in fixed income. We continue to record positive flows into SQI, our bright spot, with 1.5 billion euros in the third quarter and almost doubling net flows year-to-date to 3 billion euros, with retirement products being a key contributor. Fixed income returned to positive net flows of 0.2 billion euros, mainly driven by significant mandate top-ups, as well as our top-selling DWS floating rate funds, which continue to attract strong inflows. We further see increasing positive momentum into credit funds. Although our equity business reported outflows of 0.6 billion euros, momentum for active equity is improving, especially in Germany. Style and thematic equity funds such as DWS Invest Artificial Intelligence and DWS Invest Critical Technologies continue to see steady inflows. Multi-asset saw outflows which were largely driven by two large low margin redemptions. Excluding these effects, the flow picture for the broader multi-asset platform remains stable. We grew our newly launched active ETF offering, which continues to gain traction with clients, reflecting the client's confidence in our approach. This demonstrates our ability to innovate and bridge our active and passive capabilities, an area where we see significant long-term growth potential. We further plan to launch the X-Trackers Floating Rate Notes Active Usage ETF in Q4 2025. Moving now to our Xtrackers business. After a challenging second quarter, our Xtrackers business has regained strong flow momentum, reaffirming its position as our key flow contributor. Our Xtrackers business delivered net flows of €10.3 billion marking the 11th consecutive quarter of positive flows. Asset under management increased to 376 billion euros, up 9% quarter on quarter. The main flow contributor was our usage business, which delivered net flows of 9.4 billion euros. This was mainly driven by equity ETFs, especially by our top seller Xtrackers MSCI World Financials. Our mandates and solution business delivered 0.8 billion euros in net flows, driven by a mandate win in Germany, as well as continued flows into our scalable MSCI AC World Extract Consumers ETF. Our U.S. retail funds, also known as U.S. 1940 Act, saw net flows of 0.2 billion euros in the third quarter, maintaining its positive trajectory. Our focus campaign, Think Outside the US Box, concluded successfully and our US platform surpassed 29 billion US dollars in AUM for the first time ever. Overall, we are confident in our strategic development and our flow momentum has returned after a challenging Q2. As Stefan mentioned in previous quarters, our multi-year growth plan is focused on accelerating digital distribution, expanding our regional footprint, and scaling our active offering marks a key milestone in Xtracker's growth journey. As an example, in Q3, we expanded our strategic footprint through two new digital distribution partnerships in Switzerland and Sweden, driving further expansion across key European markets. Let me turn to our Q3 highlights for our alternatives platform. In Q3, Our assets under management totaled 107 billion euros, remaining stable versus the previous quarter. Our alternative business delivered overall net flows of 0.3 billion euros in the quarter, with infrastructure remaining the growth contributor within our alternative platform, followed by liquid real assets. Infrastructure contributed 0.4 billion euros of net flows, largely supported by fundraising efforts across various strategies, such as our P4 fund and our infrastructure debt strategies. They continue to generate positive momentum and position us for future growth. We further continue to benefit from strong investor appetite for the European transformation. In liquid real assets, flows remained positive in the quarter, recording 0.3 billion euros. We saw a momentum shift in client sentiment with increasing levels of renewed interest in core tailored strategies, particularly in listed real estate and infrastructure. The sentiment for real estate remains challenging. We report outflows of 0.6 billion euros in Q3 as traditional real estate strategies face continued pressure this quarter. Throughout the third quarter, we built on strategic initiatives focusing on expansion in real estate debt and launched our second vintage property debt strategy in Europe. Our private credit platform build-out is progressing steadily. During the third quarter, We finalize the number of key hires that strengthen our capabilities, ensuring we have the right expertise in place. In parallel, we have kicked off a series of roadshow activities to engage directly with investors and showcase our differentiated approach. Let me now move to our revenue development. Total revenues increased slightly quarter on quarter at 754 million euros and marked a 10% increase year on year. Management fees increased by 4% quarter on quarter to 655 million euros. This was largely due to higher average assets under management, mainly coming from active and passive businesses. Performance and transaction fees totaled 50 million euros, down 14% versus Q2, mainly due to lower contributions from real estate performance fees, partly offset by increased transaction fees in EMEA real estate. As Stefan already mentioned, performance fees from our from one of our flagship multi-asset funds, concept Karl De Morgan, are expected to contribute substantially during the fourth quarter, currently standing at the high double-digit euro number. Other revenues amount to 48 million euros, which reflect a decrease in our fair value of guarantees and include 21 million euros from net interest income and a 16 million euro contribution from harvest. Moving to our cost development. I am very proud of the proactive and disciplined way of managing our resources and our cost base at DWS. And the Q3 outcome is another testament to that. In this quarter, total costs declined by 2% quarter on quarter to 435 million euros, despite higher volume-based costs and ongoing investments. It keeps us on track for essentially flat costs in full year 2025. Compensation and benefit expenses were managed prudently, reflecting a 2 percent decrease from the previous quarter, primarily due to lower retention-related expenses. General administrative expenses also went down slightly and stood at €218 million despite rising AUM in Q3. As a result of these concerted efforts, our reported cost-income ratio improved by 1.5 percentage points versus the prior quarter, now standing at 57.7%, being significantly below our full-year 2025 guidance of less than 61.5%. Again, this outcome reflects disciplined cost management by driving revenue growth. It provides us with meaningful capacity to invest into future growth initiatives without compromising our profitability. Handing now over to Stefan for a deep dive on our digital strategy.

Thank you, Markus. Now let's take a step back from the quarterly numbers and talk about how we are positioning DWS for the decades ahead by building the digital foundations for the future of finance. When you do a deep dive on digital, you always run the risk of sounding too abstract or heavy on buzzwords. So let me start by underlining that our build category is not about hype. It is about disciplined execution like everything else we do. At our Capital Markets Day in 2022, We introduced our digital priorities and set specific milestones. We brought in the right caliber of talent to drive this transformation, most notably Rafael Otero, who joined us to oversee technology and operations. Rafael's deep experience in payments and fintech has been instrumental in building our digital foundation. Three years later, we have been delivering on our plan as promised. I will touch on a few of the specific initiatives that we are currently working on in just a moment. Our focus now lies on scaling three key areas, embedded investment solutions, digital assets, and artificial intelligence. We believe these are the digital developments with the greatest potential to redefine asset management and drive shareholder returns. Allow me to share an analogy that captures how we think about the future of finance. Think about your house or your apartment. You have electrical installations to ensure your lights turn on. There's a good chance that the main electric wiring was built long before you moved in and will stay in place for many years to come. We like to think of embedded investment solutions as the electric wiring of your home, the connections that keep everything running. At DWS, these are the digital links that let our partners connect directly into our products and integrate them seamlessly into their own platforms. You simply expect those wires to work, and you wouldn't replace them unless you absolutely had to. Now, every once in a while, a new material or standard is invented, like smart grids or renewable energy systems, transforming how the infrastructure works. That is how we see digital assets, a new way of representing asset ownership with currencies, stocks, bonds, and funds moving onto blockchain. And like any new standard, success depends on trust and scale. Scale to produce at volume, and trust built on credibility, regulation, and the confidence that investors' assets are secure. And finally, you have what flows through those wires, the energy or signals that make everything function. This is how we see artificial intelligence. as the intelligence shaping and optimizing what flows through the system. AI can transform how we operate, enhancing alpha generation, improving efficiency, and reducing the cost to produce. This layer evolves quickly, and AI is attracting substantial excitement right now. Nevertheless, at DWS, we are focused on generating sticky recurring revenues and annuities represented by the wiring underneath. the infrastructure and trust layers which stay the same. That is why we are focused on building those foundations through embedded investment solutions and digital assets, while using AI to enhance and transform the products flowing through them. Let's take a closer look at each. Let's start with embedded investment solutions. Digital channels are becoming the dominant gateway for investors. We see this shift clearly at DWS with around one-third of X-Tracker's AUM coming from digital platforms. This brings both opportunity and challenge as products become more embedded. Product providers risk turning into a commodity, while platforms own the client interface. You first heard us talk about this concept during our Q2 call last year, using the example of how Amazon or PayPal use embedded payment services of Deutsche Bank without the end clients noticing. We describe this as operating in a little B2B2C environment with the first B being the little or less relevant B. The same shift is happening in asset management. Investors will still want exposure to US stocks, to German mid-caps, but how they get that exposure may soon become the commodity. At the same time, Customers expect hyper-personalized investment solutions that need to be integrated into their daily lives whenever they need it. That is where embedded investment solutions come in. They are the invisible infrastructure that powers investment platforms and digital channels behind the scenes. Our goal is for DWS to provide the trusted, indispensable IT infrastructure that connects investors seamlessly to products and capabilities wherever they invest. We've already made strong progress in building an IT platform that integrates our investment intelligence directly into client systems. Our first APIs are live, and we've onboarded our inaugural client who is leveraging the platform to deliver individualized asset management solutions. Additional clients are already in the pipeline. Looking ahead, our focus for the next years is on scaling quickly and building a true platform business. For that, we are currently focusing on further developing our IT platform to deploy additional DWS capabilities as a service. Moreover, we aim to establish a partner ecosystem that allows us to offer investment solutions in a modular and flexible way, adapting to client needs across different channels. All of this contributes to our long-term vision to embed our investment expertise seamlessly into both individual and institutional investor portfolios. Let's move to digital assets, where we have already translated a challenging vision into tangible progress. Over the past three years, DWS has established a Swiss-domiciled ETC platform offering physically backed Bitcoin and Ethereum ETCs, that give investors secure and convenient access to crypto markets. And when it comes to stablecoins, I guess, when we first spoke about this at the Capital Markets Day in 2022, it must have sounded like a pretty bold vision to you, as we're quite early with this topic. Today, we are proud to say we delivered on it. AllUnity, our joint venture with Galaxy Digital and Flow Traders, launched EuroAU, the first fully regulated Euro-denominated stablecoin out of Germany. The joint venture stands for expertise in blockchain technology and asset management credibility. These achievements position DWS at the forefront of digital finance in Europe, combining blockchain innovation with the trust and governance of global asset manager. Looking ahead, our focus is on scaling and diversification. Within the next 18 months, we plan to broaden our crypto offering with a diversified crypto basket of leading digital currencies. In parallel, we will develop complementary products and services around all Unity's Eurostablecoin. Once agentic payments and machine-to-machine transactions become the norm, We want to be the backbone and enabler of that ecosystem, connecting traditional finance with the on-chain economy. Finally, we're preparing to tokenize our first fund with discussions already well-advanced with potential partners. Ultimately, our goal at CWS remains to become the trusted tokenizer, the party aiming to ensure each token truly represents what it claims to. When people talk about democratizing alternatives through tokenization, they rarely think about how to ensure the token they buy actually represents what they think they are buying. Tokenization of real-world assets is not easy. While several companies can handle the technology, few can actually bring real assets on-chain in a way that unites technology with legal, compliance, and regulatory expertise while ensuring investor protection. That is where DWS has an edge. As a fiduciary asset manager, we combine precisely those capabilities, positioning us as the credibility layer of digital finance and the bridge between real-world assets and the digital economy. Finally, let's turn to artificial intelligence, which optimizes the way the system functions. For us, AI provides the potential to enhance the way we work, to deepen investment intelligence, make our products more efficient and effective, and ultimately improve client experience. Like many peers, we are testing and experimenting broadly. Our teams are using AI productivity tools, and we are engaging with our Chinese joint venture, Harvest Fund Management, where the use of AI in asset management is already well advanced. We are in close touch with leading players across the field, and so far, most of what we see at DWS and across the industry has been in efficiency gains rather than alpha generation. But we believe this to be the necessary first step in building long-term capabilities. Over the next two to three years, we will focus on creating a data platform with integrated AI capabilities and launching an AI companion that supports and challenges portfolio managers in their daily decision-making, based on trained and observed behaviors. When it comes to our long-term ambition around AI, we are distinct from many others in the market. We are less focused on a probability-driven, what is the most likely answer. Instead, we're doing the exact opposite. Not most likely answer, but rather, What is the question or perspective that no one has thought of before? As such, we are not competing with the tech industry to build AI models. That is the domain of tech giants. We are focused on tapping into that new technology to elevate what DWS does best, disciplined, insight-driven asset management. Our real advantage comes from decades of proprietary investment data the cumulative decisions of nearly a thousand portfolio managers across asset classes, market cycles, and regions. By combining that knowledge with machine learning and generative AI, we hope to scale human insight and connect the dots others may miss. Our best portfolio managers are the ones who ask the questions that have not yet been asked. Imagine a proprietary AI model that challenges conventional thinking in markets, a sort of digital Klaus Caldemorgan on steroids. We see this as the true opportunity of AI in asset management, human plus machine collaboration, not replacing judgment but sharpening it. In the long run, we believe AI will be a key enabler of alpha, asset growth and cost efficiency, helping DWS stay at the forefront of intelligent investing. Hopefully, this gives you a clear picture of our overall vision for digital channels, digital assets, and AI. Together, these initiatives are differentiating DWS and embedding us more deeply into the digital architecture of our clients and the overall financial systems. They're building lasting value that will sustain DWS well beyond this strategic cycle. So to wrap up, In the big scheme of things, the 2025 earnings per share target may appear to be just a milestone. However, for us as a management team, it is paramount to deliver the €4.50 that we promised you. We are confident we will reach our full-year targets now well positioned to deliver 10% EPS growth in both 2026 and 2027. Hopefully, today's update has provided confidence not only in our ability to meet our short-term goals, but also in the investments we are making to secure our long-term growth. We are now concluding our sprint to the finish, executing with the same discipline and consistency that you expect from us. And now, handing over to Oliver for Q&A. Thank you.

Thank you very much Stefan and operator. We're ready for Q&A now. And if I may just remind everybody to limit yourself to the two most important questions. That would be very kind. Thank you very much.

Yes, we will start with the question and answer session. Anyone who wishes to ask a question may press star and the one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Anyone who has a question may press star and one at this time. And we have the first question coming from Hubert Ayam from Bank of America. Please go ahead.

Hi, good morning. Thanks for taking my questions. I've got two of them. Firstly, Stefan, thank you very much for the overview on digital and AI. Can you tell us how much investments are you putting into them across all three pillars? And also talk about the timeline for these initiatives to start paying off in terms of revenues, particularly around the digital assets and investment solutions side of things. The second question is on P4. I was wondering if you can give us a further update on it in terms of when you expect it to close. Should we expect it later on this year or Q4 or next year? And it seems like also you had some inflows into it in the quarter. So just wondering where AUM is or commitments are in that fund today and what your target is for the fund. I think the last time we checked it was between like $4 to $5 billion. Just wanted to confirm these numbers. Thank you.

Hubert, thank you. I will actually take both starting with P4 because that's probably the shorter and easier one. So firstly, we do not need any fundraising of P4 to reach our €4.50 EPS, so that we'll get to just with one rate plus concept-guided model. Now, our ambition to get to €4-5 billion, that remains intact. The question is simply how many investors will come in this year and how many will wait for the final close, which is Q2 2026. What we currently see in these types of large private equity funds is that there's a very barbed way of investors coming in. They come in very early to get discounts or at final close, and there's very little upside to come in in between. So what seems to be the case right now is that people observe how we're investing. We just signed a couple of other investments for P4, just seeing portfolios, seeing what we do, and then potential come in for the final close. So therefore, we're still fully committed, fully confident in reaching the $4 billion to $5 billion overall. How much of that comes in Q4 versus Q2 next year remains to be seen. And I think everyone remembers that there's going to be big catch-up management fees, like dating back to August 2024, when that flow comes in. Now, the first question, which I think is a pretty broad question, and also for all of you smart folks out there, we would love to get your feedback and see what questions you ask. So if you follow up with investor relations on those three themes, so embedded investment solutions, digital assets, and AI. I would actually personally try to join as many meetings as possible and bring some of the experts because, again, we'd love the challenge and want to see what questions you're asking. There's going to be some sort of prize for the best, smartest questions in Berlin where many of the smart folks sit. Now, question on investments and timelines. So how we invest in those three is actually quite different. So embedded investment solutions is our own folks in sitting in IT mostly. So we have a team of like two dozen, a little bit more, it's like, you know, close to 30 really smart people, mostly sitting in Berlin and London that are working on that. They are folks that have been working in API world for most of their lives. Not that many actually have as a management experience, many of them's like FinTech background, but those are people Coding working on DWS payroll. The investment isn't that significant. I mean, it's smart people coding, but it's not that we are buying massive licenses. It's really an API platform with intention to then deliver our own services. But I think that's relevant. Also, in-source services delivered by others, which we will then bundle and deliver to our clients. um for digital assets the investments are mostly through all unity so in that case it's basically an equity investment which you know to some extent translates into human labor and and cost at the level of all unity but therefore that you wouldn't see currently in our in our cost base but it would be an equity investment obviously we have plenty of people at dws sort of contributing to that but the full-time employees sit with all unity um ai is again different. So obviously we have a few people in tech and data. When I say a few, it's actually like a mid to high double-digit number of people that are fully dedicated to that. But then that's obviously tooling for everyone at DWS. So most of our folks have access to AI tools and there's obviously licensing costs and so on. So therefore for AI, I think we can maybe quantify it at the next earnings call. It's not gigantic, but it's a combination of license costs and then some dedicated folks, but then everyone sort of contributing a percentage of their time to AI. When it comes to timeline, I mean, some of those milestones are quite specific. So for digital assets, we said what we do in the next 18 months. For embedded investment solutions, we are pretty much live. I mean, it will continuously be improved. There will be more services being added. but we have our first clients, so the first revenues will come in. AI remains to be seen. There will be efficiency gains, but for that to be contributing to revenues may take some time. Overall, I think it's difficult to anticipate, I don't want to start speculating, how meaningfully that will contribute to revenues and by when. I think the way that we think about it, and again, happy to take any and all questions on it, is What is the total addressable market for the respective area? What will the future market structure look like? So is it going to be an oligopoly? Will there be many players and so on? And then third, what does it take to win? And therefore, can we win? I think for embedded investment solutions, the total addressable market is gigantic. You can debate how big, but I think if platforms source products through these APIs, it could be a lot of service, like sticky fees, sticky revenues, service fees come in. I think for payments for stablecoin, I mean, who knows what the total addressable market could be, right? It could be gigantic. For tokenization, which I think is a key feature that so much hasn't attracted a lot of attention really across the industry, what are the revenues generated by custodians, by clearinghouses, by exchanges and so on, which I think could all be disrupted once.

Yes. Good morning, everyone. Congrats for the company is going to have an investor on the 18th of November. Are you going to issue a press release or anything like that to renew and reiterate what you just said, reiterate or maybe add new target on your deep dive, which was indeed very interesting. You just mentioned that you had had already some clients in the inventing investor solution. So what type of profile do you get in that type of client? And, you know, are you actively pitching for partners in that area? And maybe a little bit, if you can give us even a little bit more color of the tangibility of that. Thank you.

Thank you, Jacques-Henri. I think I will again take both. So the Deutsche Bank Investor Day is on November 17th. And I will actually present the asset management segment. We will not have new targets. I mean, Deutsche Bank is likely going to have potentially until 2028. And then, you know, we may have to like at the year 28. But our current financial targets of 10% EPS growth in each of 26 and 27 from the jump off point of this year's EPS, that remains intact. And I don't see that changing or any additional targets being added. Now, on embedded investment solutions, the inaugural client is a wealth retail bank, private bank, that offers digital solutions and will simply insource asset management capabilities through our individualized asset management API platform. I think most of the clients initially will be these platforms, new brokers, private banks that all have digitally savvy consumer clients and clients, retail clients, and need to deliver as management services at that scale. I think over time, I would expect institutional investors to also be much more interested. Think about a pension plan. Think about a corporate that wants to provide pillar two solutions to their clients. You could see how they will just quite seamlessly insource those capabilities through an API platform in order to deliver to their employees. So I think over time, most of the, let's say, interaction between us and clients, I would expect to happen more and more digitally through this type of platform. Now, and again, happy to discuss in more detail as a follow-up, but the way you should think about it is there is a platform that integrates all of the capabilities that can be sourced internal, so obviously a bunch of things we produce, but can also be insourced from other asset managers. That is then integrated into what we show to our clients to our end clients. So we'll then essentially be a, well, a client facing layer. And, you know, that could be scaling quite, quite interestingly. But again, that's something that's going to play out over the next couple of years. Thanks, Jacques-Henri.

The next question comes from Angelique from JP Morgan. Please go ahead.

Good morning and thank you for taking my questions. Just two from me as well, please, on alternatives, both of them. So first of all, there was an announcement a month or so ago that Deutsche Bank is partnering with Partners Group and DWS for the launch of LTIPS. And I was just wondering if you can give us a little bit more color with regards to DWUS's role in this initiative, and also why, in your opinion, Deutsche Bank is not just going directly to you, their in-house asset manager, and requires a third party to launch these LTEs to their private banking clients. And second question with regards to private credit, You mentioned in your presentation that you are hiring a few people there. Shall we expect to see some inflows already from private credit origination in cooperation with Deutsche Bank in 2026? And perhaps a comment more broadly. I mean, we've obviously seen private credit managers being put much more in the spotlight over the past couple of months with some defaults in the U.S., What is your view with regards to sort of the risk-reward at the moment in the market when it comes to direct lending and origination? Thank you.

Thank you, Angeliki. I guess it's probably a good sign that there are not a lot of tough questions for our CFO who's relaxing too much. So the next question should also be addressed. So on the LTF, It's essentially teamwork between Deutsche's private bank partners group on us, in which we are, well, essentially, we are the one servicing the A firm. So we are the one setting it up, managing the LTF. But then the capabilities on private markets, partners group is providing. Now, we have to be honest. Partners group is a formidable, long-storied alternative asset management firm out of Europe. with great knowledge in private equity, in private credit, and so on, we simply do not have private equity or VC capabilities. So if you choose somebody who is then managing a sort of fund-to-fund of a variety of strategies, frankly, Partners Group simply has broader capabilities than DWS. And so it was a very amicable, well, collaborative discussion between Partners Group, us, and DB's private bank. I think over time, we want to develop those capabilities, and I think having that LTF2 structure is something which is going to come quite handy for us. I mean, overall, with our knowledge on retail distribution and our knowledge in alternatives, having those LTF structures for retail distribution in Europe is going to provide upside for DWS. Now, on private credit, we are progressing nicely, again, focused on Europe. As you know, once we are active fundraising, I can't really give updates. But based on very specific opportunities I see in private credit, I would expect this to start contributing pretty meaningfully in 2026. Team complete and everyone actively fundraising. So senior folks complete. We're still adding VPs and associates, but senior folks complete and actively fundraising. I think risk reward and direct lending, I don't want to be sort of the a person that's not involved in direct lending in the US making smart statements. I think risk-reward in direct lending seems to be somewhat exhausted, which is why everyone seems to be focused on asset-based finance. I think what we've recently seen is that understanding who owns collateral and ensuring that it's not pledged to multiple parties seems to be a skill set which is distinctly different from credit underwriting of corporates. So I don't know if asset-based finance is for everyone, but it seems that more and more focus goes towards that. But otherwise, not a lot to add to what very smart people in the US have said over the last couple of weeks. Thank you, Angeliki.

The next question comes from Nicholas Herman from Citi. Please go ahead.

Yes, good morning. Thanks for taking my questions. Just a quick follow up firstly on P4. I think I missed it. What volume of commitments have you now closed for P4? The questions that I had are on your 26, 27 targets, even very explicit on the building blocks there. But I guess looking at the consensus, it seems like the market is struggling, I guess, with the revenue part of that. And I guess it's also partly because 2025 is clearly also a high bar. with strong contributions from performance fees and from other income so I guess my question is what do you what is the market's missing. And I guess the subset of that is, does the current run rate of fair value guarantees make it harder to achieve those targets? But also, do your target, am I correct that your targets seem to imply, again, outsized performance fees in 2027? Is that correct? And then finally, just the requests. given the increasing importance of your closed-ended funds, it would be helpful if you could provide private markets funds. It would be helpful if you could provide us with periodic updates on fund performance for each of those key private markets funds. Thank you.

Thank you, Nicholas. Let me do these three questions. So P4, just to make sure that it gets across clearly. So firstly, we do not need any fundraise of P4 this year in order to reach the €4.50. We are still confident that we get to €4 billion to €5 billion overall. We're currently sort of in the twos. Now, what we've seen is that investors come in in a bothered fashion, either very early, so in the beginning, to get discounts, or at final close just to see performance of those assets being bought. Final close is going to be in Q2 2026. So plenty of discussions, plenty of due diligence and sort of happening. We just need to see how many choose to come in December, which is sort of calendar year, but not too meaningful to those investors, or come in at final close. Now, your second question on 26, 27, what is the market missing? I mean, I would obviously phrase it more modestly. I mean, Whatever assumptions you have are your assumptions. I wouldn't, you know, would be condescending to say that you're missing something. But let me just tell you how we are thinking about it. So when you look at the revenue run rate right now, we're getting like a little above 750 on average per quarter. So they just called it 3 billion to whatever plus whatever concept is going to contribute. So I think I think it's not heroic to assume that we'll get to 3.1 billion of revenues for this year. I think the one-eighth of cost, I think everyone sort of believes us, so it would get you to a PBT of 1.3 for this year. Now, when we promise 5.5, when we talk about 10% or target 10% EPS growth next year, what we previously said is that that would be 5.5% revenue growth, and about 2% cost growth. That was the underlying assumption when we communicated it. If you break it down into management fees, performance fees, other revenues, and cost, the way that we think about it is as follows. Our AUM in Q1 and Q2 was roughly 10 billion euros. Average in Q3 was sort of 10, 30, looking at markets, 34, 35. Obviously, markets have been on fire so far. So our current AUM is more like 1070, 1080. So I think when you think about the average AUM for the calendar year 2025, it will probably be in the 1030s on average in 2025. Now, when you think about the incoming AUM going into 2026, it doesn't require any heroic market development to kind of get quite close to 1.1 trillion euros. Now, if you believe our NNA assumption or net new asset targets for next year right so the 150 billion over three years let's just call it 50 for next year and if you believe that you would see that our average aum in the year 2026 would be around 113 right like a trillion 130 billion just based on where we stand today plus nna just by site with sideways moving markets without any market growth assumption for 2026. Now, 100 billion additional average AUM obviously would translate at the current margin into let's call it 250 million of additional management fees. Now, if you do the math, getting from 3.1, extra 5.5% is sort of 165 million. So now when you look at performance fees, I think this year we'll get above the 4% to 7% target Even if you assume that next year we will not quite get there, but be at the upper end of the 4 to 7, which I think would be conservative, but based on the PEEF 2 sales of assets. But if you want to assume that, you have quite some cushion between the additional management fee and the 165 that we would have to get to in order to have revenue growth of 5.5%. When you look at other revenues, this year was not special. I mean, harvest is performing really nicely. The contribution from harvest in Q3 was the highest since, what, Q2 2023. So we can discuss harvest. But I think that is going up with markets going up in China. The NII is stable. You mentioned fair value of guarantees. There was nothing special. I mean, the swap spread is still significantly negative. So you can call it a reserve. So I think the other revenues, my assumption would be for it to be similar next year to this year. That's how we look at it. Again, it would be arrogant to say that you're missing something, but this is how we think about the revenue growth next year. I think the cost everyone seems to believe of, which is why, you know, I mean, let's see what happens over the next couple of days, but that's how we think about the 10% EPS growth in 26 over 25 years. Last question on close-ended funds, happy to provide it. I mean, what we can say is that our close-ended infrastructure private equity funds are all top-quarter performance, but that's a good challenge, so we will add that next quarter. Thank you, Niklas.

Thanks very much. The next question comes from Pierre Shedville from CIC. Please go ahead.

Yes, good morning. Two questions on my side. You mentioned the new world regarding digital distribution, IA, etc. My question is on the old world, and particularly, how do you see the evolution regarding third-party distribution, ex-digital partnership? I mean with wealth management companies, things like that. And also the development of your presence within retail regional banks in Germany or elsewhere in EMEA, where currently we can see a kind of risk aversion, but that could change in the future. And are you still ambitious regarding this kind of old partnerships? My second question is on passive management. We can see that despite your efforts and also your dynamism on this part, we see that market share are quite sticky in this area. between the three major players. And my question was, when you talk about external growth, you always mention potential acquisition in Asia, but never, as far as I remember, in the passive management business where we still have some minor players. What is your view on gaining market shares in passive management with external growth. Thank you very much for your very interesting presentation.

Thank you Pierre. So Marcus and I were just smiling at each other because we have like an internal allocation of duties and work and you know your questions are also like in my remit so it seems that Marcus had it easier so please a lot of questions for Marcus next quarter. Let me do in reverse order So on passive, you're right. The market shares are sticky. In Q3, we sort of grew at our market share. I mean, is that dynamic or not? Probably not as we'd like because growing at your market share implies that you're sort of growing with the market, meaning you're average. And to all of the smart X trackers folks listening into the earnings call, obviously you don't want to be called average. So we want to see more dynamism going forward. And I think that's going to come from further digital distribution partners. So that's now in the 40s. I think last time we spoke, it was in the 30s. We just approved the next growth phase of the Xtrackers business, I think we mentioned last quarter. So we approved, what, like 20 additional salespeople for new regions. So that will grow. And our ETF as a service, active ETF and so on, gives us hope that we will grow above market like we've done in 2023 and 2024. We're not really looking at inorganic growth in the passive space, to be frank. I don't know if you would need it. I mean, I think our brand is pretty good and I would want to invest in our brand or further invest in our brand rather than integrate somebody else's brand, unless BlackRock wants to sell iShares, which appears unlikely. So therefore, I wouldn't expect any inorganic measures in the passive space. Now, your first question, let us be clear. I mean, the digital capabilities, and that's why I phrase it as such, are mostly for the next generation. I mean, we benefit from great work done by our predecessors. We are very happy to work hard so that the CFO and CEO of VWS in 2035 are happy with what we've done. I mean, I think we contribute earlier than 2035, but I think you understand the logic. the vast majorities of revenues for DWS stem from the traditional business. And obviously the biggest piece of it is our amazing retail franchise, specifically in Europe. So let's say traditional third-party distribution is the beating heart of DWS, just to be clear. I think we mentioned before that our disciplined CFO called it a whatever it takes. in his address to the franchise early in the year, meaning we basically approved unlimited resources, marketing folks, campaigns and so on for retail for 2025, which I think you see in the numbers. I mean, we talked about the positive momentum shift in active equity. In Germany, we are almost flat, right? 1.8 billion inflows in Q3. Unfortunately, 1.84 billion outflows. So we are slightly negative. But I think this quarter could be the one in which we actually turn positive in retail distribution equities in Germany. So this is by far the biggest focus that we have at DWS and will continue to be a dominant part of our franchise. Thank you, Pierre.

Thank you. As a reminder, if you wish to register for a question, please press star and one on your telephone. There are no more questions at this time. I would now like to turn the conference back over to Oliver Flade for any closing remarks.

Thank you, everybody, for joining today and for your continued interest in DWS. As you have seen, also our third quarter results, I think, highlight the resilience of our business in a still challenging environment, but it also reaffirms the good progress that we're making towards our 2025 financial goals and beyond. And with that, I would like to thank you again. Looking forward to any incoming questions on digital and other topics. We are around, and please let us know if there is anything that we can help with. Have a good day, and bye-bye. Thank you very much. Bye-bye. Bye-bye.

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