(Bloomberg) -- Stefan Hoops secured his perch atop DWS Group by putting out fires for Deutsche Bank AG. Now the lender is repaying the favor by stepping in to resuscitate an ailing private credit push he’s put at the heart of his strategy.
Most Read from Bloomberg
After months of negotiations, Germany’s biggest lender agreed to grant DWS, the asset manager it majority owns, preferred access to some loans originated by the bank. And into the bargain Deutsche Bank has sweetened the deal by shuttering DB Investment Partners, an investment manager it set up less than two years ago to target private credit, eliminating a competitor for scarce client money.
DWS will now get first pick on asset-based finance, direct lending and other private credit asset deals originated by the bank. It’s a move designed to persuade the world’s largest pension and sovereign investors to eschew the established giants of private credit in favor of a fledgling platform that has so far struggled to raise capital.
While Hoops had little experience prior to joining DWS as CEO in June 2022, he has significant experience is asset based finance. During the aftermath of the financial crisis, Hoops oversaw Deutsche Bank’s structured solutions unit in North America, reporting to Ram Nayak, now co-head of the investment bank and key counterpart in Hoops’ negotiations on the private-credit partnership.
The commitment speaks to the challenges faced by DWS’ push into private credit, which was dealt a further blow when it lost out in a recent auction to buy a life insurance business that would have given it ready access to a vast pool of assets and the opportunity to match the insurer’s long-term liabilities to policyholders.
The two moves by Deutsche Bank highlight the depth of the crisis at DWS’s private credit unit, which Hoops previously touted as a cornerstone of his strategy but has since failed to meet goals despite major efforts to boost it, including star hires.
DBIP hasn’t raised any money since launching in late 2023, according to two people with knowledge of the matter. The unit employed around a dozen people in London and Singapore and their jobs have been put at risk on Tuesday, another person with direct knowledge the move said, declining to be identified because they’re not authorized to speak publicly.
The unit’s CEO Raheman Meghji, previously a managing director at Deutsche Bank, is setting up his own investment firm together with two DBIP colleagues, another person with knowledge of the matter said. A spokesperson for Deutsche Bank declined to comment on the potential job cuts. Meghji declined to comment.
The agreements are testament to Deutsche Bank’s faith in Hoops, who in 2016 caught the attention of Christian Sewing, then a board member and now chief executive officer. The young executive helped soothe clients that were spooked by the threat of regulatory settlements that risked engulfing the lender.
Sewing doesn’t see “any slowdown on the private credit side,” he said at a conference hosted by Morgan Stanley on Wednesday, when asked about Deutsche Bank’s business. “The most important thing is only that we are not losing our underwriting standards,” he added.
The new partnership could be a “masterstroke for both DWS and Deutsche Bank, that could reshape market perceptions of both firms,” said Johann Scholtz, equity analyst at Morningstar. Having an “in-house deal originator could serve as a competitive edge for DWS, enhancing its appeal to clients and driving superior returns,” Scholtz added.
Still, it remains to be seen whether an agreement that provides DWS with a pipeline of potential deals will help secure an edge when the unit’s biggest challenge has been to raise capital from investors lured by alternative asset management giants including Blackstone Inc., KKR & Co. and Apollo Global Management Inc.
Hoops was brought in to steady the ship after a period of tumult surrounding allegations that the investment firm overstated its green credentials. The faltering private debt business is Hoops’s biggest challenge yet.
Are We Exclusive?
Deutsche Bank and DWS made a first attempt at establishing an exclusive private-credit partnership in 2019, launching a direct lending fund that raised €700 million ($763 million), according to people familiar with the matter. Then, Deutsche Bank decided to set up DBIP and launch a second private credit fund itself.
DWS, meanwhile, struggled to attract sizable commitments for its own private credit fund targeting €1 billion, Bloomberg News reported in January. At the same time, some senior sales staff have been heading to the exit over the past year because the pay is higher at US rivals.
Another setback for DWS in recent weeks was that it lost a bid to buy German life insurance consolidator Viridium Group. On Wednesday, a consortium including Allianz SE and BlackRock Inc. said it’s acquiring Viridium in a transaction valuing the company at about €3.5 billion including debt.
A deal for Viridium would have given DWS access to a vast pool of assets to match Viridium’s long-term liabilities to policyholders. DWS is still considering partnerships and acquisitions to get hold of insurance portfolios, a person with knowledge of the management’s thinking said.
Alternatives Lag
Hoops also scored some wins at DWS, including settling with US regulators probing allegations of greenwashing. He oversaw a 21% rise in total assets under management to more than €1 trillion at the end of December, driven by inflows into lower-margin passively managed funds. The company’s shares have outperformed key rivals since his appointment, albeit with Germany’s radical spending plans providing a recent boost.
But stronger performance at group level has masked some weaknesses in its alternatives business, which failed to meet a three-year goal of 10% compounded annual growth set by Hoops in 2022. The division has seen its assets drop more than 10% since he took over, in part due to a global real estate slump. The only bright spot of the alternatives unit in recent years has been its infrastructure business, which has attracted consistent inflows.
“We have achieved most of the targets we had set out in 2022, and the share price seems to be reflective of that,” Hoops said in an interview. “The alternatives business has been lagging behind to some extent and we’re tackling this now.”
Indeed, Hoops has been taking matters into his own hands. Earlier this month, the 45-year-old executive removed Paul Kelly, the New York-based star hire who joined from Blackstone run the alternatives unit, from his management role after just two years in charge. The heads of the alternatives business lines now report directly to Hoops.
To be sure, it will likely take years to establish a track record for DWS’s private credit business to lure clients away from larger rivals. Still, a landmark spending package by the German government, which is set to unlock hundreds of billions of euros in debt financing for defense and infrastructure, could prove timely for DWS’s private credit ambitions in its home market.
--With assistance from Silas Brown.
(Updates with comments from Deutsche Bank CEO in fourth paragraph below Hoops photo.)
Most Read from Bloomberg Businessweek
©2025 Bloomberg L.P.
