Stefan Hoops had long known he was in the running to take over from DWS, Deutsche Bank’s majority-owned asset manager besieged by allegations of green money laundering.
But a public police raid on the Frankfurt offices of both companies on Tuesday catapulted Deutsche’s 42-year-old body to the center of Germany’s latest unforeseen corporate catastrophe.
Hoops, a protégé of CEO Christian Sewing, will take over from the assaulted Asoka Wöhrmann next week, inheriting a business investigated by US and German authorities after a whistleblower accused DWS of misrepresenting how it used environmental, social metrics and government to analyze companies. through its investment platform.
The consequences of these probes have meant that DWS, which went public in 2018, has lost a fifth of its market value over the past year, although it recorded a record net profit of 782 million euros for in 2021. While both the asset manager and Deutsche continue to deny any misconduct, Hoops will be left with a bit of “cleaning up” to do when it comes to DWS’s reputation, in the words of a leading investor.
It will also have to deal with regulators on both sides of the Atlantic who promise to tighten rules on the ESG sector, an industry that has grown to just under $ 2.8 million in assets since 2019, but has had to deal with suggestions that companies are inflating their sustainability. credentials to attract capital or customers.
The announcement on Wednesday morning of Hoop’s rise was not received with euphoria. Shares of DWS closed down 6.2%, while Deutsche was down 0.8%.
“The problem is, Hoops [who spent most of his career in sales] he has no experience in asset management, ”the investor said, adding that the change to the top of DWS may be just the“ first step ”in a broader reform of the company.
“Instability in DWS senior management is an issue, especially for institutional clients and consultants advising them,” said a former senior DWS executive.
Credit Suisse analyst Haley Tam said she saw the change in leadership “announcing a period of uncertainty for DWS’s strategy.”
Tam added that the measure “could even raise questions about its future as an independent asset management company”.
A person close to both companies said that Hoops’ nomination, who joined Deutsche as a graduate in 2003, would not see DWS “return to the mother ship” and that his goal was to become one of the top 10 world asset managers remained. intact.
But Hoops has yet to convince customers and shareholders that DWS is about to enter calmer waters, even as it becomes the sixth person to lead the asset management business in a decade, a long time. which a succession of managers left after not being able to stop an exodus of customers. .
Nicolas Moreau, Wöhrmann’s predecessor, was fired in 2018 a few months after guiding DWS through his roster. Moreau had promised that the group would attract 30 billion euros a year of additional assets under management, but customers continued to withdraw their savings from the group’s funds and the price of its shares fell after the initial public offering.
Under Wöhrmann, DWS had begun to attract customers, with € 47.7 billion in net revenue last year. But greenwashing’s investigation, along with questions about a 160,000-euro payment made by a customer to Wöhrmann and his use of a personal e-mail address for business purposes during his stay at Deutsche, eventually cost him work.
Some of the recent DWS issues will start with Wöhrmann. In an internal note sent Wednesday morning, and seen by the Financial Times, the outgoing executive referred to allegations against him that “have left their mark”, and people close to the company said Deutsche had been looking to replace Wöhrmann since of its staff. the conduct was questioned.
But others involved in the greenwashing debacle remain at the heart of DWS, most notably supervisory board chief Karl von Rohr, whom complainant Desiree Fixler said she emailed directly in March last year. U.S. officials say Deutsche, whose executive board also includes von Rohr, violated an agreement by failing to report its complaints in a timely manner.
“Karl von Rohr, how are you still in your seat?” said Fixler. “Christian Sewing and Stefan Hoops need to clean the house. That means senior management and the executive council have to leave. “
He added: “This is both greenwashing and a totally rotten corporate culture within the top levels of DWS and Deutsche Bank.”
Complainant Desiree Fixler said she sent an email to the head of the supervisory board Karl von Rohr directly in March 2021 © Stephen Coke / Shutterstock
So it could be “a matter of time before he too has to leave,” said von Rohr’s chief investor, who was in charge when PwC was asked to conduct a controversial investigation into the allegations. , who as recently as April said he was “very pleased” with the performance of Wöhrmann and his team.
Deutsche declined to comment, but a person close to the bank said von Rohr had followed a “standard practice” for investigating internal complaints. DWS declined to comment.
Hoops, a passionate basketball player, will also face questions about why, if the DWS ESG criteria are up to par, the group revised them to the point that it only recorded 115 billion euros in “assets. ESG “in 2021, 75 percent less than a year earlier, when it stated that 459 billion euros in assets were” integrated ESG “.
“It simply came to our notice then. . . but I was always amazed that DWS made such bold statements about ESG, “said an industry consultant about the company. “.
The rest of the asset management industry will also be shaken by Wöhrmann’s resignation, according to Magdalena Senn of Bürgerbewegung Finanzwende, a non-profit organization pushing for tighter regulation of financial services.
“Suppliers of financial products advertised as sustainable will now look closely at whether their own investment criteria meet what they promise,” he said.
Hoops spent Wednesday morning talking to his predecessor and the DWS management team and compiling a list of key customers to call and reassure. No one at DWS or Deutsche has been accused of illegal acts of greenwashing, people close to Hoops wanted to point out, although the probes could take years to reach a conclusion.
But, as Hoops told his LinkedIn followers last year, ESG’s “data requirements and reporting standards” are keeping executives “awake at night.”
Additional report by Chris Flood in London