DWS Group GmbH & Co. KGaA (DWS) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the DWS Group Q2 2024 Results with Investor Analyst Conference Call. I'm [ Sagar ], the Chorus Call operator. [Operator Instructions] and the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions]. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand [ it ] over to Mr. Oliver Flade, Head of Investor Relations. Please go ahead.

Yes, operator, thank you very much, and good morning to everybody from Frankfurt. This is Oliver Flade from IR, and I would like to welcome everybody to our earnings call for the second quarter of 2024. Before we start, I would like to remind you that the Deutsche Bank analyst call outlines the Asset Management segment's results, which have a different parameter basis to the DWS results that we are presenting now. I'm joined, as usual, by Stefan Hoops, our CEO; and Markus Kobler, our CFO, and Stefan will start with some opening remarks, and then Markus will take you through the presentation. And for the Q&A afterwards, please could you limit yourself to the 2 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. 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. And with that, I will now pass on to Stefan.

Thank you, Oliver. Good morning, ladies and gentlemen, and welcome to our Q2 2024 earnings call. Over the recent quarters, we tried to describe our transformation journey by using imagery. We spoke about the ultimate super bear environment for DWS in 2022, talked about our steady climb up the mountain and called it a momentum shift last summer. We also [ aimed ] to provide utmost transparency on challenges like the ESG related allegations in our massive IT project. Knowing that we are viewed as a show me story, we categorized our businesses into reduce, value, growth, bid to explain where self-funding would come from, specifically where we would invest and how we are steering the different asset classes. While we will always remain disciplined on costs, tenaciously focused on implementation and will continue to strengthen governance and controls, we believe that our transformation journey is now complete. We feel that we've become a predictable company that is boring from a corporate news headlines perspective and an exciting case study for disciplined organic growth. In other words, while over the last few quarters, we worked hard to give you enough reasons why you should not own our stock, we understand that going forward we need to give you enough reasons why you should really want to own our stock. With our special dividend payment in June, we showed that we deliver on what we say. The next round of promise keeping is due end of 2025, which is the target date for reaching our ambitious financial targets. In order to provide transparency into our key levers to accomplish our 2025 targets and grow EPS beyond the current financial plan, going forward, we will provide in-depth insights into one specific aspect of our franchise per quarterly update. We will start with a deep dive into our client flow momentum today, which is a key component of our growing management fees. We will walk you through our global client franchise by client type, asset class and region to describe current client dynamics and our respective outlook. But before we get there, let me briefly summarize Q2, which Markus will go through in more detail. Overall, we are positive about today's numbers as they show continued progress on our path to deliver on our strategy. In a continuously challenging environment for the industry, we kept costs contained and increased our revenues. Our cost-income ratio stayed well within our guidance for the full year. We are particularly pleased with the composition of our revenues as the increase is driven by higher management fees. For our Active business, the beating heart of our franchise, we further improved our investment performance. The fee margin developed positively driven by market impact. We have to acknowledge that the flow picture looks mixed. As already mentioned during my speech at this year's AGM, we saw low double-digit billion outflows in the second quarter. Those were mainly driven by outflows in low-margin areas, specifically in 2 [ large ] insurance and one advisory mandate. On the positive side, our Xtrackers and Active SQI businesses continued to deliver strong net new assets, which helped to counter the outflows to some extent. Lastly, profit before tax and net income displayed healthy gains, which makes us comfortable to increase our guidance for the full year 2024. All-in-all, we are convinced that 2024 will be a significant step forward towards reaching our 2025 targets. More on that later on. But for now, I will hand over to Markus to explain our Q2 results.

Thank you, Stefan. Our second quarter 2024 results continue to underline the positive execution of our strategic plan with a quarterly increased adjusted profit before tax totaling EUR 249 million. The adjusted cost-income ratio further improved to 63.2%, being well within our guidance for 2024. For our long-term assets, we are reporting net outflows of EUR 6 billion, driven by 2 low-margin insurance mandates. Our investment outperformance ratio for 3 and 5 years further improved to 75% and 81% respectively. Thanks to our performance in the first 6 months, we have improved our financial outlook for the full year 2024. Moving on to the financial performance snapshot in the second quarter. Starting at the top left. Total assets under management decreased by 1% quarter-on-quarter to EUR 933 billion, impacted by outflows in low-margin products. On the top right, adjusted revenues totaled EUR 678 million, being up 4% quarter-on-quarter. On the bottom left, adjusted costs remained essentially flat quarter-on-quarter and totaled EUR 428 million, resulting in an improved adjusted cost-income ratio of 63.2%. The adjusted profit before tax continued to benefit from a positive operating leverage and increased by 8% to EUR 249 million. Let's recap on the market environment. The stock market's performance in 2024 further advanced, thanks to a continued optimistic market sentiment underlined by robust macro data and improved inflation data. In the second quarter, market tailwinds weakened as the U.S. economic growth slowed and global elections created headlines. Most asset classes moved sideways with equity performance being dominated by handful of technology companies. Sovereign yields remained at elevated levels despite the first rate cut in June from the ECB. Overall, the market environment remained favorable for our AUM development, which I will now outline. We reported EUR 933 billion of total assets under management at the end of the second quarter, being essentially flat quarter-on-quarter. Our assets under management were supported by a positive impact from markets and ForEx movements totaling EUR 11 billion. This impact was fully offset by EUR 19 billion of total net outflows. The Passive business continues to grow and stood at EUR 290 billion with contribution from UCITS ETFs, mandates and 1940 Act. Our Active asset class has benefited from continued market tailwinds in each product category, but were impacted by 2 large fixed income insurance mandate outflows. This brought our assets under management to EUR 433 billion. The market sentiment for alternatives continue to be challenging with assets under management remaining essentially flat at EUR 107 billion. Moving to our flow development. As Stefan will conclude today's results presentation with a deep dive on our client franchise and the underlying trends, I will do the groundwork and give you the status quo for the second quarter. A more detailed picture on our AUM and flow development can also be found on Slide 17 in the result presentation. In the second quarter, we reported total net outflows of EUR 18.7 billion and EUR 6 billion of long-term net outflows. Our strong client dynamic in the retail business was underlined by the sixth consecutive quarter of inflows in a row, which was mainly driven by our Passive franchise. The total outflows were driven by 3 high volume, low-margin mandates, 2 long-term fixed income insurance mandates and one advisory mandate. All 3 items were accounting for around EUR 23.5 billion of outflows and around EUR 5 million of annualized revenues. Continued strong momentum in Q2 for our Passive business, which reported net inflows of EUR 8.5 billion, driven by all businesses, UCITS ETFs, mandates and 1940 Act. In the first 6 months, our UCITS ETF business recorded inflows of EUR 14.3 billion, almost double the amount compared to the first 6 months in 2023 and reached assets under management of above EUR 200 billion. The strong inflows year-to-date are translating into a year-to-date flow share of around 15%, which puts us on the #2 spot by year-to-date inflows in the European UCITS ETP market. Our Active business continued to be impacted by the shift towards Passive and reported outflows of around EUR 13 billion, which this quarter were mainly driven by the 2 fixed income insurance mandate outflows. However, excluding the 2 mandates, our fixed income business would have maintained the good flow momentum from the first quarter and reported net inflows. We reported inflows of EUR 0.4 billion in our SQI business as our systematic solutions are currently capturing the upward trending positive market environment. For the first 6 months, we reported inflows of EUR 1.9 billion with DWS Funds Invest ZukunftsStrategie being the key contributor. The marketing alternatives continues to be challenging with EUR 1.4 billion net outflows driven by LRA and real estate. On a positive note, we reported net inflows in infrastructure of around EUR 0.2 billion with positive inflows throughout all regions and client types. Let us turn to our product launches. Our commitment to product innovations within the organization remains high. Since our Capital Markets Day, the number of our above EUR 1 billion funds grew by almost 20% and recorded inflows of over EUR 6 billion, mainly driven by inflows from our above EUR 1 billion funds in Xtrackers. We continue to grow our inflows through new funds since the IPO to EUR 62.6 billion with ESG products accounting for 42% of the fund launches. In H1 2024, we attracted around EUR 1.2 billion of ESG net inflows, which were mainly driven by the EMEA region, where the ESG demand remains strong, especially from retail clients. Article 8 and 9 products reported inflows of EUR 2.7 billion. Regarding our product launches, there are 2 highlights. In Alternatives, we are continuing to build our product offering and can report ongoing successful fundraises in new vintages of our direct lending and European infrastructure funds. Furthermore, to enlarge and strengthen our digital offering and competencies, we have established a joint venture called AllUnity together with Galaxy Digital and Flow Traders, which aims to launch the first BaFin regulated euro stablecoin in 2025. Moving on to revenues. Total adjusted revenues amounted to EUR 678 million in Q2, being up 4% quarter-on-quarter. Our management fee stood at EUR 613 million, up 4% quarter-on-quarter, benefiting from a continued increase in our average total assets under management which amounted EUR 934 billion. This quarter we had a positive impact of 0.4 basis points on our management fee margin, which stood at 26.4 basis points. Performance and transaction fees stood at EUR 10 million and remained at a low level. In this context, I would like to emphasize that we remain confident to reach our guided level for performance fees of 3% to 6% of adjusted revenues. From an accounting perspective, we are booking our performance fees when they are realized on the recognition date and not at a pro rata basis. Next to the pipeline we are building in alternatives, for instance, with our Pan-European infrastructure fund offering. Our flagship multi-asset fund Concept Kaldemorgen is a recurring source of revenues to our performance fee development. The Concept Kaldemorgen performance fees are normally booked in the fourth quarter. Assuming stable performance, we would expect a mid-double-digit contribution from Concept Kaldemorgen in 2024. Other revenues increased quarter-on-quarter and stood at EUR 54 million, including the EUR 13 million contribution from our Chinese investment, Harvest. In this quarter, we have booked a positive adjustment of EUR 18 million in other revenues due to an insurance recovery. Moving to costs. Total adjusted costs stood at EUR 428 million, being essentially flat quarter-on-quarter, resulting from lower adjusted compensation and benefits and higher adjusted general and administrative expenses. This development reflects our continued cost discipline and is in line with our last quarter guidance to keep the adjusted cost base flat, except the volume-based contribution, which is positively correlated to our AUM development. For our cost components, adjusted compensation and benefits amounted to EUR 215 million, being down 3% quarter-on-quarter, thanks to lower compensation costs, including lower retention costs. Adjusted general and administrative expenses increased quarterly and amounted to EUR 213 million. The increase is attributable to the growth in our Passive business. On the one hand, we experienced increase in volume-based service costs. On the other hand, we made further growth investments. Our adjusted cost-income ratio decreased compared to the first quarter to 63.2%. Based on this, we have updated our full year guidance to a range of 62% to 64%. Moving to our outlook. Based on our performance and the market development in the last 6 months, we have updated our outlook for 2024. Adjusted revenues are expected to be slightly higher in 2024. We project adjusted costs to be essentially flat versus 2023. Consequently, adjusted profit before tax is expected to be higher than 2023. We also foresee long-term flows to be higher compared to 2023. Let me show you how this is feeding into our 2025 financial [ path ]. Last quarter, Stefan has walked you through the 3 key components to reach our financial targets in 2025. Let me quickly explain how our second quarter results and updated outlook are demonstrating that we are on a steady path towards our 2025 targets. We are no longer predicting having a hockey stick effect during the last year of our strategic plan. On costs, we keep demonstrating strict cost control with an unchanged flat outlook for adjusted costs. The one-off costs are expected to increase on a year-on-year basis, thanks to lower litigation, severance and transformation costs. The one-off costs are expected to increase on a year-on-year basis, thanks to lower litigation, severance and transformation costs. On performance fees, we confirm our guided range of 3% to 6% of adjusted revenues. The progress on asset sales and the realization of performance fees from PEIF II is ongoing and in line with expectations. On management fees and other recurring revenues, we continue to show that we have a strong underlying client dynamic, especially in our retail business. Despite margin pressure and high outflows this quarter, we are on track to reach our management fee target as average AUM continued to grow and fee margin development is in line with our guidance. The above development is leading to a higher EPS guidance for 2024 versus the EUR 2.76 EPS we reported in 2023. With that said, I will now hand over to Stefan for the deep dive on our client franchise and the closing comments.

Thank you, Markus. So last quarter, we showed you a bridge displaying how we want to grow from our 2023 numbers to our financial targets for 2025. Going forward, we will provide further transparency on the pillars and key components of this bridge. Today, we start doing so with a deep dive into client momentum, which obviously drives management fees. So this will not just be my normal conclusion for like 2 minutes, but a proper deep dive. Markus provided a breakdown of the AUM and flow picture in recent quarters. Here's how we expect the next 6 to 12 months to shape up. When we look at our clients, we differentiate broadly between retail or wholesale clients on the one hand and institutional clients on the other. On the following 2 slides, we want to show you what we observe as client trends, what we do to serve our various client segments and how this ultimately informs our flow expectations for the different asset classes. Let me start by looking into retail or wholesale business, which contributes around 70% of our revenues. Retail products are our core strength and heritage since the foundation of DWS in 1956. We now need to carry this strength into the environment that we think of as b2B2C with a little b. The little b in the sub headline is on purpose, signaling the potential loss of relevance of the product provider in a business-to-business-to-client value chain. This is much more than just the shift to digital, but could really be a tectonic disruption for the industry. It implies that services you provide being the first [ b ] in a b2B2C value chain could be viewed as a commodity, hence, the little b. In this model, the power [ will ] sit with the aggregators who own the interface with retail clients. While asset management has not yet seriously been disrupted, we can already see this environment in other parts of the financial industry. My personal paranoia regarding the topic stems from my previous experiences at Deutsche Bank's Corporate Bank [ where ] in Germany, Amazon and PayPal were our clients. In Germany, if you buy something on Amazon and pay with PayPal, there was a fair chance that DB processed both payments. You just don't notice it. And most likely, you also wouldn't care. The critical service of transferring money has become an invisible commodity embedded in the front end that clients see. Imagine this for asset management. We can already see first signs of little b2B2C in our industry with private banks actively selling their own discretionary portfolio management solutions to their clients or the question of who will be on the shelf of Neo banks and brokers. The answer may not be driven by the actual performance of our products. Instead, better APIs, faster delivery of content and ease of access will become key differentiators. We want to capitalize on this trend with a sense of urgency, and we try our utmost to prepare for it. For us, this means that we not only have to deal with key changes in the buying behavior of retail clients, but we also have to react to the changing demands of our distribution partners. We are responding to the trends you see on the slide by addressing the specific needs of our partners. For our distribution network with private banks and with independent advisors, we focus on performance and product innovation to maintain our high-margin business, which is mainly Active products. At the same time, we work on enabling digital transformation, not only of our business, but equally importantly, also those of our distribution partners. We want to carry our strength into the digital environment. The shift into little b2B2C is most pronounced for Neo banks and brokers. We are fully embracing these nontraditional distribution channels and want to become their partner of choice. As outlined, one of the differentiators of the future will be how easily a product provider can be integrated into a sales platform from a technical perspective. We, therefore, aim to help grow these new partnerships with Neo banks and brokers by providing attractive content on the one hand, but also, and more importantly, easy to embed product offerings on the other. This is why we're investing into building up Asset-Management-as-a-Service with already observable positive effects. Year-to-date, 1/3 of our Xtrackers net new assets were sold through digital channels. When it comes to professional funds, which are services that we provide for other asset managers, the aim is to remain a strong component of the value chain. Offering passive solutions as part of the strategic asset allocation of these funds is one way and other is to offer Asset-Management-as-a-Service. In our unit-linked insurance business, we team up with our insurance clients to provide solutions for their customers. We feel that we are well positioned in our home market in Germany and can leverage this knowledge abroad. We can cater to our clients' needs with a full product offering, including attractive alternative solutions and structured products. This is one key driver of our Active SQI business. Overall, we advanced in some of these initiatives, such as further developing our value proposition to Neo banks. On other topics such as Asset-Management-as-a-Service, there's still some way to go. Now, how will this translate into future flows? For the retail Active business, we expect flows to be flat. Recognizing the shift towards Passive, we play the game with the ambition to maintain the value creating core of our business. It is our clear goal to secure the business, participate from market appreciation and where possible generate flows in a [ flowless ] market environment. In Xtrackers, we expect a continued increase in flows with a clear aim to gain further market share in UCITS ETFs, solidifying the current #2 position in Europe in ETF sales. We also expect to continue our double-digit growth with digital distribution channels. For Alternatives, we remain positive on the long-term and continue to build out a retail offering for our products and capabilities, such as with our [ infrastructural ] [indiscernible] or with potential [ LTIF ] products in the future. However, given the market environment, for the time being, we only expect a flat flow momentum. In a nutshell, concerning our retail clients, we aim to carry the strength of our franchise into the little b2B2C environment. Thanks to our strong Active business and the support and resilience of our sales partners, especially in German retail, we have the resources to fund the necessary investments into our digital offering as well as our growth areas in Xtrackers and Alternatives. Let's turn to the institutional business, which stands for roughly 30% of our revenue stream. Here, we see a similar trend as in the retail business, where just managing assets is not enough anymore. For each client segment, we need to understand regulation and provide the appropriate [ advise ], understand their respective workflow and ensure exceptional services and quality when it comes to hygiene factors along the value chain. Starting with insurance companies, as mentioned, we saw outflows this quarter in very low margin insurance fixed income mandates. These flows are high in volume, but they have only very limited impact on our revenues. Nevertheless, the outflows show that standard fixed income products are becoming an add-on business in conjunction with more holistic solutions. Already last year we restructured our fixed income team and are now able to provide specialized fixed income capabilities that complement our strong offering for our insurance clients. We are very pleased with the development of the FI team, so the fixed income team, during recent months, and we continue to strengthen this franchise. While other competitors provide excellent but very specific value-add services, such as outsourced CIO services, which shows a holistic solution approach. This includes the ambition to fully appreciate our clients' internal workflow and provide outstanding services for every part of this value chain. Regarding pensions, changing demographics provide a significant growth opportunity that we want to capture. Consider the reform of the German pension system, where we strategically position ourselves to be involved in the management of the envisaged [ Generationenkapital ], a capital market-oriented portfolio within the first pillar of the pension system. We also actively addressed and increased relationships with pension consultants, leading to an increase of pension advisor ratings in the U.S. from 2 prior to the IPO to 62 as of now. Coming to our corporate clients, we feel that we are already in a strong position. Here, we can further build on Deutsche Bank's excellent corporate relationships, but also utilize other partners and our strong network. Providing pension solutions and building out our defined contribution offerings remain top priorities. When it comes to official institutions and specifically Sovereign Wealth Funds, you may remember that we laid out the ambition to be the gateway to Europe for global investors wanting to invest in the transformation of the European economy. Delivering on this ambition, we aim to [ readily ] diversify our business with a specific focus on clients in the Middle East where we plan to build a local presence. Again, what does it mean from a flow outlook perspective? For the institutional Active business, we continue to invest to strengthen our capabilities and maintain our position in fixed income. At the same time, defined contribution pension plans for corporates also offer promising outlooks. We like to think of these models as an institutional saving plan. As in retail, the business is relatively profitable, and our teams are working hard to develop it further. This will take some time though, which is why for the next 6 to 12 months we expect flat flows. For Xtrackers, we will further leverage our growth momentum with continued investments. At the same time, we aim to become the go-to partner for global corporates, offering bespoke Passive mandate solutions. Against this background, the very encouraging flow momentum in our Xtrackers business should prevail. For Alternatives, we expect a turnaround in flow momentum with a strong pipeline for the second half of the year. Ongoing successful fundraises in the new vintages of our direct lending and European infrastructure funds should create high-margin flows towards the end of the year. Let me conclude with a recap. The aim of this walkthrough was to give you confidence in our ability to continue on a strong and attractive organic growth path with the aim of further increasing AUM and management fees. We continue to invest significantly into our client franchise, and ideally, we have given you a better sense of where we will invest. We accept the reality of a paradigm shift in client buying behavior and address these trends with a healthy dose of paranoia. Obviously, you can be sure that we continue the everyday blocking and tackling of topics with a sense of urgency and that we will not lose focus when it comes to constantly improving our processes. One signal for our own confidence is the fact that we increased our 2024 outlook in key metrics such as adjusted revenues, adjusted pre-tax profit and earnings per share. This is a significant step towards achieving our financial targets for 2025 and to further build DWS for the long-term. Thank you, and over to Oliver for Q&A.

Yes. 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 2 most important questions, that will be very kind. Thank you very much.

[Operator Instructions] Our first question is from the line of Angeliki Bairaktari from JPMorgan.

The first question on your cost guidance, which -- your flat cost guidance for this year. This implies that adjusted cost in the second half will be 5% lower year-on-year and also 4% lower versus the first half of 2024. And we do see that H1 '24 costs are actually up 5%. So I was just wondering how can we square the fact that the costs year-to-date are up 5% with the fact that you guide now for flat cost for the rest of the year? There should be some cost cuts or cost savings coming through in the second half? And if yes, from which area are they going to come? And then, with regards to the flows, you guide for long-term net flows to be higher than 2023. In 2023, long-term net flows were EUR 16.5 billion. In the first half of this year, long-term net flows are only EUR 2 billion. So that implies a very big increase in net flows for the second half of the year. Which asset classes are expected to drive this increase in net inflows? And do you have any visibility on any specific mandates that are going to help you achieve that guidance?

Thank you, Angeliki, for the 2 questions. I would start with you -- answering your first question and Stefan afterwards addressing the flow question. When we provided guidance and mentioned that we are essentially flat with regard to our adjusted cost base, that does not mean that we are exactly flat in absolute euro numbers. It allows for a certain range for which we cater for. I mean, I would just remind that we have volume-linked expenses which increase when AUM go up. We have the variable part of the compensation both discretionary as well as [ formulaic ]. We have also a range of products, or projects which are addressing regulatory requirements this year. And there are always items which -- like taxes, audit fees and the like, which are also adding to contribution. However, when we look into the second half of the year, we expect that to be flat compared to the second half of the year -- last year.

And then Angeliki, let me answer the second one, and thank you for pointing out that. As you said, last year we had long-term inflows of EUR 16.5 billion, we're now at EUR 2 billion. How can we have confidence that we'll get to above EUR 16.5 billion for the year, which obviously means we have some path ahead of us for Q3 and Q4. Now a couple of comments because you asked about specific mandates. I mean, to some extent, people always say that timing is everything. In insurance fixed income, that's a pretty volatile market and we have always a couple of potential large inflows, potential large outflows, and coincidentally, with a significant inflow this Monday, so 2 days ago, of EUR 8 billion, which was pretty much in line with the very large outflow, which we had end of Q2. And Markus and I, when we talked about timing is everything, just imagine, we would have had the inflow in Q2 and the outflow in Q3, right? In that case, we would have had long-term inflows of EUR 10 billion instead of outflows of EUR 6 billion, but the company would be the same, right? So to some extent, it's a little bit of timing. Now take that out because those one-offs, we -- I mean they help, but we will get to higher long-term inflows than last year even without these one-offs. So let me just walk you through the asset classes. When you look at Xtrackers, that business is humming nicely. And so we have EUR 8 billion, EUR 9 billion, even if it's a little bit lower in Q3, Q4, but that inflow should be, let's say, EUR 6 billion to EUR 9 billion every quarter. So that will add EUR 12 billion, EUR 13 billion, EUR 14 billion for the next couple of quarters. When it comes to Alternatives, I can no longer speak about specific funds because we're now in active fundraising and we've had a couple of first [ closes ], so I cannot be specific, but you know which ones are currently in active fundraising. So we expect Alternatives to contribute net inflows in Q3 and Q4. When it comes to Active, SQI is continuing to do really well. And as you know, the average flow margin, this is a very profitable business. So we sort of walk through where this comes from, some cases pensions, some cases retail, but that's high-margin inflows and that we continue. So we expect that to continue. And then Multi-Asset and Equities, obviously, we aim for flat. Could they be up a little bit? Potentially, performance has been strong, but that's probably not a significant ingredient. Fixed income, we are more positive for Q3 and Q4. So Markus already gave the update in the script that if you take out the 2 big insurance mandates, we actually had decent flows. So in European retail, we had EUR 2 billion of inflows in fixed income in the first half. So we expect fixed income to contribute positively in Q3, Q4, right? So from EUR 2 billion to about EUR 16 billion, where the Xtrackers [ is ] EUR 678 million a quarter, positive contribution from Alternatives, expected positive contribution from fixed income, which obviously, I can say with the confidence given the massive inflow this week. And then for Equity, Multi-Asset and SQI, that may be a wash, but obviously, we aim for also positive contribution from there.

That's very clear. Sorry, if I can just follow-up on the cost then. Then -- excuse me, when I see essentially flat, I understand flat, and I think that's what most people understand. But just to be clear, you expect the H2 '24 cost to be flattish versus H2 '23. Overall, given that the H1 '24 costs are 5% higher, that cost base should be somewhat higher in 2024 relative to 2023? I mean, I think consensus was around 4%. So we're probably talking around those levels where consensus is already at?

That's correct. And again, it is using the wording of essentially flat. That falls within our guidance, what we meant by essentially flat.

And allow me to just add one point, which I'm sure some of you have spotted. When you look at the difference between adjusted cost-income ratio and reported, that has compressed nicely, right? So, your question was essentially on adjusted cost. But, obviously, shareholders care about what's ultimately paid to them. So what you will have seen is that, in the first half of '23, there was still a [ 6 percentage point ] difference between adjusted and reported, which is now compressed to 3%. So when you look at total cost, including the below-the-line, that will look quite positive, quite favorable in '24 versus '23.

The next question is from the line of Jacques-Henri Gaulard from Kepler Cheuvreux.

Usually analysts congratulate you about results, but here, I really feel like congratulating you about the outlook, Stefan. But jokes aside, I wanted to know, roughly, how many -- how much excess capital you have following the EUR 800 million [ spec ] dividend that you paid to shareholders? And now, you having, as you said, DWS in really nice marching order, at least by next year now, we're seeing consolidation again. You're still at EUR 930 billion AUM, which is good, but which one could argue could be bigger than that? Are you going to be in a situation now considering that the company is really well structured to be able to actually go into some of the big movements that we're starting to see in the industry?

I can give you the CFO answer on the capital, and afterwards, Stefan, you may add then more like the strategic perspective. We do not disclose excess capital, but we are well capitalized even after a total payment of EUR 1.2 billion in June for ordinary and extraordinary dividends. I mean, one figure I may share is that our liquidity position end of June was at EUR 2.6 billion, and that is also adding quite nicely on to other revenues. More than that we do not disclose at this stage.

And Jacques-Henri, just to -- and thank you for your comment at the beginning. But just to add to that, so we have -- when you think about -- and I guess your question was focused on ability to potentially do M&A. In addition to excess capital and our Moody's rating, which we could always use for debt and our ability to increase -- to have a share increase, that puts us in a position to do M&A if we found it sensible. Now, also to your point, we actually like our organic growth path in the West, right? So broadly speaking, in the west, we are satisfied -- we're [ flirty ] [ in ] there and speak to people and see what's happening. But overall, we're not in a desperate position where we need something inorganic to deliver on our strong ambitions in the West. Now when it comes to the East, last time -- I guess, the last couple of earnings calls, we talked about the ambition to be top 5 -- in the top 5. So I think Markus and I have also been traveling to India, to China in Q2, and we'll continue to do that in Q3. So there we are still actively seeking to increase our position in those amazing, very interesting growth markets, India and China.

The next question is from the line of Hubert Lam from Bank of America.

I've got two of them. Firstly, on costs again. So I get that you have -- you're guiding for essentially flat or slightly up cost -- adjusted costs for 2024. But how should we think about 2025? Should we also think about cost to be essentially flat year-on-year -- adjusted cost to be essentially flat year-on-year for 2025? That's the first question. The second question is, on your slides, on 12 -- Slides 12 and 13. I really appreciate those slides. You talked about how you're targeting different clients and what you're doing around distribution. I assume a lot of these things you've already done previously. So, where do you see the biggest changes you need to make internally to address these different client bases? Does it require additional hiring, or additional reorganization? Just maybe some color on what's happening in the inside?

I mean, addressing -- thank you, Hubert, for the question. With regard to 2025, the guidance is that the adjusted cost base remains essentially flat, except volume-linked and volume-based expenses.

And in -- for your second question, Hubert, there would be a longer discussion on the various client types, right? You guy -- all of you provided feedback on what would you like to see more of going forward. And therefore, we'll do deep dives every quarter. And I think those 2 slides are pretty intense, so very, very detailed. I think high level what we need is more investments in technology, but in that case, it's very specific people. So, our new Head of IT and Operations, Rafael Otero, he is a -- essentially a private, like a retail payments person who has set up a bunch of fintechs and then ran technology for the corporate bank, and he brought over a few people that are focused on data, I'm trying to refrain from the buzzword AI, but that are really focused on data, a couple of people that are very, very good in embedded value chains, so APIs and so on. And again, that's not hundreds of people you need. You just need a couple of right people who have seen the picture before and know what to do, and a couple of people that just allow our different businesses to just operate more efficiently so that when we actually have APIs, so essentially connectors to platforms that we can also deliver the different services swiftly. Now that's for the retail side, so I think the retail [ space ]. If you think about the cost base, it may not go up actually. Obviously, Markus commented on the intent, the ambition, the goal to stay flattish on cost. But I think we will probably invest a little bit less in brand. For all the salespeople out there, love you, but in some cases we probably need fewer salespeople because we deal with platforms, but therefore, more investments in technology, right? But that's essentially fungible. Now when you look at institutional clients, we will need more people in alternative sales because the demand for alternatives is going up. We now have the product capabilities, and now we need salespeople. So in that case, there's no point in hiring sales before you have the product capabilities. So we obviously needed to hire for private credit, which is now broadly complete, and real estate debt U.S., which is now also broadly complete, and now we can add the coverage [ folks ]. Now then when you look at the value chain for institutional clients, it does remind me of what I've seen in cash management in the corporate bank. So when you think about you being a cash management provider for a large corporate, the service of actually holding cash safely or getting money from A to B, that's irrelevant. That's essentially an add-on commodity. But then the ability to do salary payments in Indonesia, that's differentiating. Now when you think about what it means for insurance clients or pension fund clients, the ability to manage fixed income and be the benchmark, that's nice, but many [ can ] do that. But then to really understand how the CIO likes to look at data, how they have mandates across different countries, how they're doing M&A and just added, whatever, India, and therefore, they need those capabilities and all of that connected, that will be differentiating. So that's why, again, the comment on asset management in itself may not be enough anymore. You really need to appreciate the way that clients like to consume products, and then again, the buying behavior of them.

I would like just to add, Hubert, to my answer before, because you were referring your question to the adjusted cost base 2025, which in finance lingo is above the line. I mean I would then also for the total cost base, again refer to Page 11, where we explain the path to the financial targets 2025, where we talked about also the below-the-line items like severance, like litigation and like transformation costs. And these costs in total were EUR 172 million in 2023, on which we expect in 2025 an upside potential of around EUR 125 million. So it's important really to be precise what we talk about.

The next question is from the line of Arnaud Giblat from BNP Paribas Exane.

I've got 2 quick questions, please. Firstly, could you talk a bit about the outlook for real estate on the flow side, in terms of gross interest and gross outflows? If I understand well, it does take a while for a redemption request to be fulfilled. So perhaps you've got a bit of visibility in terms of the outflows that are likely to come through? And also given your -- given the recent 1-year performance, that had made me think that [ maybe ] perhaps it's challenging to [ fund ] inflow. So if you could give us a bit of an update on the outlook [ for real estate ] specifically, that would be great. And secondly, in terms of the performance fee guidance, is the -- sort of the EUR 100 million uplift in performance fee for 2025 [ entirely ] coming from PEIF II?

So very happy to answer both questions, and then Markus may support me on the second one. So on real estate -- and just to recap, in the -- so roughly EUR 110 billion of [ alts ] we have, we have about 70% which are linked to real estate, right? So therefore, when we talk about real estate now, I will just refer to the equity portion, which is about [ EUR 30 billion ] in the U.S., about EUR 40 billion Europe. But then we also have -- within liquid real assets, we have [ REIT ] strategies, which is another roughly EUR 10 billion. So when you look at the quarter, in real estate, I'm just looking at the numbers we had, inflows of EUR 500 million , outflows of EUR 1 billion. So therefore, we had roughly, I mean, EUR 500 million of net outflows, but there are inflows, but obviously overshadowed by the outflows. Now you asked about essentially the redemption [indiscernible]. So the German retail funds have gotten some special coverage over the last couple of months, not DWS-related, but more market related. In that case you have a 1-year notice period. So we see it coming with essentially 1 year's heads-up, and have to manage liquidity accordingly. The outflows that we currently see, we have, obviously, therefore known for 1 year, and the notices have gone down substantially. Now, the outflows today are essentially -- those folks that decided 12 months ago to leave -- to sell. But I can tell you that from here on the outflows will reduce substantially simply because we see notices having gone down substantially. What we do not yet see in retail, in Europe, is people really coming in, but we see institutionals coming in. So therefore, when it comes to real estate, Europe, I would expect continued but smaller outflows from retail based on the notices we see. And we have always been managing liquidity appropriately, so I don't expect any hiccups, but that being balanced out by net inflows from institutionals. I think the U.S. is probably 6 months ahead, meaning that trough we had seen probably 6 months ago. So in the U.S. we've already seen a couple of people that had canceled or terminated come back saying, "Look, I just want to stay with you." So therefore, in that case, we didn't really have -- in the U.S., it's almost even at this stage. Liquid real assets is continuing to suffer from outflows. Our performance has picked up nicely. So relative to our competitors, we've done very well year-to-date. Versus benchmark, it's always difficult because you have [ like an ] all equities benchmark, and overall liquid real assets haven't done great, but relatively, we're doing fine. So in liquid real assets we've also seen a reduction in net outflows. If there are more questions, then tell us. Now, second question on performance fees. We have a variety of contributors. We have transaction fees. And as you would imagine, there were fewer real estate transaction fees than in the past. When you look at performance fees, we have typically real estate, we have Concept Kaldemorgen, we have infrastructure and a couple of other bits and pieces. Now real estate, I would expect '25 to pick up over '24, maybe be in line with '23. So '23 was actually a good year for real estate. In Q2 last year we had, if memory serves me, I think EUR 38 million of performance fees in U.S. real estate, which was a very good quarter. As you would imagine, there was a little performance generated in real estate over the last 12 months, which is why this is substantially lower, but I would imagine this picking up in '25. You're right that PEIF II, that is the private equity infrastructure fund, that has sold the majority of its assets. There we expect the performance fee to kick in between end of '24, '25, '26. Obviously, the exact timing depends on when we sell the assets. And for the record, we sell the assets whenever it's in the best interest of the [ LPs ] and not any carry considerations for DWS. But best guess is that in '25 we will have an extra EUR 100 million from that. I think the point that Markus made on Concept Kaldemorgen, I think it's sometimes overlooked. So when you look at Concept Kaldemorgen, we have about EUR 14 billion of AUM, of which roughly EUR 11 billion of Concept Kaldemorgen are eligible for performance fees. Now the performance fees is 15% of performance over the high watermark and over 0. So it's essentially struck at 0. Now when you look at the history -- and I'll come to the [indiscernible] in a second, but when you look at the history, in 10 out of the last 13 years, there was performance fee from Concept Kaldemorgen, but we always book it on December 31st to the point Markus made. So you don't see it throughout the year. Now we didn't have that in '18, '20 and '22. We had 15 in '23. We had, I think, 80 in '21. So this can be significant. Now we had reached the high watermark as of [ Gen 1]. So this year we have been accruing. So, the best way to think about it is that every percentage point of investment yield basically gets us 15 basis points of EUR 11 billion. So this could be significant, whatever assumption you make on markets. Year-to-date we had 4% to 5% investment performance. So that probably helps with the math, but then it kind of depends on your outlook. And now knowing that, whatever assumption you make for market performance and investment performance in '25 will also help you kind of understand what you can expect from Kaldemorgen going forward.

The next question is from the line of Bruce Hamilton from Morgan Stanley. The line for Bruce has been dropped. So we'll move on to the next question. The next question is from the line of Chedeville from CIC.

First of all, you mentioned that in H1, the difference between the cost-income ratio and the adjusted income ratio was reducing to 3 points, and I wanted to know if you think that this gap of 3 points between the 2 types of cost-income, if I may say, will be maintained in 2024? And how do you see evolve in 2025? Because I think that all analysts [indiscernible] we will not have any more this discrepancy, which is quite not good to analyze. And my second question relates to the 2 very interesting slides, as my colleague said, regarding your business, particularly on Xtrackers. We know that in U.S. there is a huge development of what they call active-passive management, which could seem contrary, and -- but [ it is ] something which is developing well. And I wanted to know where you stand regarding this development? And what do you think of this type of product?

Thank you, Pierre, and happy to take your first question. In fact, it's something we have also elaborated and observed that over the past quarters, the gap between the adjusted cost-income ratio and the reported cost-income ratio keeps converging, and that we see as another indication to what Stefan mentioned that we see ourselves becoming a more predictable company, and that's a normalization of DWS. I mean, we also mentioned that in Q2 we had one [ X ] -- I mean, one item which we adjusted on the other revenues, which was EUR 18 million of insurance recovery. However, we believe that trying to continue, in particular, towards 2025, and when we set the target of our EPS, EPS target for next year of EUR 4.50, that is not an adjusted EPS. It is the EPS. And so, we expect also more and more -- I mean, normalization and less one-offs.

And just one addition to the first question, and I'll come to your second, Pierre. The way that Markus and I see the company is we never think about adjusted. So we hate waste, dislike cost, like investments. But whether it's above the line or below the line, it pains us the same. So, we dislike litigation, we dislike severance, we dislike transformation charges. And therefore, we're really managing the company based on earnings per share. And that's why that's the target for next year, and to the point Markus made, that's not an adjusted. It's basically what you see is what you get, right? But we dislike all waste, and therefore, this further [ compress ]. Now on your Xtrackers question, and then specifically the Active ETF, I think -- and hopefully, it doesn't sound too pedantic or scientific, but I think the way we define ETF is actually more a [ wrapper ], essentially a structure, therefore certain capabilities you need to have. And typically, you've used it for passive just for indices, for example, or certain thematic, but obviously, you can use this wrapper also for Active strategies. And therefore, this idea of Active ETF is reasonably straightforward. You just need to decide which strategies you want to use and then wrap as an ETF. Now I think a couple of observations. So firstly, ETF is definitely the instrument of choice of retail investors. And [ while ] we will work very hard to maintain Active funds and so on, ETF is what people buy at neo banks and brokers and so on. So, ETF as a [ wrapper ] is the way to go in the future. Now, we are working hard on adding Active ETFs, but you also want to be smart about doing it because some of your incredibly well-performing active strategies, they're fine the way they are structured. There's probably no point in wrapping them in ETFs, but we take new things like in the U.S. a Natural Resources ETF, which is essentially a joint venture between our liquid real assets business, so the [ PM ] sitting there, and then our Xtrackers business who provide the wrapping. Now, Pierre, we feel that especially in the U.S., it fits very nicely in our approach to focus on thematics, right? And thematics can be Big Data AI, which has been going very well this year, but it could also be certain specific actively-managed strategies that we then wrap as an ETF. So it's definitely very important because clients simply like ETFs. But then again, you need to be smart in which strategies you want to wrap.

The next question is from the line of Michael Werner from UBS.

Just one question from me, please. I was just wondering if you could provide a little bit more color on the cost side. I think you indicated that now second half costs will be flat or in line with last year's levels. You've had 5% cost growth year-to-date. So, what's driving that slowdown? And ultimately, are these kind of one-offs [ getting ] [ traveled ] and stuff like that, that will come back on in '25? Or should we think about this as a better sustainable run rate, the second half figures?

Thank you, Michael, for the question. Again, when you look at the different components, and we just disclosed compensation and benefit cost and general administrative cost, that -- again, what stands out, as we mentioned, is that banking services cost, which are related to the assets under management, to the volume, they keep increasing when assets under management go up. Besides that, you can also look then at the compensation and benefit costs for which the number of FTEs is a good indicator. There again, you see -- when you look over the last 6 months, we have been pretty stable, and the outlook again towards the second half of the year is pretty much the same. And then again, on the components of -- other components of general and administrative expenses, there are, I mean, always items which add up a bit, but again, within the range of being essentially flat.

The next question is from the line of Nicholas Herman from Citi.

Most of my questions have been asked. So I'd like to just dig into the -- on the infrastructure side, please. Just on PEIF II, my understanding is that you crossed the hurdle [ rate ] -- so the future performance fees will be generated by future sales. And I think you provided those numbers before. Just curious, how many assets are left in that fund? And how many of those do you have sale processes currently in process? And then secondly, on infrastructure fundraising, presumably, you -- can you just [ reaffirm ] you are still confident in the EUR 4 billion to EUR 5 billion target size? And how do you think about the phasing of that over the next couple of years? And I guess a part of that, how reliant do you see fundraising on a recovery in industry distributions?

Hey, Nicholas, as you asked the question, I just looked at our Head of Legal just to see what I can say, not say. So for PEIF II, we had -- I will try to be as specific as I'm allowed to. So let's think of PEIF II as having had, let's call it, a dozen assets, right? So what we do, we buy -- our focus is mid-market private equity, so utilities and so on and so forth. We have sold, to the point you've made, enough assets to cover the return to clients and their preferred returns. So meaning, for the lack of a better term, we're now at the money. We have a couple of assets left. Let's define a couple as 3 to 4. And we know that the next couple of sales essentially are paying the catch-up performance that is ours. Now again, just for the record, I don't want to get into any difficulty. There's zero pressure on the team to sell. We will sell when the market is right. We were always trying to optimize those assets and sell when it's optimal for the [ LPs ]. So therefore, we are theoretically in the market with all 3 to 4 assets. And we'll sell when it's in the best interest of the LPs. Again, best guess is that it will happen sometime between now and mid-end '26 at the worst case. And therefore, the performance fees, again, Markus explained how we account for it, so incredibly conservatively only when we can really book it so that to happen over that period of time. Total performance fee that we expect is a little over [ EUR 200 million ]. And therefore, we have -- best guess is [ EUR 125 million ], [ EUR 126 million ] . When it comes to the current fundraising, I'm not allowed to talk about specifics once we're actively fundraising. Now what I can confirm is that for PEIF IV, we are targeting EUR 4 billion to EUR 5 billion in line with what we've said in the past. I would expect that money to fly in -- it would nice [ it'll be ] be flying in -- but to come in between recently and maybe the next 12 months. Typically, you have a series of closes. You know about the structure that PEIF that come in later still have to pay management fees as if they had been there from the beginning. But that should start to contribute management fees in '24 and then will be relevant in '25. Now within infrastructure, we also have a variety of other structures. So we [indiscernible] infrastructure CLO in Q2. I mean, there are a variety of things which we do. But again, we are very conservative with how we account for it. So for example, when we raise CLO, we typically only account for it in AUM once we've deployed the dry powder and not once we've raised it. So that's more conservative than in some other instances. And therefore, we have confidence when we say that we expect positive alternatives contribution to flows in Q3 and Q4.

Just on the CLOs, could you just remind us how many CLOs you expect to issue you per year, please?

So we issued CLOs in 2 parts of our structure in U.S. infrastructure, and then we aim to issue CLOs in private credit, Europe. So, for private credit, Europe, we've now hired the team. We have mandated the arranger for the first 2 CLOs. It was a long-drawn process to decide on the name of our CLO [ shelf ], and we'll go [ indiscernible], but we won't disclose what the first one is going to be called. So this warehouse should open end of July, early August, meaning imminently, just going through the last processes. So I think in private credit, Europe, we would expect to launch the first CLO this year, and then have 2 to 3 a year for the foreseeable future.

The next question is from the line of Bruce Hamilton from Morgan Stanley.

Just a follow-up on the sort of private credit opportunity, which I know you've talked about a lot, and it sounds like you've already built out quite a bit of the team. But I think you said sort of direct lending product [indiscernible] flows towards the end of this year. But then in terms of the broader opportunity, I mean, how broad are you going to go in terms of fixed income replacement? And how many of those products do you think will feed into the kind of retail offering versus being more sort of focused on the insurance client base, just to give a sense of the -- looking beyond the next kind of 12 months? And then one very quick one. I know GenAI, a bit of a buzzword, but have you identified any areas where it can drive efficiencies within the organization? Do you have any sort of workflows in production on that?

Hey, Bruce, thanks for your questions. So on the first one, we are adding essentially debt capabilities in 2 very specific areas, real estate debt, U.S. and private credit, Europe. Nothing else for the time being. Real estate debt, U.S., I can be very quick, we've decided to go organic. We've now hired the top people and the small team and we'll announce it in August. I think that we're probably 6 months behind Europe because the team just needs to arrive, get ready, and then we feel that there's a lot of demand for real estate debt, U.S. And given that we have a very long history of managing real estate equity in the U.S, I feel the ability to know what it feels like to own a property is what you need at this point in time because you may lend to ultimately own. Now in private credit, that's where it's been giving like updates on a quarterly basis, think of it as 3 product strategies. One is a direct lending fund, which because it's an active fundraising I cannot go into detail, but that's focused on Europe, I spoke about in the past. We feel the benefit from the collaboration, interaction with Deutsche Bank's Corporate Bank and Investment Bank to sort of have privileged access to certain risk types. Obviously, Deutsche is doing what's in the best interest of their client base, but sometimes referring to us for [ mezzanine ] financing may be in the best interest of everyone. Secondly, we have a capital solutions business, which I would expect to start contributing in Q3, working on a couple of interesting capital solutions, and that's an experienced team that had joined us sort of 6 months ago. The third in private credit, Europe, is then issuing CLOs, and that's the point that I've just made. Sorry. The people have been smiling at me. So I'm now losing a [ bet ] because I promised to not use that term on the -- GenAI on the call. But given that you ask, I'm happy to answer it. So firstly, we need to get our data in order, which we're not far from, but that's a -- it's like, unfortunately hygiene aspect of going into that direction. I think there are plenty of areas in which you can make the organization more efficient and you can debate whether it's just proper data flows or actually AI. But actually, the data flowing, it's like an enterprise data management, enterprise process management and so on, is a key component, key building block. What I would then expect in the near future is to enhance the ability of individuals. So I think gathering information is an obvious one. But what we are experimenting with is, imagine you're a gifted portfolio manager with a gifted thought process, but you fumble, you stumble on the last step to actually decide whether it's security A or B. So your performance may be mediocre, but it may be based on an amazing thought process, but then sub-optimal decision on how to actually express your transaction. We feel that AI can help greatly, and especially given that we have so many capabilities across products in our firm, the ability to say what -- based on this thought process, this is the best way to express your view on the market, I think this is a near-term application. And we've brought in a good team partially from outside the financial industry, partially from the investment bank and so on and so forth, that are focused on that. I think medium to long-term, there are many very, very interesting ways of deploying it. What is actually helpful, I'm trying to describe it carefully, is having a 30% stake in Harvest, the Chinese asset management company, is quite helpful because what they do around data, around using what we would probably call AI is years ahead of what I would expect in the West. So, their approach to people willingly being observed so that you can track what they read and what they buy and, therefore, track their thought process, that is something where they're just years ahead. And we're learning from that. So our people have been over a few times to see which algorithms we could potentially get from there and use over here. But this is a couple of years away, right? I think for Generative AI to fuel investment processes, this may be after my retirement, which is in 20 years. But I think that you will see a lot of efficiency generation, probably allowing people to be more specific in the choice of instruments and then in a couple of years, even more value-added approaches to using data.

[Operator Instructions] The next question is from the line of Oliver Carruthers from Goldman Sachs.

It's Oliver Carruthers from Goldman Sachs. So Stefan and Markus, thanks for the presentation, particularly slides -- [ especially ] slides 12 and 13. If I summarize, I think you're saying that there is a paradigm shift in client buying behavior, particularly on the wholesale side where there is a risk that investment content becomes more commoditized in the b2B2C value chain, and a big part of the solution staying relevant is to invest in driving efficiency in marketing and distribution, whilst also having a comprehensive offering across Active, Passive and Alternatives. Not trying to twist your words, but is that a fair summary? And then in this view of the world where fee margins probably come down and cost to serve probably goes up, what do you think happens to subscale competitors?

Thank you, Oliver. And by the way, I quite like your research report on [ platformalization ]. I just can't pronounce it properly, so that's why I'm just calling it something different. But I think that you will have seen that our thought process is not far away from each other. Now when it comes to retail specifically, the way we think about it, so think about the value chain between investor and investment. How is a retail person, a retail client that is in their 30s or 40s, how would they actually see investments? [ And they ] may simply not go to a branch where they have a trained coverage person saying, "Please buy Top Dividend or Concept Kaldemorgen", but they maybe have an account at Scalable, Trade Republic, Revolut, whatever, like one of those neo banks and neo brokers. In that case, they see what they see. They see what's on the shelf. And what's on the shelf is everything which is easy to embed. Now if you then want to provide value add to that platform, to that neo broker, to that neo bank, you need to be able to deliver thought processes, thought leadership, research, marketing material, but in a way that they can distribute it swiftly to their customer base. So therefore, I don't think it's about less or more. It's more the delivery mechanism, is one which is very similar to what you've seen in payments, very similar to what you've seen in private banking and so on. But technically speaking, this is APIs, so that doesn't sound that complicated. What makes it complicated is that all of our internal services need to be able to be API-able. So that connector to the nontraditional distribution channel, that is not difficult. What is difficult is for us to be able to deliver multi-asset equities research, the CIO view and so on, through that channel, and that's what we're investing in. We can go into more detail. I think it's a fascinating topic, which will happen, right? You can call it little b2B2C, the era of platforms, whatever, but that will happen. I think you need product capabilities, no question, but then also the ability to actually get it into the hands of the retail client, and that is decided by the platform. Now to the second question, I don't know if the -- so I think, essentially, will the -- how you deliver products become more expensive, probably because you need to make proper investments. And then to the point you've made, it's about scale. So I think once you have those investments, I don't think that the ongoing cost will be high. In fact, it could be lower, right? Remember what I said about salespeople who I love, but they're probably maybe less relevant in 10 years than they were 10 years ago. Once you have APIs and the ability to distribute your services through APIs to the end clients, you will save cost. So I think that it could be a scenario in which once you've built it, your operating cost, both for institutional and retail, could be much lower. However, you will need scale, and you will need to have been there when the insurance client decided that they award you with whatever they need. And that's why I think that's smaller subscale player. People that don't fully comprehend that value chain, people that don't have the full product capabilities, they will probably struggle in the future. But again, we just wanted to kind of show you in 2 pages it's always difficult, but provide a deep dive on how we think about it and how we're investing for the future.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Oliver Flade for any closing remarks.

Yes. Thank you very much, everybody, for listening in, and good questions. And please reach out to the IR team in case there are any open questions left. Otherwise, we wish you a fantastic day. Thank you very much, and bye-bye.

Thank you.

Thank you very much. Bye-bye.

Thank you. Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.