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

Good morning, ladies and gentlemen, and welcome to the DWS Group Q2 2025 Conference Call and Live Webcast. I am Youssef, the Chorus Call operator. [Operator Instructions] And that this conference is being recorded. [Operator Instructions] 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.

Yes. Thank you very much, operator, and good morning to everybody from sunny Frankfurt. This is Oliver from Investor Relations, and I would like to welcome everybody to our earnings call for the second quarter of 2025. Before we start, I would like to remind you that the upcoming Deutsche Bank analyst call will outline the asset management segment 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 as well as closing remarks, and Markus will take you through the main part of the presentation. For the Q&A afterwards, [Operator Instructions]. And please note that the Q&A session can also be extended beyond 11:00 if needed. I would like to remind you that the presentation may contain forward-looking statements, which may not develop as we currently expect. And 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 2025 earnings call. You will notice that my introduction today will be a bit longer than usual. I would like to take more time to walk you through our view on our financial performance and present our hypothesis for the path ahead, not just for this quarter, but for the year as a whole and the trajectory we see for 2026 and 2027. As Markus takes you through the financials, I would like to ask you to keep this hypothesis in mind, which will hopefully help you challenge the numbers constructively. To put it simply, we are delivering exactly what we promised, sustainable earnings that put us firmly on track for the EUR 4.50 EPS this year, which we see as the jump-off point for 10% annual EPS growth in 2026 and 2027. To frame that, I will start by revisiting the bridge we first outlined in 2024, then discuss the sustainability of our current earnings, the long-term investments we are making and the path to our 2025 EPS target of EUR 4.50. I will then hand over to Markus, who will take you through our Q2 financials in detail and provide a deep dive into our balance sheet. And finally, I will return to present the outlook and explain why we feel well positioned to deliver a consistent 10% EPS growth annually in 2026 and 2027. With that, let me begin with the first point, credibility of the bridge we laid out back in April 2024. More than a year ago, when we communicated our Q1 2024 results, we first presented the path to reach our 2025 financial targets. From the outset, the bridge was designed to be both clear and tangible with its main pillars being reduced cost-adjusted items, higher performance fees and rising management fees. We committed to this bridge and have remained consistent in our financial steering ever since. Today, the numbers show that we are on track to deliver what we promised to the market, and we believe that consistency is what builds long-term trust. Second, our growth does not come from one-offs. It's hard-earned, sustainable and the result of disciplined execution over the past years. What you see in our numbers is not a onetime lift. So we didn't just get in summer shape once. This was the result of systematic and sometimes difficult run rate optimizations that have reshaped the business for the long term. We've taken deliberate steps to optimize our platform, including reorganizing our legal entities to simplify our operating model, advancing our large-scale IT transformation project and reducing the number of internal committees by 42% to speed up decision-making. As an additional example, we've reshaped our workforce, our largest cost line, but also one of our greatest sources of long-term value. As Markus outlined in his cost deep dive 3 quarters ago, we are growing talent from within. Since 2023, we have quadrupled our graduate intake and implemented development programs to reduce our reliance on costly external hires. We've also built-up teams in India and the Philippines, creating scalable, cost-effective hubs, which tap into deep resource pools. None of this happened overnight. Every improvement from cost management to platform efficiency has been the result of consistent focused effort over time. These tangible actions are central to how we've built a more efficient DWS optimized for the future, and we are confident in our ability to keep these costs stable while continuing to grow. When Markus walks you through the financials, we will provide -- he will provide further insights into how these optimization efforts are reflected in our numbers. Third, we are investing for the long term. Alongside our cost discipline, we are also deploying resources with a clear focus on future growth to strengthen parts of the business that will matter most over the next decade. We continue to expand Xtrackers in our Alternatives platform, both of which are already delivering momentum in flows. To be more specific, we've recently signed off on our next multiyear growth plan for Xtrackers and will double down on our European infrastructure franchise with additional hires. We are also investing in the digital infrastructure that we believe will define the future of finance. A key example is AllUnity, our joint venture with Flow Traders and Galaxy, which recently received regulatory approval to issue Germany's first fully licensed MiCAR-compliant euro-denominated stablecoin. Bringing the euro onto the blockchain is a foundational step towards a faster, more transparent and efficient European financial system and exactly the kind of forward-looking innovation we aim to lead. We view DWS much like a family business. Our responsibility is to leave the firm stronger for the next generation. That means making the right investments today to ensure we remain resilient, relevant and positioned for sustainable growth. Fourth, we are firmly on track to deliver our EUR 4.50 EPS target for 2025, which we see as the jump-off point for the next few years. Markus will provide more detail in a moment but let me share how I view the numbers and why we see this target as entirely within reach. In Q1, we delivered an EPS of around EUR 1. And despite a very difficult April with heightened volatility and a weakening dollar, we delivered an EPS of EUR 1.07 in Q2. Given our current AUM is higher than the average AUM in Q2 and with an extra business day in both Q3 and Q4, you may assume a slightly higher EPS in the next couple of quarters, provided market conditions remain supportive. This would put us on track for an EPS in the mid EUR 4.20s for the full year. To close the gap to our EUR 4.50 target, we would need to generate roughly an additional EUR 50 million of net income or EUR 70 million of profit before tax. As you know, we have some seasonality in our revenue generation. In Q4, we expect additional contribution from two recurring key drivers. Firstly, performance fees from our flagship multi-asset fund, Concept Kaldemorgen. And secondly, as I've referenced in prior calls, the PEIF IV fundraise is on track for significant closing by year-end, with management fees accruing back to August 2024. So when we say we are at a run rate that supports EUR 4.50 EPS for 2025, we are on solid ground to meet this target. Importantly, we view this not as a one-off achievement, but as a hard-earned run rate, supported by the structural improvements and strategic investments we have made. Many of these investments, particularly in Alternatives, digital assets, platform efficiency and the next phase of our Xtrackers growth plan will show their full value in the years ahead. With that, I now hand over to my partner, Markus, who will walk you through our financial performance in more detail and provide a comprehensive view of our balance sheet.

Thank you, Stefan, and good morning, ladies and gentlemen. Let me take you through the key financial highlights for Q2. In the second quarter, we demonstrated the resilience of our business model in a challenging environment, delivering an increased EPS of EUR 1.07. Our net flows were robust with EUR 3.7 billion in long-term net flows and EUR 8.5 billion in total net flows. Revenues held steady at EUR 746 million, notwithstanding a decrease in average assets under management in the second quarter, reflecting the strength and the diversification of our revenue base. Driven by our active cost management, our net income increased and rose to EUR 214 million. The operational efficiency improved, resulting in a cost-income ratio of 59.2%. Our capital position remains healthy with EUR 0.8 billion in excess capital, providing flexibility to pursue growth opportunities and shareholder returns. Together, these results reflect our strategic focus towards our 2025 financial target plan. Moving on to the financial performance snapshot in the second quarter. Starting at the top left, long-term assets under management totaled EUR 893 billion, stable quarter-on-quarter with our net flows and market appreciation being almost entirely offset by unfavorable ForEx movements. Total assets under management remained flat quarter-on-quarter and stood at EUR 1.010 trillion. Moving to the top right. Revenues remained stable compared to the first quarter at EUR 746 million and up 7% year-on-year. On the bottom left, costs amounted to EUR 442 million, down 6% quarter-on-quarter. Thanks to active cost management approach, the cost-income ratio stood at 59.2%, being down 3 percentage points quarter-on-quarter and 6.6 percentage points year-on-year. The continued operating leverage drove an 8% increase in net income quarter-on-quarter and a 32% increase year-on-year, reaching EUR 214 million. Let me now share some insights into client dynamics during Q2. The client dynamics observed at the end of Q1 continued into Q2, shaped by elevated market volatility and a persistent risk-averse sentiment. Overall, we reported net flows of EUR 8.5 billion and long-term net flows of EUR 3.7 billion, a robust figure that underscores the enduring strength and appeal of our diversified product suite. Although the flow picture has slowed in the second quarter, we were able to retain a positive flow momentum across all client segments and regions, being able to capture our clients' demand for risk management and diversified strategies through our broad product offering. For example, in APAC, we reported net flows of EUR 3.1 billion, marking our best performing quarter ever. Clients are increasingly receptive to European investment opportunities, resulting in strong net flows across various asset classes. In EMEA ex Germany, the flow picture was impacted by market volatility, especially in Passive strategies and totaled EUR 0.7 billion. Although the volatility led to high gross flow volumes, we saw limited net movement. Net flows in our home market, Germany, amounted to EUR 1.4 billion, driven by an ongoing demand for Passive products. The U.S. region recorded EUR 3.3 billion in net flows. While overall direction of asset allocation remained steady, demand further shifted towards highly liquid short-duration products, especially money market funds. Across client segments, both retail and institutional investors showed a clear common trend, a strong focus on resilience and risk management. Despite ongoing market headwinds and a clear risk of sentiment, our retail business has delivered its 10th consecutive quarter of net flows. This resilience reflects the strength of our dedicated proactive focus campaign and our ability to align with client preferences. Retail investors continue to favor risk-averse strategies, driving strong momentum into short-term fixed income solutions and advised quant-driven funds within SQI. On the institutional side, flows were positive with EUR 7.4 billion, led by inflows across asset classes such as infrastructure, Passive mandates, Multi Asset and cash. The focus, however, continued to be on derisking, favoring liquid short-term solutions with diversification being a consistent theme. Moving to the quarterly highlights within our Active business. In the second quarter, our Active assets under management stood at EUR 442 billion, a quarter-on-quarter decline, primarily driven by negative ForEx movements, particularly within Fixed Income products. The flow picture in Active remains challenging with EUR 1.7 billion in net outflows. However, we observed encouraging underlying momentum, particularly in Active Equity. We recorded net flows into Multi Assets and SQI with EUR 0.4 billion and EUR 0.2 billion, respectively. These flows were largely supported by institutional mandate wins, including an LDI mandate in EMEA. Within SQI, inflows were partially offset by rule-based outflows as clients adjusted risk budgets in response to market conditions. Although our Equity business reported outflows of EUR 1 billion, primarily due to previously notified mandate losses, underlying trends improved. This was supported by a reversal in rule-based inflows from SQI to Equity amid a more favorable equity market environment. Additionally, DWS Invest Top Dividend attracted strong inflows backed by solid performance, while DWS Invest Artificial Intelligence continued to see steady daily inflows. Fixed Income saw outflows of EUR 1.3 billion, while our top-selling DWS Floating Rate Fund continue to attract strong inflows, these were outweighted by mandate losses. Notably, our DWS ESG Floating Rate Notes surpassed the EUR 1 billion mark in the second quarter. We continue to expand our Active ETF offering. In Q2, we launched three new active ETFs, each targeting a different region, global, European and U.S. equities. So far, early investor interest has been strong with inflows exceeding EUR 205 million according to latest available data in July. In addition, we repositioned two active products, DB US Dynamic Growth and DWS Invest Critical Technologies. The latter is designed to address today's geopolitical landscape, focusing on five key investment areas: Defense and space, AI and semiconductors, energy security and infrastructure, advanced manufacturing and robotics and cybersecurity. These sectors are expected to benefit from the global push for greater technological autonomy. Moving to our Xtrackers business. Our Xtrackers business delivered net flows of EUR 3 billion in the second quarter, marking the 10th consecutive quarter of positive flows. However, flow momentum was impacted by U.S. exposure and rule-based outflows in the quarter. Assets under management increased to EUR 346 billion as net flows and market appreciation offset negative ForEx movements. The main flow contributor was our UCITS business, which delivered net flows of EUR 1.9 billion. Portfolio diversification and highly liquid products continued to gain momentum with strong interest in top-selling products like MSCI World ex U.S. and EUR Overnight. U.S. exposure sell-offs impacted overall flows, particularly in S&P 500 Equal Weight ETFs and select sector client ETFs such as China and financials. To further strengthen our product offering and stay ahead of peers, we are preparing to launch U.S. equity swap ETFs on our Irish domiciled platform. Our mandates and solutions business delivered EUR 1.1 billion in net flows, driven by a global ex-Europe mandate win in Germany and two mandates from Southeast Asian institutional clients. These wins support the continued expansion of our Xtrackers institutional footprint and our core equity exposure. Our U.S. 1940 Act saw net flows flat in the second quarter, though performance was highly volatile. In April, we experienced strong outflows after the market turmoil, followed by flow recovery in May and June, led by renewed interest in high yield and a rebound in ESG products. Despite the flat net flows, our U.S. platform continued to expand and reached USD 27 billion in assets under management. Overall, we are confident in our strategic development and our flow momentum has returned after a challenging Q2. With the start of Q3, the Xtrackers business has regained strength, supported by a strong return of flows that has continued throughout July. As Stefan mentioned, Xtrackers has launched a multiyear growth plan focused on generating additional net new assets. This includes expanding digital distribution partnerships, entering untapped markets such as the Baltics and Eastern Europe and scaling our Active Xtrackers ETF range through both internal and external strategies, positioning us as a full spectrum leading ETF provider. As an example, in Q2, we expanded our digital reach through our three new digital distribution partnerships, strengthening our strategic footprint. Let me now turn to our Q2 highlights for our Alternatives platform. The development of our Alternative platform continues in line with the trajectory outlined in last quarter's deep dive. In Q2, our assets under management totaled EUR 105 billion, remaining stable versus the previous quarter. Net inflows and market appreciation were offset by ForEx headwinds. Infrastructure remained the growth contributor within our Alternative platform, leading to overall net flows of EUR 2.4 billion in the quarter, which were supported by positive flows in liquid real assets. Fundraising efforts across various strategies such as our PEIF IV fund and our newly launched U.S. real estate Core Plus Debt strategy continue to generate positive momentum and position us for future growth. Infrastructure contributed with EUR 3.9 billion of net flows, largely supported by a new fund mandate, which is expected to generate incremental management and performance fees over the next 12 months. With the mandate, we have secured a controlling stake in the underlying asset, which will support the delivery of a successful equity for PEIF I and the gateway funds, ultimately maximizing value for investors. Our LRA business recorded net inflows of EUR 0.4 billion, which were driven by renewed interest from institutional investors and the newly won SMA. The sentiment for real estate remains challenging. We report outflows of EUR 1.9 billion in the second quarter. Around half of the outflows were attributable to a single redemption in our U.S. real estate portfolio. Despite strong asset performance, investors sought greater geographic diversification. For the EMEA real estate platform, the redemption queue continues to ease with incoming redemptions declining in 2025, likely driven by falling interest rates, market volatility and positive year-to-date performance, particularly in our grundbesitz funds. Our private credit platform build-out is progressing steadily. The wind down of our European CLO business is now complete with the warehouse fully sold down. We have expanded our strategic partnership with Deutsche Bank across both investment and corporate banking. Our focus now sharpens on European direct lending and asset-based finance with key hires already made. Fundraising is underway for our European Direct Lending Fund II, building on our successful partnership with Deutsche Bank. We expect the platform to begin generating revenues in the first half of 2026 with asset-based finance following in the second half. Let me elaborate how this performance impacted our P&L. Revenues remained stable quarter-on-quarter at EUR 746 million and marked a 7% increase year-on-year. Management fees declined slightly by 1% quarter-on-quarter to EUR 630 million. This was largely due to lower average assets under management, a result of foreign exchange headwinds and continued investor caution amid macroeconomic uncertainty. However, it is worth emphasizing that this slight decrease was well contained, demonstrating the resilience of our client franchise and the strength of our globally diversified product offering. Performance and transaction fees totaled EUR 58 million, supported by the fee recognition of PEIF II, spezial invest funds as well as real estate APAC. Other revenues amounted to EUR 58 million, including EUR 26 million from net interest income and a EUR 11 million contribution from Harvest. Moving to our cost development. As many of you may know by now, I am passionate about active cost management. In the third quarter of 2024, we introduced you to our active cost management approach, a key enabler of our sustainable profitability and operating margin projection, particularly in volatile market environments. As part of that deep dive, we presented our robust cost management framework that distinguishes between discipline-based cost, expenses we can directly control through rigorous planning, budgeting and process optimization and volume-based costs, which are inherently linked to market dynamics and client-driven business growth. This combination of discipline-based cost control and agile management of volume-driven expenses ensures our cost base remains both flexible and aligned with market conditions and strategic priorities, something the second quarter with its challenging backdrop has clearly reinforced. In this quarter, total costs declined by 6% quarter-on-quarter to EUR 442 million, driven by reductions across all cost management pillars, keeping us on track for essentially flat costs in full year 2025. Compensation and benefit expenses were managed prudently, reflecting a 9% decrease from the previous quarter due to primarily lower retention-related expenses. General and administrative expenses were also contained, driven by lower volume-based costs. As a result of these concerted efforts, our cost-income ratio improved by 3 percentage points versus the previous quarter, now standing at 59.2%, being below our full year 2025 guidance of less than 61.5%. This outcome demonstrates effective stewardship over our cost base, but also provides valuable headroom to continue investing in future growth initiatives without compromising our profitability. Moving now to our balance sheet deep dive. This quarter, I would like to provide you with a comprehensive look at our economic balance sheet and capital position. As of Q2 2025, our economic balance sheet remains simple, stable and robust, underlined by a solid liquidity position and backed by capital with no debt financing. Our economic balance sheet matches our consolidated IFRS balance sheet but excludes assets and liabilities from investor-owned funds such as guaranteed funds and matching items related to unit-linked life insurance investment contracts. Key characteristics are a strong equity and liquidity position as well as corporate investments to support our business and intangibles. This structure provides financial resilience and flexibility to support growth and shareholder returns. Looking at our capital position, we speak of tangible equity as our key capital supply metric. It is central to our economic capital adequacy framework, ensuring that we not only comply with regulatory standards, but also maintain ample resources to support the risks inherent in our business. As of Q2 2025, we hold EUR 0.8 billion in excess capital, which is a solid buffer and well above our target capitalization. It reflects our financial strength and gives us strategic flexibility going forward. Our capital management strategy is dynamic. We are continuously stress-testing our balance sheet under a range of economic and market scenarios, incorporating lessons from recent volatility and industry shifts. The excess capital not only enhances our resilience in uncertain markets, but also provides us with meaningful optionality, allowing the group to respond decisively to attractive growth opportunities, potential inorganic investments or adapt to evolving regulatory requirements without undue delay or stress. Since our IPO, we have remained committed to the efficient and responsible return of capital to shareholders. We have now returned EUR 3.44 billion to shareholders via ordinary and extraordinary dividends, a clear reflection of our focus on shareholder value creation. Looking ahead, we have announced our intention to establish a sustainable dividend payout ratio of approximately 65% starting in 2025. This strikes the right balance between generous shareholder distributions with reinvestments in future growth and innovation. All in all, our economic balance sheet and capital position demonstrate not just financial robustness, but also the discipline and long-term thinking that shape DWS strategic direction. We are confident that this solid foundation enables us to finance innovation, navigate uncertainty, reward shareholders and support sustainable organic growth well into the future. With that, let me now hand over to Stefan for his closing remarks.

Thank you, Markus. Now let me turn to our outlook for 2026 and 2027 and specifically how we plan to build on a strong and sustainable earnings per share base we've established and converted into continued growth over the coming years. As I said in the beginning, our hypothesis is clear. We are delivering sustainable earnings built on a foundation of structural improvements and strategic investments. From an EPS jump-off point of EUR 4.50, we see a clear and tangible path to 10% annual EPS growth in 2026 and 2027. As we look ahead, maintaining active cost management remains just as important as driving revenues. While we've held costs flat for the past 3 years, we are being realistic about the future and therefore, assume that costs will increase around 2% annually going forward. To achieve 10% EPS growth on this cost base, we need revenue growth of roughly 5.5% per year. We believe that is achievable through a balanced combination of market performance and inflows. Previously, we flagged EUR 150 billion in net new assets cumulatively over 2025, 2026 and 2027. As expected, market turbulence led to slower flow picture in Q2. Fortunately, as client momentum has picked up again, we're now back at our typical monthly run rate and our ambition remains intact. We expect that growth to come from the key areas where we are already investing and seeing momentum. First, our Active business remains a steady contributor to our platform. We recently extended a key distribution partnership with DVAG, Germany's largest independent network of financial advisers, for another 10 years. This speaks to the strength of our relationships and our long-term positioning in the market. We've also expanded our Active product range with the launch of three enhanced active ETFs, providing clients with new solutions and helping to broaden our reach. Active Multi-Asset strategies and SQI both saw inflows this quarter, and we expect that they will continue to attract strong client demand. Second, in Xtrackers, the trajectory remains positive with steady growth over the past 3 years as we scale up. We continue to see strong inflows into key products like MSCI World ex U.S. and EUR Overnight. We're also giving clients new ways to access our expertise through innovative solutions like ETF as a service, and our digital distribution partnerships are playing a key role in accelerating flows. As I mentioned earlier, we have now signed off on a dedicated growth plan over the coming years. Third, in Alternatives, we delivered positive inflows in the first half of the year, and we expect that momentum to continue with a solid pipeline for the second half. Our Gateway to Europe strategy is starting to pay off with the capabilities we have built now beginning to deliver tangible results. We're making further investments in infrastructure, including hiring specialist talent to strengthen our platform and meet growing client demand. We're also moving forward with the opening of our Abu Dhabi branch, which will further expand our global reach and bring us even closer to key growth markets. As an asset manager rooted in Europe's largest economy, we are uniquely positioned to help clients unlock the full potential of the opportunities ahead. Our strategy remains fully aligned with our financial steering, and we continue to be one of the few asset managers with no distractions from restructuring or integration. Based on this position and the outlook we have outlined, we are confident that 10% annual EPS growth is realistic and achievable. So to summarize, we are firmly on track to deliver EUR 4.50 EPS in 2025 and are comfortable using this as a jump-off point for future growth. We have a clear and tangible path to delivering 10% annual EPS growth in 2026 and 2027. And while we stay disciplined on costs, we are continuing to make long-term investments in our platform, capabilities and people. We look forward to being challenged on this, but we hope we have gained credibility by showing you the hard work and discipline we've put in over the past couple of years, work that we feel has put us in a strong position. Based on what we've outlined, we have built a sustainable revenue and cost base and set the foundation for long-term profitable growth. Thank you. Over to Oliver for Q&A.

Yes. Thank you very much, Stefan. And operator, we're ready for Q&A now. [Operator Instructions]

[Operator Instructions] The first question comes from Hubert Lam from Bank of America.

A couple of questions. Firstly, on the target for this year of EUR 4.50, what market assumptions do you have for the rest of the year? And in terms of your performance fee assumptions, how much of it is driven by fees that you've already locked down, but yet to recognize versus those you need to perform form markets, such as like Kaldemorgen? The second question is on active ETFs. How important is this for your growth outlook in Xtrackers going forward? How much has it contributed to your inflows within Xtrackers today? And like how big of it as a percentage of your AUM is it? I assume it's pretty small at this stage.

Hubert, thank you for your questions. I'm just going to start and then see if Markus adds granularity. So first question, for our target of EUR 4.50, what is the market assumption. And how much of the performance fees are essentially locked in. So market assumption basically in line with our CIO outlook, which -- so like markets have already surpassed what we had expected or what we expect over the next 12 months. But I would just say broadly stable markets. So nothing heroic. We had initially assumed market growth in the mid-single digits for 2025. So obviously, there's been more than that. But so for the next couple of quarters, we just expect broadly stable markets. When it comes to the performance fee, the PEIF II performance fee is basically locked in. So I want to be careful how I phrase it. But from an accounting perspective, we're now giving credit for the essentially inherent value that was created over the past few years. And based on market discussions that we had with potential buyers, we feel pretty confident about that being a floor to ultimate valuation. So when you look at the contribution of PEIF II performance fees, which was like EUR 30 million in Q1, roughly EUR 30 million in Q2, a little bit more in Q2. I would expect similar performance fee to come in Q3 and Q4, and it's basically locked in. What would come on top is a potential Concept Kaldemorgen performance fee, which we always book on the last day of the year. So that would be Q4. I think everyone understands the math, right? So we have EUR 11.1 billion of essentially funds that are eligible for performance fee. We get 15% of that. They're in the money. So multi-asset as you would expect, have -- I mean, I guess, phrased positively, they navigated markets well enough that they are ahead for the year despite obviously having a global portfolio in euro, which was impacted by euro-dollar, but they're in the money. So that's a performance fee that you would expect in Q4. When it comes to active ETF, I think you're both -- you're right with both of your assumptions. This is important going forward, but at this point in time, has a reasonably small percentage of AUM. So the launches were successful. We raised a couple of hundred million. I mean, I guess all those numbers you can see if you dug for it on Bloomberg. But the launch was positive, collected a couple of hundred million. We think it's going to be an important feature going forward, just like other like thematic ETFs. And yes, so excited for the future of the active ETF franchise.

So if I just add one detail there, Hubert, I mean, we are extremely well positioned in that growth area, and it's also one of our focus area, active ETFs. And we have already started launching the first ETFs in the course of 2024. And as of the end of the first quarter, we were in terms of assets under management around EUR 300 million. But I also mentioned before that the three newly launched active ETFs have already gathered more than EUR 200 million. So that is still a small segment but growing very fast.

The next question comes from Jacques-Henri Gaulard, Kepler Cheuvreux.

Two questions from me. One is about the outlook for the year. My question is more on the change of tone. Q4 2024, brilliant, confirming EUR 4.50, everything is fine. Q1 '25, the tone is definitely a bit more wobbly. We're talking about a range of EUR 4.50 to EUR 4.60. And I have the feeling that in answer to what you gave to Hubert immediately, I mean, more or less was -- on PEIF II was more or less predictable. So what makes you now more back on the balance of certainty and what makes us believe that we're not going to have something a little bit less secure, I would say, in Q3? That's the first question. And the second, thank you very much for the excess capital, Markus. Within that, the requirements have remained amazingly flat since 2022. So is it fair to assume that the requirement will not really move over the next 2 to 3 years if we try to actually value the excess capital from '25 and '27? And on a modeling purposes, to go from EUR 800 million to sort of year-end figure, do we just have to take retained earnings as an addition? Is that a fair way to look at it or estimate the retained earnings? Or is there a quarterly aspect within the excess capital that we don't know about and that you could guide us on?

Jacques-Henri, thank you very much. By the way, thank you for -- to everyone to like limiting yourself to two questions. You have unlimited questions on European infrastructure or euro stablecoin, if anyone cares. So that's on top of your two questions. But starting with the first one, so tone, our Q1 earnings call was in late April, and the world just didn't look amazing in late April. So at that point in time, we simply didn't quite know what May, June, the recovery we saw specifically in equity prices. So at that point in time, we simply said, "Look, EUR 4.50 is still in sight. However, range of outcomes slightly broader." I think that was the terminology we used. So since then, markets were much better than I think you were able to expect in April. And I think that's simply reflected in our statement. I mean, again, the logic that we are simply applying, we had EUR 1 of EPS Q1, EUR 1.07 Q2. Q3 and Q4 have an extra calendar day. Our AUM is now like EUR 10 billion, EUR 15 billion higher than the average AUM in Q2. So therefore, given that the performance fees are mostly baked in, meaning should be similar in Q3 and Q4 to what you saw in Q1 and Q2, we simply feel we are currently on a run rate kind of getting us into the mid EUR 4.20s simply from that run rate. And then in Q4, we have those two extra items, one, the Kaldemorgen performance fee; and second, the PEIF IV fundraise. And I think everyone understands you get the management fees accruing back to when the first asset was bought, which was in August 2024. So a couple of billion, whatever you assume, that's our target. Those two items combined would then add the EUR 70 million plus of profit before tax, EUR 50 million of net income, which would get us to the EUR 4.50. So that's why at this point in time, granted markets looked better in the last 3 months than like in April, but that's why our tone is now more confident. I mean, again, we haven't deviated from our bridge. But obviously, the confidence and the range of potential outcomes is a bit market dependent, and we feel better now than 3 months ago.

And happy to address your question with regards to the excess capital. On Page 11, it shows the dynamics. I mean we are using tangible equity as the capital supply. And on the capital demand side that is relying on two pillars. The first one is regulation-driven IFR, EU regulation from 2021. And additionally, we have our internal model where we assess all the risks. So again, given the course of the business, we are generating, again, net income, and that is adding to the tangible equity. And on the other hand, we also pay out dividends. And that again is going to then reduce the tangible equity. So all factors stable, we currently accrue our excess or increase our excess capital between EUR 200 million to EUR 300 million on an annual base. And that comes on top of the EUR 800 million, which we have as of end of Q2.

The next question comes from Angeliki Bairaktari from JPMorgan.

First of all, can I please check whether the strong flows that we saw in infrastructure reflect any incremental fundraising in PEIF IV in the second quarter? Or is the additional capital expected to come in the second half of the year for this fund? And second question, can you provide a bit more color on the avenues to monetize the euro stablecoin venture that you're working on? And what could be the revenues earned from this initiative? And under which time frame are we looking at?

Thank you, Angeliki, for the two questions. Let me take both. So we had a small close in PEIF IV in Q2, but it was small. So that significant inflow was a separate mandate. That separate mandate comes at a lower fee than the average in Alternatives because it was a essentially significant mandate we took over from another asset manager in a specific situation. So this is hard earned. We competed against multiple other asset managers to win it. It brought us a relationship with a bunch of new LPs, which we quite enjoyed. So therefore, it's going to be supportive for the PEIF IV fundraise, but it's completely separate to PEIF IV. That's the way to look at it. Secondly, and thank you for the stablecoin question. So that kind of gives you another couple of questions that you may ask on top of it. So that joint venture with Galaxy and Flow Traders is something which obviously we've worked on for a number of years. So it was hard work, as you would imagine. And the AllUnity management team run by or led by Alex Hoptner is excellent. We look at three different ways of monetizing. And they're essentially with increasing relevance, however, also with an increasing time frame. So it's crypto, securities on blockchain and payments. That's how I look at it. So obviously, AllUnity is going to participate in the crypto ecosystem. So for retail investors in Europe to simply go on-ramp, off-ramp if they want to buy crypto. I mean that's something which you have to do. It's part of the ecosystem and it's going to create revenues short term. I think secondly, what is, I think, more exciting, once securities are cleared on chain, so whether that's bonds, stocks and you see multiple experiments, obviously, the other leg needs to be a stablecoin. I don't think anyone is going to buy DWS shares and exchange it against other shares or DWS shares against Bitcoin, right? You would be, at some point, buy our shares on blockchain. And the other leg would be euro, and that would be a euro stablecoin. Our hypothesis is that at that point in time, you will not choose the stablecoin of a fintech-launched stablecoin regulated in the Baltics, nothing against those regulators. But I think you would prefer a large stablecoin, MiCAR-compliant launch in Germany. So that's why I would imagine that to be a significant source of revenues. However, that will take a couple of years because that's more an experimental stage. I think third, when you think about payments, that is quite exciting. So AllUnity is already engaged with at least one large corporate that wants to pay employees in a non-euro country. And simply as opposed to converting euro into that local currency, they want to send the employees stablecoin, so euro on chain and then they can do whatever they want to do with it. So I think that is something which is going to be quite interesting as everyone understands. Bitcoin aren't really great for payments. And therefore, this is going to be a further use case. And again, I would imagine multinational large blue-chip corporates to choose a properly regulated, Germany-regulated or France-regulated stablecoin. So therefore, quite excited about the outlook for the next few years. I think for the purposes of your 2026 model, I would not assign a lot of value to the AllUnity inflows, which, by the way, will come from two sources. I mean, one, managing the collateral, but obviously, secondly, dividend simply of our 1/3 ownership. And I would say the timing of it couldn't have been more interesting given the Circle IPO and so like the excitement around stablecoins in the U.S. And I think that competitors currently waking up to that and trying the same. I mean, it will take a couple of years, right? This is very difficult to get regulators in Europe comfortable. And that's why we are happy that we started -- that we seed invested that a couple of years ago. And again, I think the revenue outlook for the next 5 to 10 years could be tremendous.

I'm going to take the opportunity to ask one more question since you give me that opportunity. Just on Passive flows that -- they were much lower than the run rate this quarter, and you did explain why in the presentation. But when I look at some of your competitors in Europe, for example, the #2 player by AUM, they had much stronger ETF flows in Q2. So is there anything there that has played a role? Is there any concern about your sort of near-term market share loss? And what is the outlook for Passive net flows for the rest of the year?

Thank you, Angeliki. I think when I said that you have another question, I should have caveated that, but it's fine. So look, let me not beat around the bush. Our Xtrackers franchise had an off quarter in Q2. It is what it is. I think when you look at our flows, EUR 3 billion of inflows in Q2, yes, you're right, they had 10 quarters of consecutive inflows, but the EUR 3 billion is a fraction. It's like 1/4 of what they had over the last couple of quarters. So they had a bad quarter. Now Markus and I had a series of business deep dives, like in-depth deep dives with the team. That's probably less pleasant than what it sounds like for the team. And look, what we realized is sometimes a lot of bad stuff comes together. So what the team was exposed to in Q2, and I'm not being defensive, I'm just explaining, is they had aggressive fee cuts from competitors in areas of relevance to us. We lost a couple of large institutional mandates, a couple of campaigns didn't go as expected. We are the largest provider of Chinese A-shares ETF in the U.S., which you would imagine wasn't flavor of the month in April and May. We had some rules-based outflows stemming from our SQI strategy. So frankly, a lot of stuff came together in Q2. So after a series of deep dives with the team, we simply said, look, "Michael Jordan, Roger Federer, Lionel Messi, I mean, great players have off nights. Don't make it a trend, but we believe in the outlook of the market, and we believe in the management team." So we signed off on the new growth plan for the next 3 years, which is quite ambitious. And when you look at our flow share in Q3, that's back at 15% versus the market share of 10.6%. So we feel that we've bounced back nicely. But again, I'm not being defensive. Q2 was an off quarter for Xtrackers. The one thing I would say when you look at our flows, when you look at, one, minus Xtrackers, so you look at total long-term flows and subtract Xtrackers, we had a few quarters in which the rest was negative. This time, the rest was actually positive, to also -- and maybe there will be questions on Alts flows or other parts of the franchise. But this quarter, the flow momentum was entirely down to Xtrackers having an off quarter, but we are very confident in their ability to bounce back. And therefore, the growth outlook and the monthly run rate that we've seen over the previous quarters, that is now recovered in July. Thank you, Angeliki.

The next question comes from Arnaud Giblat, BNP Paribas.

I've got a quick follow-up. Did I hear well that you said that PEIF IV was activated in August 2024? And my two questions are, firstly, in terms of your targets on the Alternatives, could you break out what the flow expectation is there, which areas they're coming from? I mean if you could give us a little bit more granularity looking out over the next 2 years as to how much you expect the private credit business to scale, whether there's other launches in infra, et cetera. I mean I'm just wondering what sort of quantum of money you can raise there over the next 2 years? And secondly, EUR 0.8 billion of surplus capital, thanks for the extra disclosure there. Clearly, you did a special dividend last year, and you're talking about distributing eventually excess capital to shareholders should the opportunities not come available. I was just wondering if you could put a time frame on that.

Thank you, Arnaud, for the question. I would address the second question you asked about the excess capital. Again, we do not put any time frame on what we do and whether we would pay any extraordinary dividend. We believe now we are in a position of strength at DWS, and we're also not under time pressure. And we also mentioned before that we are open for inorganic opportunities if they're going to add shareholder value, which means they both increase our EPS, but also afterwards help to further grow the business. And two, to keep that flexibility open, that allows us to work active on targets, but also then only move ahead if something really makes sense. But we have already said back in December 2022 at the Capital Markets Day, if we're not investing into an inorganic opportunity or -- and internally, we would return money back to the shareholder. And again, that's why we decided also to provide this time a bit more transparency on our balance sheet.

And Arnaud, the question on Alternatives. So firstly, yes, to confirm, PEIF IV was activated, I think it's actually a good term, in August 2024 when we bought the first asset. So I think as all of you know, private equity side, everyone coming in later is paying management fees accruing back to when the first asset was bought. So I think the best way to think about it is assume fees 1%, anyone coming in, in December 2025 will have to pay 17 months' worth of management fees. And given that we target a EUR 2 billion capital raise, could be a bit more, it could be a bit less. I mean that's essentially the math behind it. You asked about specific flow targets for the various parts of Alternatives, which we haven't broken out so far. And I don't know if I would want to do it just because there's so much happening in that space. But I will give you like high-level slight thoughts. Starting with the easiest one, so the liquid real assets, which is always a good leading indicator for Alternatives overall. We have now seen positive inflows in Q2. So you saw that roughly EUR 0.5 billion. And I would continue that path, or I would expect that path to continue over the next few quarters. So let's just assume a couple of billion a year. Infrastructure is looking nicely, right? So we have obviously PEIF IV. We have something else called [indiscernible], which is more, let's say, core plus European focus that will be raised at some point after PEIF IV is closed. And our infra business in the U.S. is something which actually I haven't spent enough time on explaining, but that is a very nice, neat infra debt business, which I'm happy to explain in more detail if anyone cared. But that will also add a couple of billions a year. So I think for infrastructure, I would just expect a couple of billion a year in Europe, a couple of billion a year in the U.S. It could be more. I mean, look, we are waiting for the fiscal bazooka in Germany and getting ready for that. Once that comes, we should be one of the -- how do I say, I mean, the Gateway to Europe is probably the best way to think of it. So we would be one of those asset managers that global investors trust deploy capital in Germany. Again, this is not part of our growth plan that would come on top if it came to that. When you look at real estate, that's probably the toughest one because rates in the U.S. are just not coming down. However, hardly U.S. [indiscernible] is trying. So therefore, that business is still slightly challenged, as Markus explained, with a couple of large outflows, institutional outflows, lower margin than the average, but still outflows. So I would like to say that, that business has stabilized, but I've said that for a couple of quarters. So for U.S. real estate, I would probably be cautious for the next 12 months. At some point, that will recover. And our real estate debt in the U.S., that's off to a good start of investor discussions. So that's something which we've launched a couple of months ago. So that will add. But I think U.S. real estate is probably one of the bigger swing factors. European real estate looks more promising. So the Grundbesitz outflows have slowed. I mean, I think everyone understands we have good visibility given that we have 12 months' notice. So that is much lower now than in Q1, lower than in Q4 last year. So that's helpful. And we had a nice inflow in European real estate from an Asian investor. So I think for European real estate, I'm more optimistic. Private credit, we are now basically complete with the senior team off to good discussions. We will not raise capital in '25, but that is something which I would expect to start meaningfully contributing in '26 and '27, but more to come on that front. Thank you, Arnaud.

The next question comes from Bruce Hamilton, Morgan Stanley.

So the two from me would be, firstly, just going back to the German sort of bazooka, the infrastructure spending plans. How do you think about that in terms of -- do you have any concrete plans for how to participate in the public, private? I know there's not a lot of clarity yet, but how do you look at the time frame? And how much could that incrementally maybe add to the sort of EUR 2 billion run rate you're talking about would be the first question. And then the second one would be on the sort of pension reform proposals that are working their way through under the Savings and Investments Union. Obviously, we're in a consultation period. So I'm keen to understand what you are pushing for, what you think good would look like, what -- whether there's more opportunity through auto enrollment, whether it's more through kind of tax incentivized savings? Or what could drive household savings into more productive assets? What would you be pushing for there?

Thank you, Bruce. So both questions fully understood. I will be cautious when I speak about them because if I put out large numbers, it's going to be somewhat lame because if those reforms don't come, I would just be able to say, "Hey, we tried, but not our fault." So that's why I will give you my true and fair view, but then all of you will need to haircut it to whatever extent you want to do it. So starting with the large infrastructure program, that will come. So I have no doubt in my mind, and you've seen some of the news flow out of Germany on Monday when the CEOs of the largest companies all committed to invest in Germany and the Chancellor and Finance Minister and Economy Minister making their commitments. So that will come. That will not just be infrastructure investments. I mean, some of the other items like growth investments in VC, which is something we haven't really done, but then again, nobody else has really done in Germany. That could be an interesting opportunity. So when it comes to all the things happening, which we would essentially make investable through alternatives, this is much broader than just infrastructure and lots of discussions are happening. We're not opening a branch in Abu Dhabi to sell money market funds. And same applies to investors from Asia. So I'm quite optimistic, but again, I want to be careful just because it depends on decisions, which I think will come in the next few months, but not like in my hands. I think the pension reform is similar, right? And really, when you think about all pillars 1, 2 and 3, I'm pretty optimistic that big reform packages will come. So I'm pretty optimistic that the people in charge will really make, I would imagine, the biggest reform package potentially in the history of Germany, definitely in the last 20, 30 years. And that will probably include government investments in pillar 1. I think it will be more mandatory for corporate pension funds to fund pension plans, and we've seen the first steps in that direction and also provide incentives for pillar 3. Again, I mean, this will be open to anyone. And by the way, for the record, we are always advocating not doing anything just for European asset managers. I mean, we should be competing against anyone. And I wouldn't want to exclude any U.S. competitors from any of those. However, it will be a significant opportunity for DWS, again, and really coming from, I think pillar 1 will be mostly like covering in institutional. Pillar 2 will be difficult for others to access because our partnership with Deutsche Bank's Corporate Bank probably gives us better access to corporate pension funds than most of our peers would have. And pillar 3, conceptually open to anyone. But I think having strong partnerships with the DVAGs, the Deutsche Banks and other distributors will also be helpful. So again, we're quite optimistic. Pillar 3 will be ETF, but also Active Equity. Maybe one point to add, when you look at our Active Equity, yes, there were outflows overall. But when you look at the gross flows, what's quite interesting is that out of the [ EUR 3.5 billion ] of gross inflows and then [ EUR 4.5 billion ] of outflows, but the gross inflows were much broader diversified coming from retail investors, where some of the outflows were larger mandates. So therefore, also quite optimistic about that part of the business. Thanks, Bruce.

[Operator Instructions] The next question comes from Pierre Chedeville, CIC Market Solutions.

I would like to focus my two questions on the cost, which was clearly a good point this quarter. And I wanted to know -- I didn't do my math, no time this morning, but I would like to know what could be your target in terms of cost-income ratio in 2027, considering your 5.5% growth in revenues and 2% growth in cost. Could you give us, I would say, what would it be in terms of cost-income ratio? And if we come back a little bit on the cost themselves, could you explain me a little bit better what is exactly retention-based cost? How do you see them evolve? Because I don't know exactly what you mean by that? And also, in terms of externalization, you mentioned two countries in which you externalize people. Do you think that you have here something that is not to be improved or it's stabilization in terms of organization? Or do you think that you still have room of maneuver ahead to improve your organization? Or do you think that now most of the job has been done.

And thank you, Pierre. And I'm going to start and Stefan, you may add afterwards with some additional thoughts. With regards to your cost-income ratio question, I mean, first of all, we are well on track. When we outlined that we're now talking no longer about adjusted cost-income ratio, but reported cost-income ratio, we explained it last time that the target for this year is 61.5%. And year-to-date, we are at 60.2%, and that is probably going to improve further going forward. Now when we also look forward and Stefan outlined how we see the cost line to develop with around 2% per year, but stronger revenue growth, that again shows improvement of the cost-income ratio as well towards '26 and '27. I would not put a figure there yet, because on the other hand, we also -- we want to be in the ability or having the capacity and the ability to invest, right? We continuously improve our operating model. And as a consequence, the run rate costs, both for compensation and benefit costs as well as for G&A costs should come down, which should also free up resources we can then reallocate into productive investments. And so we have cost-income ratio as one of our KPIs, which we use for our financial steering. But the #1 KPI is EPS and EPS growth. And we would not compromise EPS growth just to achieve a [indiscernible] point cost-income ratio, which anyway is depending on other factors, which we can't influence. When we talk about to your other question, Pierre, about retention, that is share price. And as part of the variable remuneration, so again, when you look at our cost base, very, very simple cost base, about 50% compensation and ben, 50% non-comp. And within comp and ben is about 1/3 is variable remuneration and 2/3 is base salaries and add-ons. So in that, in the variable remuneration line, some of our staff are incentivized and have the retained variable remuneration, which is linked to the share price. So if the share price goes up, that goes up. And if the share price goes down like in the second quarter, that comes down. So that's to your second question. Then the third question about externalizing resources. And I spoke about that a few quarters ago. We very much look at that very broadly and comprehensively. Our employees, our people is the most precious assets we have, and we invest into our people, which we call active human capital management. And what we had a few years ago, we were depending on, again, on a very high number of externals, which again is important that we add resources, especially when we have projects. But as a company, you would like to have as much as possible of this -- of the human brain, of the human capital be internalized, so you can afterwards also invest into that. And that's what we did when you look at -- and Stefan spoke about the graduates, but we also have been increasing our workforce in India and in the Philippines because that's such a deep pool of experts, and we're just at the beginning, tapping into that, which then again, obviously, in combination of our staff in other locations are working on that. And so we're not looking about compensation benefit cost just looking as a line item in the cost base, but we look at it as an asset, right? It's like a balance sheet in which we invest for long-term value.

And Pierre, that was obviously a comprehensive answer. The only thing I would add when it comes to India and the Philippines, very publicly, 18 months ago, we banned the term outsourcing because sometimes people almost imply that we are moving small tasks to those folks in India and Philippines. And our view is quite clear. I think the average IQ of people in the Philippines and India working for us is, I would say, at least the average of DWS, probably higher given when you think about what percentage of the population would be working for a Western company. So what we've done, and this is in line with what we have done in the corporate bank, Deutsche Bank, for example, is move whole essentially services or parts of the value chain to India, then you get phenomenal outcomes. So part of our investment engine in systematic quant investments sits in Mumbai and so on and so forth. So therefore, this is not just a cost play, but in some cases, you simply have access to excellent talent, and it's something which we intend to leverage even more going forward.

The next question comes from Oliver Carruthers from Goldman Sachs.

Oliver Carruthers from Goldman Sachs. So European ETF flows are having a record year. The market is now growing flows at a faster rate than the U.S. and -- but access to ETFs in Europe is still well behind that of the U.S. market. So it feels natural to ask a couple of questions. So number one, are you seeing U.S. asset managers increasingly trying to compete here with your Xtrackers business? And then number two, if they do try and compete more, how durable do you think your incumbency market share position is here? So I guess, really, beyond the market leader we all know, do the U.S. players have a right to win here in your home European markets?

Thank you, Oliver. Do they have the right to win? I think so, just like we have -- actually, so you always have a right to compete questions. Obviously, do you have a right to win. So I think European ETFs, and I don't want to lecture anyone, slightly more difficult than U.S. ETFs simply because you need to have financial infrastructure in every country where the underlying stocks are being traded. So slightly more difficult than just doing the U.S. Obviously, iShares and you said the market leader, let's not talk about them. I think you've seen Vanguard gain market share. They probably found it slightly more difficult in Europe than in the U.S., but they're growing market share. So I think that people have a right to compete and probably a right to win. I think my view is, though, if you really want to understand how the digital platforms are operating, how ETFs can be integrated in solutions for corporate funds and so on, if you simply assume that we're going to have the same disruption in Europe that we've seen in the U.S., meaning ETFs just sort of taking over, then your knowledge of essentially the whole client base in Europe is going to be paramount. And I think that's going to be difficult for a new market entrant that doesn't understand active to win, right? So therefore, I think just understanding retail is not going to be enough given the difference in distribution mechanisms over here. That's number one. So I feel that our market share of which was 10.6% in Q2 would be higher now after like a strong start to Q3. That is supposed to grow, right? I just want to be very clear. The new growth plan that we signed off is more ambitious than the growth plan, which we signed off on 3 years ago, and the team materially outperformed that growth plan. So we are quite optimistic. But again, that's quite granular. So we feel that we can continue market share. But I'm just looking at Markus, we had, I don't know, 60 different initiatives as part of that growth plan. So when I said that in-depth business reviews with Markus and I are, maybe not as pleasant as it may seem. It's not that we just say, "Phenomenal last 3 years, here's your new budget, please run." There was very, very specific growth plans for countries in Eastern Europe for new client types we haven't accessed yet. I think a deep understanding of not just what platforms have done over the last couple of years, but investments in API, and we just made a bunch of hires in that tech space in order to be even more integratable into all of those digital players. So it's a broad series of specific initiatives, which we are confident is going to allow us to grow our market share from here.

The next question comes from Michael Werner, UBS.

Just two questions from me, please. First, with regards to kind of the change in resourcing towards India and Philippines, what percent of your headcount is currently based in those 2 countries? And ultimately, where do you think that can go in the next 3 to 5 years? And then just quickly on the active ETFs. I was just curious to see what the fee margins on those products were relative to like-minded non-ETF active strategies.

On the first question, Michael, and thanks for asking in terms of resources, in the two regions, India and Philippines, it's currently about 1,100 of our employees and growing.

And do you guys -- do you know where that can go? I think that's what, maybe 1/4 or so of your total headcount or...

At the moment, yes.

I mean I think it can grow. It's not going to be half of our workforce because we're probably not going to like stand-alone operate or sell assets in those countries. But I think it can probably go up 30%, I would imagine, right? So it kind of being maybe 1/3 of our total workforce. That's probably what I could see, which would be in line with resourcing the corporate bank, for example, when you look at kind of the tech and ops folks. And again, I think the level -- so the competency of people we get there is excellent, especially if you don't treat it as a like offshore outsourcing, but really as a super significant value creator for the global franchise. On active ETF, obviously, you see the margins. So I guess your question was versus similar strategies. We've chosen to not cannibalize successful active strategies yet, right? Maybe that will come at some point, but it's essentially new offerings where we didn't have active strategies. So therefore, it's not quite comparable. As you would imagine, it would be lower, right? I mean when I say a fraction, it would be maybe 1/3, maybe half of comparable active strategies. But again, I think something where if as the market grows overall, this is going to be a more relevant part of our franchise. Thank you, Mike. Which I think was the last question. So before I hand over back to Oliver, so is there one last question? Okay. But can I say something? Sorry, the sometimes live TV, the -- thank you for all the questions. Allow me to make one comment. It's like a passionate comment given that I'm overseeing Alternatives myself. I understand that you view performance fees as lower quality than management fees. So I get that, right? I'm not trying to argue that this is much better than management fees. I can just tell you, we work really, really, really hard to get those low-quality revenues, and we'll have more of that going forward. So I think you may want to just take a look at PEIF II continuing to paying performance fee in '26, I would say, at least in line with '25. When you look at our performance fees, let's say, in 2021, which were over [ 200 ] when the real estate was kicking in nicely, why wouldn't we have that as a base? So when we said that we had 4% to 7% of revenues going forward, this is not just coming from one strategy. So yes, we have Kaldemorgen every year. We have the infrastructure business, but private credit, real estate coming back, and a few other things are all essentially a diversified source of performance fees. So I would just ask you to -- in follow-up ask any question you may have on performance fee, but I think that this is something which you will see as a steady recurring source of revenues for DWS in the future. And with that, I wish you a happy summer, but back to the operator. Thank you, everyone.

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 all for joining today and for the continued interest in DWS. I mean, as you have seen, our Q2 results highlighted the resilience of our business. And I think a very challenging environment and also reaffirmed the solid progress that we are making towards our 2025 financial goals and beyond. And with that, I wish you all a great summer. Thanks again, and we're looking forward to catching up during upcoming roadshow meetings, conferences and other IR activities. Have a good day. Thank you. 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.