Deutsche announces details of Zurich Scudder deal

Deutsche Bankhas agreed to pay $US2.5 billion for the struggling funds management arm ofZurich Financial Services, Zurich Scudder Investments, in a global deal also expected to boost Deutsche’s push into the Australian retail funds management market.

At the same time, under an arrangement signalling greater worldwide cooperation between Deutsche and Zurich, Deutsche Bank will transfer its 75.9 per cent stake in the German insurer VHDB, as well as its insurance interests in Italy, Spain and Portugal to Zurich.

The arrangement, which is subject to regulatory approval, will make Deutsche Bank the fourth largest fund manager in the world, with over $US1 trillion in funds under management, and give it a vital foothold into the US market, where Scudder is a widely recognised brand name.

Zurich acquired the US based Scudder in 1997, but the funds management group, now managing US$278 billion, has since lost up to US$16 billion in assets under management.

The deal, driven by Deutsche’s ambitions for the US market, has widespread repercussions for Australia, where Zurich Scudder will be integrated into Deutsche Asset Management’s local operations.

Zurich Financial Services’ Australian operations, which passed on all its funds management functions to Zurich Scudder, will have its funds handled by Deutsche once the global deal is settled early next year.

“We effectively outsourced to Scudder so we’ll continue that arrangement with Deutsche while they can continue to meet the objectives that we have set down in our prospectuses,” Zurich’s Australian head of distribution Steve Newnham says.

The global agreement, which also spelled out greater cooperation in the distribution of asset management products across the two groups, could also provide Deutsche Asset Management, an organisation with mostly wholesale capabilities in Australia, with access to Zurich’s network of retail focussed financial planners.

“We will want to work with Zurich in terms of their penetration into the advisor market,” Deutsche Asset Management’s regional CEO Brian Scullin says.

A regional integration team, headed by Deutsche’s regional chief operating officer Michael Monaghan, has already been established to iron out Zurich Scudder’s incorporation into Deutsche Asset Management’s Australian business.