Rich Herman, head of the institutional client group for Europe, says that developing an in-depth understanding of clients’ objectives and their risk appetite, coupled with cross-product risk mitigating expertise, is key to providing a comprehensive risk advisory service. “Our clients are increasingly sophisticated. We need to deliver ever more innovative solutions, which often span several asset classes. The ability to ‘de-risk’ a portfolio across a range of exposures – such as interest rates, inflation, equity and commodities – is key. Clients are looking for a one-stop shop for their hedging and risk advisory needs.”
Deutsche Bank’s purchase of Abbey Life’s closed funds business is a good example of the risk advisory skills that it can bring to its client business. The bank’s insurance and pension group has for many years advised insurance and pension fund clients on managing the risks associated with the long-term nature of their business. By acquiring Abbey Life, Deutsche’s global markets business is seeking to employ its advisory knowledge and expertise by taking a direct interest in this business.
The transaction is part of a broader move by the global markets group into the insurance and pension space and follows on from the acquisition of a stake in Paternoster in 2006. “It will help to develop our ability to provide client solutions to the challenges of a rapidly changing European insurance and pensions landscape,” says Mr Herman.
The bank also continues to build out its commodity franchise and is combining this with its credit risk management expertise to provide risk management services to a broad range of clients with commodity exposure. In the UK power market, Deutsche executed one of the largest and longest-dated block hedging transactions for a producer that involved substantial counterparty credit risk. “We managed the market risk in the long end of this illiquid market effectively. Through collaboration with the credit derivatives team, we also managed the counterparty exposure, which had previously restricted the client’s ability to hedge in the market,” says Mr Herman.
