Goldman Sachs has downgraded its rating on DWS Group, the German asset manager majority-owned by Deutsche Bank, from ‘neutral’ to ‘sell’, citing a deteriorating outlook for net inflows and profitability over the next two years. In a research note published this week, the bank’s analysts cut their 2026 and 2027 earnings per share (EPS) estimates for DWS by around 10 per cent, reflecting expectations of weaker fee income and slower client asset growth.
The downgrade comes as DWS continues to face headwinds in its core European and institutional fund businesses. Analysts at Goldman Sachs pointed to a combination of elevated outflows from higher-margin active strategies, persistent pressure on management fees, and a more cautious investor environment. The bank now expects DWS’s net new money flows to be significantly lower than previously forecast for both 2026 and 2027, although specific revised figures were not disclosed in the note.
Shares in DWS, which is listed on the Frankfurt Stock Exchange, moved lower following the announcement, adding to a decline of roughly 15 per cent over the past twelve months. The stock has underperformed the broader European financial sector, which has gained ground in 2025 on the back of higher interest rates and improved capital markets activity. DWS, however, has struggled to translate those tailwinds into sustained asset gathering, particularly in its passive and exchange-traded fund (ETF) ranges.
For UK investors and pension holders with exposure to European asset managers — either directly or through funds such as the Invesco DWS range — the downgrade signals that the fee and flow pressures affecting the industry are not easing. Passive investing and low-cost index tracking continue to erode margins for traditional active houses, and DWS is among those most exposed to the shift. The company has been attempting to bolster its alternative and private markets offerings, but Goldman Sachs appears unconvinced that these initiatives will offset the drag from its core business in the near term.
Other analysts have taken a more mixed view. Some note that DWS’s balance sheet remains solid and that its cost-cutting programme could support margins, but the consensus is increasingly cautious. The downgrade from a major Wall Street bank is likely to weigh on sentiment and may prompt further re-evaluation of the stock by other institutional investors. DWS is due to report its full-year 2025 results in early February, which will provide the next key test for management’s guidance.
Source: Goldman Sachs Research