Deutsche Asset Management is losing money in its €131bn ($166bn) institutional division and has admitted the business is likely to take until at least 2008 to break even.

Kevin Parker, global head of Deutsche Asset Management, told investors last week that the institutional business needed to be bigger to compete. "If you're going to be in the business, you've got to have scale to make money. We hope in 2008 that we would break even. That would be a good result. We'll see, over the next couple of years, whether we get there," said Parker. Merrill Lynch analysts estimate the institutional business made a pre-tax loss of €385m last year. However, the overall asset management business has improved its profitability in the past two years, fuelled by strong results from its retail brand DWS and alternatives operation Rreef. Parker wants to make €800m in pre-tax profits in two years' time, which is almost double what it made last year, according to analysts' estimates. At the bank's investor day in London last week, Parker said the institutional business was not big enough outside Germany, which has two thirds of Deutsche's institutional assets. "Our asset mix is not terrific and the consultants were not focused on it as a separate client base," he said. The business generated €222m in revenues last year and commands an average 17 basis points fee on assets, well below the 59 basis points from retail. As European pension assets are expected to double in the next 10 years, Deutsche is reinvesting in the institutional business and has put a new distribution team in place under Roelfien Kuijpers. It has also made it a division in its own right, separating it from the €109bn it runs in insurance assets. Also at the investor day, Michael Cohrs, who oversees corporate finance including capital markets at Deutsche Bank, highlighted growth in the Americas as a priority.