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Possible DWS Sale Creates Uncertainty for Its Funds

AMR bankruptcy doesn't ground mutual funds, and more.

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Reports that Deutsche Bank is considering the sale of its U.S. asset-management division are not surprising given the disappointing record of its DWS mutual fund arm here. But a possible sale also introduces uncertainty for investors in DWS' U.S. funds.

DWS grew in the United States primarily through a string of acquisitions in the early 2000s--including the purchase of Scudder Investments in 2002. The ensuing integration was piecemeal and contributed to DWS' disparate investment culture. DWS was implicated in the market-timing scandal in 2003. Since that affair, the firm has struggled to rebuild its business and reputation in the U.S. Starting in mid-2003, when the SEC initiated its market-timing investigation, DWS funds have suffered average estimated quarterly net outflows of $682 million through October 2011, according to Morningstar data.

DWS has attempted to make its lineup more competitive by reducing its number of fund offerings and transferring management responsibilities for 10 of its equity funds, including some of its largest, to more-established management teams in Frankfurt, Germany. The lineup does have a few bright spots, including its municipal funds, but these efforts haven't been enough to tip the scales. More than half of the firm's funds rank in the bottom half of their respective categories over the past three and five years, and there are signs that the firm's investment culture has continued to deteriorate since Morningstar issued its stewardship report in 2010.  

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Morningstar Fund Analysts does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.