DWS Group has acquired a 24.9% stake in Arabesque AI, the latest in a string of investments from Germany’s leading financial players into ESG-focused start-up Arabesque Group.
Arabesque AI uses artificial intelligence (AI) to predict stock price developments. An Arabesque spokesman said it had been developing its AI capabilities for many years.
London-based Arabesque AI has two investors, DWS Group and the asset management arm of Arabesque Group, Arabesque Asset Management Holding.
"The next step towards the digitalization of DWS"
Last year, DWS, the former Deutsche Asset Management, also took a 2.68% stake in Arabesque S-Ray, an ESG-scoring provider arm of Arabesque Group. DWS invested alongside Allianz X, Commerz Real and the German State of Hessen. They collectively took a $20m stake in Frankfurt-based Arabesque S-Ray.
At the time of the investment, DWS said it was in talks about the firm’s AI technology. Arabesque AI was incorporated two months later in August, 2019, according to filings at Companies House.
Commenting on the investment today into Arabesque AI, Asoka Woehrmann, CEO of DWS, said: “The strategic partnership with Arabesque AI is the next step towards the digitalization of DWS. It will clearly strengthen our digital capabilities and, in particular, our Artificial Intelligence know-how. We will be able to harness disruptive technology within the asset management industry for our advantage.”
He added: “In the future, the AI engine will deliver innovative signals that will help us identify additional alpha [market outperformance] sources, and will enable us to make smarter decisions.”
The strategic partnership with Arabesque AI will include the establishment of an expert working group for ongoing collaboration. A DWS spokeswoman said it would include members of DWS’s quant team.
“The collaboration could lead to new investment products offerings including sophisticated quant products and services,” she said. “The aim is to jointly develop innovative projects leveraging AI…to e.g. generate sentiment signals, develop investment approaches, or make use of AI in the larger context of asset management.”
Arabesque Asset Management runs two Luxembourg-registered quant funds, started in early 2014. The ‘Systemic’ funds are understood to run some $350m in assets, of which $280m is invested in an Arabesque Sharia-compliant fund, where the majority of the assets is retail client money from BIMB, a savings bank in Malaysia.
Vincezo Vedda, Global Head of Trading at DWS, sits on Arabesque AI’s board, along with three senior members of Arabesque Group: Dr Dominic Selwood, general counsel, Dr Hans-Robert Arndt, head of quantitative Research and CEO Omar Selim.
Members of Arabesque Group’s quant team Dr. Yasin Rosowsky and Dr Qasim Nasar-Ullah are co-CEOs of Arabesque AI.
Commenting on the DWS investment, Dr Qasim said: “AI will transform portfolio management, and has the potential to further the mainstreaming of ESG across global markets.”
The board of Arabesque is chaired by former UN Global Compact Executive Georg Kell and includes figures like Barbara Krumsiek, the ex-CEO of SRI firm Calvert Investments, human rights figure Professor John Ruggie of Harvard and Yolanda Kakabadse, the former President of WWF International.
This week Arabesque S-Ray named Todd Arthur Bridges as Global Head of Sustainable Investing and ESG Research. He joined from State Street Global Advisors, where he was Head of ESG Research and Development.