Deutsche Bank, which has drawn the skepticism of many investors over the last few years, culminating in its stock hitting new lows in October and recently failing the Fed's most recent stress test, finally now has a public advocate. New York based activist hedge fund Hudson Executive Capital LP, which is run by former J.P. Morgan finance chief Douglas Braunstein, has disclosed that it owns about 3.1% of the bank's common stock. Hudson believes that Deutsche Bank's new CEO will be successful in pursuing a turnaround strategy that has failed to convince the broader market thus far.

The 3.1% stake amounts to about $620 million worth of stock and was initiated after the bank undertook a restructuring, along with a CEO change, in April of this year. 

Among the due diligence that Braunstein has done has been a year of talking to current and former executives of the bank. He has since concluded that the bank is "misunderstood and undervalued", according to the Wall Street Journal. He also claims that management is finally unified after being as "dysfunctional as you can find" in 2017. Braunstein believes that under its new CEO, DB will be able to boost its traditional banking business - both retail and wealth management - on top of also bolstering its dealmaking and cash management business.

DB's new CEO, Christian Sewing, told the Wall Street Journal: “Doug Braunstein and Hudson Executive come with deep backgrounds investing in financial services companies. We appreciate Hudson Executive’s confidence in our ability to execute on our strategic objectives.”

Braunstein believes that the bank's global transaction banking unit has the potential to do better than recent results suggest. He called this part of the business a "crown jewel" that can help provide affordable funding, which could alleviate higher costs that have been associated with DB's funding in the past.

Sewing said he’s focusing on making retail banking more efficient and the bank going "back to its roots" serving European companies. Sewing comes with high praise by Braunstein, who said "We would not have made the investment but for the fact that we think he’s the right guy for the job."

Braunstein also liked the fact that private equity firm Cerberus Capital Management LP formally advised the bank's restructuring and transformation back in November 2017. After also disclosing a ~3% position in the bank, they became a paid adviser to the bank early in 2018.

At the same time, the bank has seen its market cap destroyed to about just $20 billion, which is about a third of its value before the 2008 housing crisis. This year, shares are down 46%. The Journal reports that executives at Deutsche Bank see Braunstein as supportive even though he is adamant that the bank turn itself around. Braunstein also said, on the record, that he was not interested in Deutsche Bank merging with Commerzbank AG, a move that has been speculated recently.

And the fact that everybody seems to be getting along early on in this "activist" investment is conducive to Hudson's style. The fund, which launched in 2015, is more likely to work alongside with management and executives than to fight them by going public and launching proxy contests. The backer of Hudson’s capital for the Deutsche Bank investment, EnTrustPermal, has been frank in stating that since expectations are so low for the bank, they don't need the world to believe that it is JP Morgan quality.

According to Gregg Hymowitz of EnTrustPermal, he just needs the world to believe that "this bank is mediocre".