All change in Italy as expansions unveiled

Domestic and foreign fund managers active in Italy, and their clients and distribution partners, are experiencing huge changes to their product design and distribution environment.

The expansion plans of Italy’s leading fund houses, against the background of the EU’s Ucits III legislation, enacted in April, were presented to a PWM conference held in Milan attended by more than 140 delegates from the Italian industry.

Matteo Perruccio, CEO of Italy for Pioneer Investments, whose parent group Unicredito is in the midst of a merger with German bank HVB, said that Ucits III offered many opportunities in terms of products and advice. “Something which people did not predict, when the Ucits I and II directives were launched, was that the Ucits stamp would actually turn into a brand. Companies are already saying that they are the first funds group to launch a Ucits III compliant product. This represents a quality brand, which stands for reliability and credibility.”

A call for more alpha – that is the performance identified by skilled fund managers, which is not necessarily a characteristic of the market as a whole – is also coming from distributors and their clients, said Mr Perruccio. He also identified a need for absolute return products, where clients demand that they actually make profits on their funds, rather than just performing well in relation to the benchmark.

“My grandfather always told me that if you invest 100 Lire, you need to get at least 101 Lire in return. My bank manager, however, would tell me that I should be happy because I got 98, while others only got 90 back.”

But the Italian investment industry has previously suffered because investors have chased profits through following the market, and always selling off at the bottom, he added. “It is clear that investors’ behaviour is more stable in those countries where asset management is more developed,” said Mr Perruccio. He said the market would be much healthier if new product development could encourage “a change in the behaviour of Italian investors in relation to sophisticated investors in other stock-holding countries.”

The legislation would also encourage the marketing of standalone fund products, which could be sold directly to investors, rather than funds packaged as structured products which currently dominate sales made by Italian banks, said Mr Perruccio.

However, some distributors played down the implications of the new regulations.

“Ucits III is going to make certain things easier and more efficient,” said Giovanni Bagiotti, head of Wealth Management at the Mediolanum Group, one of Italy’s best known distribution houses, set up in 1981 by charismatic salesman Ennio Doris, with an investment from Silvio Berlusconi, then an up-and-coming young businessman.

“But we don’t see this as a basic way to change how we are positioned in terms of funds or insurance products,” said Mr Bagiotti. “Half of our sales are structured products, and innovation is much easier given the current regulations governing structured products. We can launch a structured product within one or two weeks, but a fund will still take three to six months to launch.”

Although speakers from large groups such as Nextra and San Paolo IMI revealed their plans to launch vast swathes of new products in line with the Ucits III regulations, Mr Bagiotti warned against over-exuberance.

“There are already too many products available out there. We have 169 funds at Mediolanum, but we sell two thirds of our products in just 15 lines.”

Mr Bagiotti also echoed the views of other speakers that the key to successful investing relied at least as much on asset allocation decisions as it did on product design. “The concept of asset allocation is the factor most responsible for the success of Mediolanum. Consulting is the most important thing, not products.”

Upcoming events

The Milan conference was the first in the European Fund Series, hosted by PWM and BNP Paribas, discussing key issues in European distribution. The next event will take place in Madrid in October. Readers interested in Spanish distribution opportunities can register by calling +44 (0) 207 382 8184.

Matteo Perruccio: Ucits stamp has now turned into a brand