Managers relish chance to unleash innovative products

Banca d’Italia has given Italian managers the much hoped for opportunity to innovate their product range, by quickly absorbing the new Ucits III directive, which allows for a broader range of investment instruments to be used in funds. Italian fund products are still suffering from the consequences of strict legislation imposed by the bank at the inception of the fund industry in the 1980s. In those years “everything was forbidden except what the bank allowed,” said Attilio Piero Ferrari, chief executive officer at Arca, the ?35bn fund house formed in 1983. Clearly there is pent-up market demand for more innovative vehicles after the success of products such as t3 and t5, launched by Arca in conjunction with Russell Investment Group, in February. These two absolute return multi-strategy multi-manager products, which Mr Ferrari claimed are the first, non-harmonised funds that have capitalised on the opportunities offered by the new legislation in Italy, have gathered ?850m since their launch. Arca’s new funds, “which respond to client demand for products having an investment horizon and an indication of return above risk-free rate,” said Mr Ferrari, aim to generate net returns above government bonds (BOT) in excess of 50 basis points over three years (t3) and 150 basis points over 5 years (t5). The innovative factor is the employment of non-directional funds, which represent more than 50 per cent of the most aggressive t5 portfolio. Portable alpha and active currency make up 30 to 50 per cent. Hedge funds, including a couple of low-beta multi-strategy funds of hedge funds, represent 20 per cent. The Ducato multi-manager Cash Premium from Monte Paschi AM has also drawn distributors’ attention, having gathered ?530m since its launch in February. The new generation non-harmonised fund, which has a target return of libor + 100 basis points, has a component of alternative funds of 30 per cent, of which 20 per cent is in hedge funds and 10 per cent in property and commodity funds.

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Ferrari: new funds respond to demand