Product providers seek tax breaks

Senior representatives of the major Italian asset management firms gathered in Milan at the recent PWM conference to discuss which strategies can be employed to fight the fund industry crisis. Aiming for high ratings, bringing new products onto the market, expanding open architecture and focus on core competency are the solutions identified by Marc Raynaud, global head of third-party mutual fund distribution at BNP Paribas Investment Partners. Eighty per cent of subscriptions are to four or five star rated funds or to new products, said Mr Raynaud. Through FundQuest, the French group’s subsidiary specialised in external manager selection, fund management delegation has expanded recently. “We have also created a whole range of new funds that are most in demand and performing, such those investing in emerging markets or specific sectors such as raw material, or agriculture,” he said. Sandro Pierri, CEO at Pioneer Investment Management, said that product proliferation has left banks and distributors alone in the difficult situation to construct investment portfolios efficiently. “One of the paths to take is to partner with distributors to help them build advisory models or strengthen the offering of those products that have inbuilt advisory mechanisms, such as total return or target return products.” The fund industry has lost around E100bn over the past 18 months, and the situation is not going to improve in the next six to nine months, he said. But advisory based promotori finanziari networks did have positive inflows. This total shake-out, also due to a cyclic stage where the industry needs to reabsorb the results of some excessive growth of the past, will encourage the polarisation of groups into a few big players, foreign players and boutiques offering quality products. “I think that within the next 3 years many banks will realise that distribution and not asset management is their core business,” said Mr Pierri. A simplification of the product range, aimed to meet the real needs of investors and not to pander to fashionable selling, was emphasised unanimously. And sophisticated products are not necessarily on the agenda. But investment planning is key and in order to be able to offset risk aversion, accumulation plans are the best instruments, said Mr Pierri. “The accumulation plan enables to take volatility off the investment. If this will not give results in the short term, because flows are very gradual, it is an instrument which gives stability in the long term.” Tommaso Corcos, CEO at Fideuram Investimenti, emphasised the necessity to invest both in staff and technology to close the gap that has opened between the Italian companies and the most sophisticated businesses abroad, such as hedge funds in London. Francis Candylaftis, CEO at Eurizon Capital spurred Italian asset managers on to distribute abroad, in addition to serving their networks. “A pure asset manager should measure itself with the external world. While we have foreign providers in Italy, Italian asset management companies [with the exception of Pioneer] haven’t opened to the external world and this is a symptom of weakness that we have to overcome.” Mr Raynaud of BNP Paribas brought up the issue of the consequences of the peculiar interpretation of the regulation MiFID in Italy, for which distributors or asset managers cannot take retrocessions anymore from the underlying firms, often foreigners. This drastic interpretation has lead to the dismantlement of the old GPFs (discretionary fund of funds products for richer clients), to create new ones charging low commissions compliant with MiFID or they are transformed into transparent funds of funds. This is because nobody wanted to reveal to the investors how much they had been charged so far, he said. A lack of incentives from the regulator has added to the general negative situation of the industry, already marred by lack of a level playing field between funds and structured products and the traditional risk aversion of Italian investors. “In all the other countries there isn’t a level playing field but an advantage playing field for the managed savings products, in particular for the medium terms savings,” said Gian Luigi Costanzo, CEO at Generali Investments, referring to example of favourable fiscal treatments in other countries. “This is the only real drive which would enable us to overcome the short-termism of the investor,” he said. Reducing taxation in the medium term would also encourage inverstors’ interest in financial instruments with equity components. “The asset allocation of the Italians is the worst you could imagine over the medium horizon,” he said.