ITALY – Growth in pension fund assets in Italy remains relatively sedate, despite being substantially upgraded following the implementation of tax enhanced benefits for contributions, says Cerulli Associates in a new report, entitled: Trends in the Italian Asset Management Marketplace.

Cerulli believes that supplementary pension schemes will hold some €27bn by 2005, the majority of which will be in industry schemes, which are earmarked for the fastest growth rate, given that 40 or so new closed-end (industry) schemes now in the pipeline should be operational within the next five years.

Currently, according to Cerulli, only 18% of Italy’s workforce contributes to a supplementary scheme. New tax breaks introduced at the beginning of the year are expected to stimulate interest in the supplementary plans, but only €2.1bn had gone into the reformed system by March, which Cerulli considers “dismal”, given the size of the country’s overall financial assets.

Elsewhere the report finds that the Italian mutual fund industry will surpass the €1trn mark by 2005, fuelled by growth in foreign funds operating in Italy.

Currently, the Italian mutual fund market is worth €560bn, claims Cerulli, but the growth will come from overseas domiciled vehicles that are cross-registered for sale in Italy, as the growth rate among local Italian domiciled funds slows down. Cerulli says it expects to see an annual compound growth rate of 16% for foreign funds, rising to 20% if so called historic Luxembourg funds are excluded. Local funds will grow by some 11.5%.

In addition, at €185bn, the gestioni patrimoniali in fondi (GPF) market is actually larger than the US mutual fund wrap-fee market, says Cerulli, adding that assets held in GPF structures will double to represent 38% of the entire mutual fund industry in Italy by 2005.

The Italian affinity with multi-vendor products will stimulate steady growth in the fund of funds business, which has grown to €7bn since March 2000, says Cerulli. Half of this amount is held in Italy’s multi-manager products, and most of the assets in this area are concentrated in a multi-manager fund complex developed jointly by banking group, Arca, and the Frank Russell Company.