The only pension fund already in place in 1999 was Fonchim. Devoted to the Italian chemical and pharmaceutical industry, its assets were actually invested into financial markets by fund managers. The other ‘closed-end’ pension funds, Cometa (mechanical industry), Fondenergia (Eni and energy industry) and Fondi quadri e capi Fiat (Fiat group’s executives), have only just started to invest their assets this year.
Fonchim (
Fonchim has more than 93,000 members, almost half of all the potential members in the national chemical /pharmaceutical industry. Contributions of 1.06% of their salaries are paid by both the employee and the employer, plus a portion (25-100%) of the annual tfr – the lump sum paid to the employee when he quits the job. The assets – about Lira500bn (E250m) at the end of February 2000 – were divided into six equal portions. Three are managed by the insurance groups Assicurazioni Generali, Unipol, Ras (Allianz) and invested in short term (one to three years) euro bonds. The other three are managed by the bank groups Europlus (Unicredito), Fideuram (Sanpaolo-Imi), Mediolanum/State Street (joint venture between Banca Mediolanum and the US investment company). Their investment is a balanced 40% in short term euro bonds, 20% in Italian equities, 20% in US equities, 20% in European and Japanese equities.
The fund managers invested their assets in March last year. After 10 months, the short term bond portfolio’s performance was 1.47% against the benchmark’s 1.35% and the balanced portfolio’s performance was 21.7% against the benchmark’s 20.93% (the individual fund manager’s performances are not available).
Members benefit from just one perfomance, which is the result of the two combined portfolios at 11.18%, after all expenses, from March 1999 to the end of last year.
Expenses paid by Fonchim in 1999 were:
o management fees, 0.067% of the assets;
o custodian bank’s fees, 0.046% of the assets; and
o administrative costs, 0.69% of the assets.
“We are pleased with all our fund managers”, says Alberto Giordanetti, chairman of Fonchim, who goes on to explain how the board – half appointed by employers, half by employees through a general election organised by unions – monitors the six fund managers: “The board receives a monthly report about performances and another every quarter, which is more in-depth. One of the six managers in rotation is the ‘evaluator’ of all performances and discusses how each manager tracks or beats the benchmark and what the risk level is. As well as this, every six months there are individual meetings between the Fonchim board and each fund manager. We want them to tell us how they achieved their performances and had the first meeting – a one hour presentation by each fund manager – in April of this year”.
Giordanetti would not disclose any problems they may have discussed but he admits that two of the bond managers made some mistakes and are now under closer scrutiny. “After two years (being February 2001) and three years (February 2002),” Giordanetti reveals, “the board will let go of two of the six managers”.
January and February 2000 were two excellent months for Fonchim where performance was higher than 3%. The stock market slides that followed have not worried the Fonchim board, according to Giordanetti: “We have also experienced some bad periods. For example, in October, Fonchim performanced less than tfr which is indexed to inflation. In the light of this, we discussed whether to change our asset allocation and asked fund managers for advice. In the end we decided to stick to the original asset allocation, which is a strategic one. We were right and are still following this philosophy”.
The Fonchim board will be reviewed next July. The new one will have to decide how to move the current organisation toward a multi-compartment fund, where the single member can choose among different investment options and get different performances.
Cometa (
Cometa has about 300,000 members which is 25% of all potential members in the national mechanical industry. Contributions are paid by the employee (1% of salary) and the employer (another 1%), plus a portion (maximum of 100% for ‘new’ employees) of the annual tfr. Assets of Lira381bn (E190m) at the end of 1999 were invested by six different fund managers:
o Generali and Paribas manage the ‘conservative’ portfolio (40% of total assets), which can invest up to 10% in equities;
o Europlus (Unicredito) and Sanpaolo-Imi manage the ‘income’ portfolio (40% of total assets), which can invest up to 30% in equities; and
o Invesco-Aig and Cisalpina-Putnam manage the ‘growth’ portfolio (20% of total assets), which can invest up to 60% in equities.
Each fund manager manages half the portfolio he is in charge of.
Financial investments started at the beginning of January this year. “Unfortunately, fund managers began building their portfolios at high stock market prices,” says Maurizio Agazzi, the managing director of Cometa. “Anyway, in February and March all of them outperformed the benchmarks. We are pleased with them, but feel a bit nervous with the current market volatility. So we’d like to have more frequent reports, apart from the monthly official ones. For example, we could have informal, short reports every 15 days, in order to have a better idea about the risk level of our investments.”
Agazzi comments that Cometa is not going to change neither the asset allocation, strategic or tactical.
Fondenergia has 30,000 members mainly within the Eni group which is 60% of all potential members. Contributions are 1% of the salary paid by the employer, 1% paid by the employee, plus a portion (36 to 100%) of the annual tfr. The assets were Lira159bn (less than E80m) at the end of 1999 and could only be invested into financial markets in February 2000. There are three appointed fund managers:
o Europlus (Unicredito);
o Sanpaolo-Imi; and
o Mediolanum-State Street.
Each of them manages one third of the assets and has the same benchmark: one third equities and two thirds bonds, internationally diversified.
“On a monthly basis, we control performances,” Alessandro Stori, managing director of Fondenergia explains. “Managers’ performances adjusted by risk are calculated after six months. So far our relationships with fund managers have been based on discussions about the asset allocation and have been positive”. Stori would not comment on the March to May performances.
Fondo Quadri E Capi Fiat
Fondo Quadri E Capi Fiat has 15,000 members, 87% of all potential members, who are professionals and executives in the Fiat group. Contributions are 1.1% of the salary paid by Fiat, 1.5-2% by the employee, plus 50 to 100% of the annual tfr. The assets are Lira55bn (about E27m) and are invested: 30% in a short term euro bond portfolio and 70% in a global balanced portfolio. The two appointed fund managers are Morgan Stanley and Romagest (Banca di Roma), which each manage half of the two portfolios. They started investing on 17 April this year. “It is too early to comment on performances,” Ms Di Bartolomeo, chief financial officer of the Fiat fund, says. “We are controlling performances’ volatility on a monthly basis.”