Italy’s Priamo to switch to absolute return when mandates expire

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Fondo Pensione Priamo, the second-pillar fund for the Italian public transport industry, is on the verge of swapping its approach for an absolute return-led strategy as part of the new asset allocation it is putting in place to manage its high rate of maturity.

Some 80% of the €1.19bn pension fund’s membership are bus drivers, and, according to their contracts, they can retire at the age of 60 for health reasons.

Osvaldo Marinig, the pension fund’s chairman, told IPE’s ‘How We Run Our Money’ in the magazine’s December issue: “This particular characteristic of our fund prompted us to reflect on our investment strategy. The time horizon of the fund is reduced compared with other funds.”

There are other challenging aspects too, he said, such as the high average age of members, which means more workers are expected to retire soon.

The fund has now decided it needs to depart from its relative value management style, and instead begin working with an absolute return approach – even though most Italian pension funds have chosen not to take this route having earned well from benchmark investing in benign markets.

“We want to encourage our managers to be more active in their investment style, to make sure they don’t just focus on beating the benchmark,” Marinig told IPE.

Because Priamo’s current mandates expire in 2017, the pension fund will work on new manager searches during the course of next year. 

But, even before that, the board foresees changes happening to the portfolio as current mandates are altered to reflect the new asset allocation.

This new model will involve a higher weighting of equities, with changes in geographical horizon and investment styles, according to Priamo. 

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