Strategically Speaking: Tages Group
Saying that Tages is an investor in alternative asset management businesses does not really do justice to its eclectic nature. The group has interests in companies managing $51bn (€45bn) worth of assets across four main areas – distressed credit, liquid alternatives, infrastructure and private equity.
Panfilo Tarantelli, founder and CEO, is himself an eclectic character. An Italian citizen, his career in financial services spans three decades, mostly spent in London. He is a former investment banker at Schroders and Citigroup and set up Tages in 2011 as the next chapter in his career, the one dedicated to entrepreneurship. Tarantelli also has extensive sailing experience. At the end of last year, he once again sailed across the Atlantic with his son, from Gran Canaria to the Caribbean island of Saint Lucia, raising money for an educational charity.
The pair’s trip ended shortly before Banco BPM, one of the largest banks in Italy, agreed to sell a €7.8bn portfolio of non-performing loans (NPLs) and a credit servicing platform alternative investor Elliott and Credito Fondiario, which partnered to win the deal. The deal was the second largest disposal of NPLs deals in Italy since the market for bad loans opened up in 2013. As part of the deal, Credito Fondiario will also manage 80% of the bank’s future flows of NPLs.
With more than €43bn of distressed credits in service, Credito Fondiario is one of Tages’ key investments. Before the bank was acquired by Tages Group in 2013, Credito Fondiario was a loss-making retail mortgage lender. Tarantelli transformed the business into a credit servicer, having seen the potential growth of the NPL market in Italy.
Today Credito Fondiario is one of the top three credit servicers in Italy. It has recently been recapitalised by Elliott, which has been a partner of Tages in Credito Fondiario since 2016 and holds a controlling stake in the bank. Tarantelli recounts: “When we bought the business, we kept the infrastructure and the banking licence and we brought in a team of former Goldman Sachs executives specialised in credit servicing. We also obtained ratings by Fitch and Moody’s. Today our competitive advantage is the huge breadth of our database, which allows us great precision in pricing deals.” The plan, he says, is to obtain a listing for the business by 2020.
The NPL market is now established and the country’s banks still have over €200bn of bad loans to clear from their books, making Credito Fondiario a long-term business.
But distressed credit was not the first step that Tages took in the world of alternatives. The company was originally founded as a fund-of-funds manager specialising in liquid alternatives. Tages Capital, the group’s liquid alternatives business, now manages assets worth over €2bn on behalf of insurance companies, pension funds and sovereign wealth funds. These funds invest in strategies ranging from equity long-short to event-driven.
Tarantelli says: “The business operates in the hedge fund multi-manager sector, which has suffered in recent years. We have done extremely well, in terms of delivering returns to our investors and acquiring market share. The firm’s two strengths are our experience investing in emerging asset managers, especially acting as a seeder or accelerator, as well as our ability to create bespoke liquid alternatives solutions for clients.”
Tages has seeded more than 20 funds over four years, investing nearly €600m in the new funds. “It’s a high-risk, high-return business that takes patience and skill. We have a dedicated team that often spends more than six months on each opportunity. We typically focus on young best-of-breed managers who are capable of achieving higher,” he says.
Tages Capital has also historically focused on infrastructure investing, particular solar energy. The company operates several funds focusing on Italian solar plants. In this sector, too, the approach was entrepreneurial. Tarantelli explains: “We acquired as partner, Umberto Quadrino, former CEO of Edison, one of the most experienced and credible executives in this sector. We then hired a team of engineers and created a company named Delos that focuses on improving the efficiency of solar plants. The company was the first in Italy to successfully use drones to monitor solar plants and to find anomalies. This way, we can enhance the efficiency of our assets and deliver double-digit returns to our investors.”
The solar energy-focused funds are proving particularly popular with insurance companies, owing to their long-term horizon of 15 years and the stability of the cashflow profile. But Tarantelli wants to go further. Infrastructure is a strategic area of expansion for Tages because governments need alternative ways of financing it, he argues. The firm is is looking to diversify into other infrastructure asset classes.
The last sector Tages stepped into is private equity. Earlier this year, it acquired a significant participation in VAM Investments, a Milan-based private equity group. At the same time, Francesco Trapani, former shareholder and CEO of Bulgari, joined Tages as a partner and took a minority stake in VAM. Trapani, also former chairman of Clessidra, one of Italy’s largest private equity groups, will lead Tages’ new private equity arm.
What holds together these four seemingly unconnected businesses? First, says Tarantelli, there is potential for cross-fertilisation. He says: “Last year our credit-servicing business happened to be pricing a portfolio of bad loans to solar companies.”
But there is more. Tarantelli views each of the four areas as strategic for a company that wants to invest in alternatives. Tages’ strategy is similar to what giants such as Blackstone, KKR or Carlyle do. “Our aim is to identify interesting areas in the market and build a diversified business. We saw the potential for the NPL market before the first operations took place. In Italy, we see a similar potential for infrastructure,” Tarantelli says. He likes to stress that he did not have fund management experience prior to founding Tages. But he says his experience in investment banking and secondary equity trading has taught him how to spot opportunities and trends.
Several high-profile executives have joined Tarantelli in this journey. Independent director Lorenzo Bini Smaghi, a former member of the executive board of the European Central Bank, stands out. With such crew members, Tages’ journey promises to be an exciting one.