Eight Italian pension funds have formed a partnership to target investments in illiquid asset classes, IPE has learned.

Assofondipensione, the Italian association of industry-wide pension funds, known as ‘fondi negoziali’, is spearheading the initiative, which will be the first of its kind in the country.

The funds formally met in Rome earlier this month to seal the partnership, and will meet again this week to iron out the first technical details, according to Giovanni Maggi, president of Assofondipensione. They will discuss the timing and process for selecting an adviser to aid the funds through the fund selection process.

The initiative, launched by three relatively small funds – Arco, Prevedi and Concreto, which have around €1.5bn of assets between them – was later enlarged to include other larger funds, which have yet to be named.

The details of the asset classes and fund types that the partners will seek out have yet to be decided. However, they are understood to be targeting investments in private debt, private equity, infrastructure and real estate.

“We want to send a signal that funds can work together and play to their strengths in a complicated phase for financial markets”

Giovanni Maggi, Assofondipensione

Maggi told IPE: “The association has been working on a system-wide initiative for nearly two years. Following from the input of Arco, Prevedi and Concreto, we have involved all its members in a transparent and direct discussion.

“We have found eight investors that are willing to move forward with a partnership. The project has now gone live. The partnership is open and more investors are welcome to join.

“The objective is pooling assets, in order to present a stronger business case to asset managers and enhance the governance of investments. We also want to send a signal that funds can work together and play to their strengths in a complicated phase for financial markets.”

Calls for collaboration between fondi negoziali had been made repeatedly in Italy in recent years by authoritative voices in the industry, including pension fund regulator Covip. So far, funds had been reluctant to act, but this initiative signalled a possible step change. 

“This is the first initiative of its kind and could constitute a model for future partnerships where funds can work together to create strong synergies,” Maggi said.

Investment rules clarified

The establishment of the partnership follows a ruling earlier this year from Covip that paved the way for investment in closed-end funds by industry-wide pension schemes. While investment in closed-end funds was never formally prohibited by the regulatory framework, Covip clarified certain aspects of the framework, thus making investment in closed-end funds significantly easier.

Covip asked pension funds to adapt their investment policy documents to reflect the updated rules on investment in closed-end funds. Investment policies are reviewed every three years and most pension funds will be updating them throughout the course of next year.  

Assofondipensioni member institutions, while not the fastest-growing type of pension funds in the country, represent the bedrock of Italy’s second-pillar pension system. They are the only category of not-for-profit, second-pillar funds not linked to individual sponsors.

There are 31 fondi negoziali, all of which are defined contribution-based. At Covip’s last count, the funds had just shy of €50bn of assets under management and 2.8m members. Both assets and members grew nearly 8% between 2017 and 2016.

More than two-thirds of their assets are invested in government bonds and liquid corporate bonds, while around 20% is invested in equities, according to Covip. A minor amount is currently invested in illiquid asset classes.