Italy: Fondo Pensione Complementare Pegaso
• Location: Rome
• Invested assets: close to €500m
• Members: 30,000
Fondo Pensione Complementare Pegaso was founded in 1997 as the contractual pension fund for the Italian utilities sector. Its membership base consists of mainly electricity, gas and water companies, at present it has around 500 member companies.
Members contribute between 4-9.3% of their monthly salary, depending on their contract, length of service and percentage of their trattamento di fine rapporto (TFR), their annual severance pay.
They can choose between three different investment lines: guaranteed, balanced and dynamic. The guaranteed line - which was prescribed by law in 2007 to replicate the TFR return of 1.5% plus 0.75% of Italian inflation - invests in domestic and foreign, government and corporate bonds and up to a maximum of 10% in equity securities.
The balanced line invests in 30% equity and 70% bonds, focusing mainly on euro-zone fixed income markets in the medium, 10-year term, while the dynamic line allocates equal parts to equity and bonds, again with a focus on euro-land but over a longer, 25-year term.
The pension fund's benchmark is the MSCI World index and JP Morgan GBI EMU all maturities ex Greece, ex Portugal. The pension fund removed these two sovereigns from its portfolio before the debt crisis struck them.
At present, Pegaso cannot invest in emerging markets or alternatives due to liquidity issues and the restrictions set by the Italian legislator.
However, it plans to gradually introduce alternative and real estate investments in new investment lines in the future, depending on market trends and the changing legislative and regulatory framework.
The pension fund has already introduced a global tactical asset allocation (GTAA) mandate into its balanced and dynamic investment lines, so as to hedge absolute risk.
Pegaso defines an absolute and relative risk budget for its overall portfolio. The latter is set for all mandates with the exception of the GTAA mandate, which has an absolute risk budget in terms of value at risk (VaR).
The biggest challenges for Pegaso now, according to its president Giuseppe Chianese, are higher portfolio diversification, more absolute risk control and better financial education of its members.
"It is also about time that Italian pension funds took a leading role in the exercise of their voting rights," Chianese says. "Pegaso voted at the annual general meetings of Enel, Eni, UniCredit, Generali, Impregilo and Intesa Sanpaolo for the first time last year to highlight the importance of environmental, social and governance issues to institutional investors."
In April, Pegaso's management system, including the investment process and its control, was certified for meeting the quality requirements of ISO 9001-2008. It is the first Italian contractual pension fund to have achieved this, according to Chianese.