Carlo Svaluto Moreolo spoke to senior figures at the Cometa and Fonchim closed pension funds about their plans and thoughts about the market
It has been a troubled year for the Italian pension sector, as the 2011 Annual COVIP report shows. However, the two major closed pension schemes, Cometa and Fonchim, continue as usual, despite significant changes in the top seats.
Cometa, the scheme for mechanical workers, and Fonchim, for chemical workers, have both undergone changes to their board of directors. Fabio Ortolani, former chairman of Cometa, ended his tenure last year when the new board came in. In 2010, employers’ representatives and trade union representatives switched seats in the board, as stipulated in Cometa’s founding document.
Ortolani has recently joined Fonchim as chairman, as was expected when he left Cometa.
The newly-appointed chairman of Fonchim says he will try to build on the positive experience he had at Cometa. He says: “At Fonchim, I will work to improve the governance of the scheme, as I did for Cometa. At Cometa we introduced a team spirit between asset managers, involving everybody in the discussions about investments. This helped everybody on the board and gave the wider asset management team a global vision of where we were going.”
Some 80% of workers in the chemical sector have joined Fonchim. Ortolani says part of his work will be trying to reach the remaining 20%, but that he will focus on “making Fonchim an example for the whole pension market”.
Between Cometa and Fonchim, Ortolani worked for the association of Italian co-operatives, AGCI (Associazione Generale delle Cooperative Italiane) advising them on the merger of the three main co-operative workers’ schemes Previcooper, Filcoop and Cooperlavoro. He currently retains this role and says he is “satisfied” with the work so far.
However, he explains that while the reasons (lower costs, better economies of scales) for the merger are clear and understood by all the parties involved, there is still a lot of advocacy work to do. He says: “There is a general will to go down the merger road, but there are political responsibilities behind such a move, so the debate has to intensify.” The issue was explored in the 2011 COVIP report, which pointed out the very high number of small-sized funds, and the need for larger ones which can save on costs for their members and gather larger assets.
Back at Ortolani’s former workplace, Cometa, general director Maurizio Agazzi says that the scheme is building on Ortolani’s work, but because of the financial crisis this year the focus is on internal issues. He says: “During the crisis, we have been working a lot on analysing and re-defining the strategy. It’s less visible internal work but equally important. We are trying to establish what, today, are the interventions in the portfolio that will help us reach the objectives of the scheme, and whether the current choices match the needs of our members.”
Agazzi says he is “perplexed” about the government’s position on the private pension sector. He says: “On the back of the 2011 COVIP annual report we expected some strong statements on the private pension market. However, labour minister Elsa Fornero, has said that she does not intend to intervene in the sector any time soon. She has intervened deeply in the public pension system, and I believe that if there are changes in the first pillar, there should be corresponding changes in the second pillar. Following an adjustment of the minimal retirement age, there should be an adjustment in the private market in how the benefits and the returns are distributed. It’s a regulatory problem which partly involves the objectives of the private pension system.”
Both Agazzi and Ortolani, urge the government to act on two fronts: communication of the benefits of private pensions, and the regulatory framework, which is still somewhat unclear. They both welcome a review of the 703 law, which is not on the government’s immediate agenda, however.
Ortolani says: “We expected clearer statements from Fornero about the 703 law. She has great knowledge of the pension system and we sincerely hope that she will act on this front. The industry would welcome more relaxed limits to investments, while at the same time the ‘guaranteed’ funds should still offer the same level of security. From a market and regulatory point of view, however, there are stringent problems such as competition: the law that stipulates that there needs to be open bidding for asset management contracts and other types of services, but today too few names participate in bidding. There needs to be more controls on this, or the law needs to be changed to solve this problem.”
Agazzi concludes: “The debates on the 703 law that has begun in the industry is a positive sign. The new version of the law will have to be clearer on instruments such as derivatives, and in particular it will have to specify the responsibilities of the regulator and of pension funds when it comes to investment in risky assets. If it is up to regulator to decide whether a scheme can or cannot invest in specific instruments, there is a risk of creating a culture of first-class and second-class schemes, based on arbitrary measurements such as risk monitoring capabilities. With a clear objective in mind, which is providing a pension, every scheme should have the possibility to access the same markets.”