Alifond, the €2bn Italian pension fund for employees of the country’s food industry, has adjusted its strategy, introducing infrastructure equity for the first time and tendering €660m across several asset classes.
The strategic review, confirmed by the fund on 9 October, reduces its corporate bond exposure while increasing allocations to government bonds and private market investments, according to the pension fund’s director Raffaello Durante.
Five mandates covering fixed income and equities, and two for private market investments, have been issued following risk-return projections and market scenarios prepared by advisor Prometeia.
Through one global active bond mandate, managers will invest an initial estimated €200m held in its ‘Bilanciato’ sub-fund with an active approach in government and corporate bonds.
A further €220m in the ‘Bilanciato’ will be allocated to government and corporate bonds through three global active balance mandates, while €180m will be invested in equities via a global active equity mandate, according to a tender document.
The incoming board restored the ‘Bilanciato’s’ strategic asset allocation to 35% equities and 65% bonds, reflecting lower yields in the current market, according to Alifond’s financial statement. The outgoing board had previously reduced its equity exposure.
The previous board had concerns about equities, while the new board was convinced and “indeed they were right” as the asset class returned 35%, Durante said.
First infrastructure foray
Alifond is also selecting managers for two private market mandates: €60m will be invested in closed or open-ended private equity and, for the first time, in infrastructure equity via an European alternative investment fund (AIF).
Managers will invest €40m via the ‘Bilanciato’ and €20m via the ‘Dinamico’ sub-fund, which previously held no alternatives.
The new commitments increase Alifond’s strategic target for alternatives to 10% of total assets, up from 8%.
Alifond decided to increase its private market investments, and since it is a significant increase, it opted for a tender instead of entrusting it to the current manager, Durante explained.
Schroders currently manages the fund’s private equity and private debt investments.
Durante added that another driver for expanding alternatives is a nearly 20% increase in assets since the last tender. Alternatives also improve the risk-return profile, with private equity replacing global equities and private debt replacing global bonds.
“Private markets have much lower volatility than liquid asset classes, but returns are in line with, if not higher [than liquid asset classes], even if the timing of investments is different. In the early years, the focus is on investments,” Durante said.
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