Economists call for further regulation of Italy’s first pillar pension funds

Economists Tito Boeri and Mario Padula are proposing tighter rules for Italian first pillar pension funds, commonly known as ‘casse di previdenza’, for white-collar workers.

Boeri and Padula co-authored an article addressing the recent investment activities by the pension funds, which have been building large stakes in Mediobanca, among others. This has led to a high concentration of assets within some of the pension funds’ portfolios, an issue that the government has failed to address so far, according to the authors.

Boeri is professor of labour economics and head of the economics department at Bocconi University in Milan, and former chair of INPS, the Italian public pension fund. Padula is the former chair of pension regulator Covip and currently professor of economics at Ca’ Foscari University of Venice.

Mediobanca has been at the centre of a corporate M&A battle, having been approached for a takeover by Monte dei Paschi di Siena (MPS), which is partly owned by the Italian government. To shrug off the deal, Mediobanca launched an offer to acquire Banca Generali, which was shut off yesterday by Mediobanca’s shareholders. 

Enasarco, the €9bn pension fund for sales representatives, Cassa Forense, the €19bn lawyers’ pension fund, and Enpam, the €28bn pension fund for doctors, together hold 5% of the share capital in Mediobanca.

The three pension funds abstained yesterday on the offer to buy Banca Generali, alongside Amundi, Anima, Tages, financial holding company Editzione, controlled by the Benetton family, and Unicredit bank, according to a note published by Mediobanca following the shareholders’ meeting.

Enpam and Enasarco also hold stakes in Monte dei Paschi di Siena (MPS) bank, targeting the takeover of Mediobanca.

Enasarco has invested nearly 70% of its allocations to European equities in Mediobanca, according to the Financial Times.

Enasarco, Enpam, and Cassa Forense are not subject to regulations on investments that could define asset allocation limits, the economists wrote in their article, questioning “risky decisions” made by institutions managing the savings of millions of professionals.

Second pillar pension funds (Fondi Negoziali), instead, are subject to rules capping to 5% the maximum amount of assets in portfolio to invest in the same issuer, and to 10% in issuers belonging to the same group, Boeri and Padula added in the article.

“We need rules. There are rules for [second pillar] pension funds, and it wouldn’t be too difficult to adapt them to the (first pillar) pension funds,” Padula told IPE.

The Italian government is preparing a decree establishing guidelines on investments by pension funds for professionals.

But Padula noted that “rules and guidelines are not the same thing: The latter lack the binding force of the former”.

Padula and Boeri also questioned in their article why Enasarco, Enpam, and Cassa Forense decided to concentrate their investments in Mediobanca, the target of a hostile takeover by MPS that has among its shareholders Italy’s finance ministry, which is also the supervisor of first pillar Casse di Previdenza.

MPS’s attempted takeover of Mediobanca, rejected by the bank’s board of directors, is instrumental to the political plan to create a “third banking hub”, according to Boeri and Padula.

Institutional investors, including first-pillar pension funds, should hold diversified portfolios to reduce risks, and invest contributions to exclusively maximise pension benefits, Boeri told IPE.

“The assets of the professional funds must not be used to pursue economic policy objectives by other means. This seems to have been the case with the massive investments in Mediobanca,” he noted.

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