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INTERVIEW: UniCredito CEO on Italian pensions

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ITALY - Alessandro Profumo, the chief executive of Italian bank UniCredito Italiano Group, has outlined to IPE in an interview the way forward for Italian occupational pensions.

Profumo, in London to present the bank’s first-half earnings, said occupational pension schemes should create age-group funds and allow for asset allocation to vary according on members’ age.

He told IPE: “Our theory is that there must be a change in the structure of portfolio depending on the maturity of the pension fund. “A 25-year-old worker should not have the same portfolio of a 60-year-old worker who is about to retire.”

He said there should be “pension funds for different ages”.

This approach would allow investments in alternatives, like hedge funds, for younger portfolios. “We have seen a trend among pension funds to invest in funds of hedge funds,” he said.

“We think it is a correct solution by definition,” Profumo said, arguing this approach would not only fit the Italian market.

The bank as a group, Profumo said during his presentation, has seen an “excellent performance in net sales.”

Its Private and Asset Management division has brought “increased contribution to the group’s net income and continual growth of total financial assets, thanks to the Pioneer asset under management increase with positive sales in all the business divisions”.

Total financial assets have recorded a 1.1% increase in June “ with higher weight of hedge funds” which have gone from 1.85% in March to 2.26% in June 2004.

At the end of the second quarter assets under management accounted for 130 billion euro out of the 160.7 billion pulled by the Private and Asset Management division.

Profumo said the asset management business of UniCredito had become more significant after the acquisition of Pioneer Investments, which has made the group a strong player in Italy and foreign markets.

Speaking on the newly approved pension reform in Italy, Profumo said he did not expect the pension market to boom over-night.

“In the medium term, it is going to be more a question of influx than stocks,” he said, referring to the compulsory investment of workers’ TFR end-career indemnity, into pension provisions.

UniCredito was “well-positioned” for the impact of the reform, Profumo said. “We are very good in asset-liability management. We hope it will be one area we continue to have a god growth.”

“Pioneer is very strong and we have excellent distribution capabilities, especially in view of the fact that workers will be proposed pension arrangements by their firms,” Profumo said.

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