Assets under management of Italian institutional Investors rose by 6.47% year-on-year in 2019 to €917.36bn, according to a report published by think tank Itinerari Previdenziali.
Institutional investors – including Industry pension funds (fondi negoziali), pre-reform funds (fondi pre-esistenti), banking foundations and casse privatizzate – saw total assets increase by 7.14% to €260.68bn in 2019 compared to €243.30bn the prior year.
This segment of institutional investors, however, recorded a contraction in assets managed by external asset managers through mandates. According to the report, €95bn was managed through mandates in 2019 compared to €112bn in 2018.
AUM for institutional investors including open pension funds, holders of individual pension plans (PIPs) and insurance companies grew by €38.27bn to a total of €656.57bn last year.
In particular, PIPs recorded a €4.78bn (15.57%) growth and open pension funds’ assets rose by 16.4% to €22.84bn. These assets make up 14.6% of the Italian GDP.
Assets of industry pension funds, pre-reform funds, supplementary health funds and banking foundations hiked by 82.5% in the last 13 years, from €142.85bn in 2007 to €260.68bn in 2019.
The share goes up to 51.3% considering assets of insurance companies, open pension funds or holders of individual pension plans (PIPs).
The number of institutional investors decreased by 2.2% year-on-year in 2019 to 807, including 86 banking foundations, 20 casse professionali privatizzate, 33 industry pension funds and 235 pre-reform funds, the report disclosed.
The share of individual pension plans also dropped to 111 from 113 in 2018 and 128 in 2015.
Additionally, the number of people enrolled in Italian pension funds stood at 8.2 million, even though the pensions regulator COVIP noted that “open contracts” with pension funds amount to over 9 million, up from 7.9 million in 2018.
Returns across all institutional investors have been positive last year, with industry pension funds recording 7.2%, pre-reform funds 5.6%, open pension funds 8.3% and PIPs 12.2%.
Institutional investors face the challenge of beating “target returns” this year, amid the consequences of the pandemic, volatile equity markers and geopolitical tensions, according to Itinerari.
Investors have started to change asset allocation strategies, with increasingly specialized and high value-added management, often not linked to benchmarks but to performance objectives.
The increase in investments in alternative investment funds and real assets is part of this strategy, it added.
Investment in the domestic real economy by institutional investors is still “modest”, with the exception of banking foundations which deploy 44.36% of total assets in Italy.
Casse privatizzate invested 21.36% in the domestic real economy, followed by pre-reform funds with 4.8% and industry pension funds with 3.42%.