Italian pension funds are taking advantage of a new ceiling set in the current budget to increase their stakes in Banca d’Italia to up to 5%, in search of solid returns while shaking the central bank’s governance.

Fondenergia, the pension fund for the energy sector, has been the first among the second pillar pension schemes – fondi pensione negoziali – to become a shareholder in the central bank buying first a 1% stake worth €70m at the end of December last year, to add another €57m investment, lifting its stake to 1.7% at the beginning of February.

The foray into the Bank of Italy is considered an alternative investment according to the pension fund’s policy targeting approximately 9% of total assets for its ‘bilanciato’ sub-fund and close to 12% of assets for its ‘dinamico’ sub-fund invested in alternatives.

The investment has been conducted under the Amundi ‘s ‘Bilanciato Globale’ mandate for the bilanciato sub-fund and the Global Bond mandate for the ‘dinamico’ option, the pension fund said.

FondoPoste, the pension fund for Italian postal workers, followed suit in February when it bought a 0.26% stake in the bank worth €20m. Other pension schemes in Italy took the opportunity to buy equity capital in the central bank after the 2022 budget law upped the threshold for investments in the bank from 3% to 5%, linking it to an annual dividend for shareholders of 4.5%.

These include Inarcassa, the pension fund for self-employed engineers and architects, the doctors’ scheme Enpam, the lawyers’ fund Cassa Forense and the accountants’ fund Cassa dei Commercialisti.

Intesa San Paolo and Unicredit bank divested their holdings to stay below the 5% ceiling.

The four schemes hold a 4.93% stake each in the central bank. Cassa Forense had already invested €225m in 2015, Cassa dei Commecialisti €75m, while Inarcassa has invested a total €370m in the central bank’s shares.

Now Inarcassa, Enpam and Cassa Forense are the second, third and fourth largest shareholders, respectively, in Bank of Italy after Unicredit, and ahead of Intesa Sanpaolo, according to the central bank’s shareholding structure, as of 19 February.

Cassa dei Commercialisti is the sixth largest shareholder in the central bank. Further shareholders include the Istituto Nazionale di Previdenza Sociale (INPS), ENPAB, the first-pillar scheme for Italian biologists, Fondo Pensione Nazionale BCC CRA, the pension scheme for psychologists ENPAP, and Fopdire, the pension fund for management staff of oil and gas company ENI.

Banks still hold 47.72% of the equity capital in the Bank of Italy, but casse di previdenza hold 32%, and pension funds 5.85%, ahead of foundations (8.45%) and insurance companies (5.98%).

Dividend policy

Shareholders are not allowed to influence the independence of the central bank when it exercises its tasks, but they have rights, for example to approve financial statements and elect the bodies for the governance of its branches, said Luigi Cannari, head of markets department at Bank of Italy, at an event organized by Assofondipensione, the association of industry-wide pension funds.

The number of shareholders in the Bank of Italy rose from 60 in 2013 to 179 today, including 42 banking foundations, 14 casse di previdenza, 10 insurance companies, 10 pension funds, and 103 banks, he said.

According to the statute, the value of the share capital of the bank stood at €7.5bn. The article 38 of the statute sets the maximum dividend at 6%. The policy of the bank since 2014, however, foresees dividends in the range of 4.5-5%, Cannari explained, adding that dividends remained unchanged over the years at €340m, or 4.5% of the share capital.

The central bank has recorded net profits of over €8bn in 2019 and €6bn in 2020, he added.

The difference between the upper side of the dividend range set by law at 6%, or €380m, and the dividends set by the policy of the bank at 4.5%, or €340m, has been put into a pot to stabilise future dividends, he said, adding that so far €200m have been set aside in the pot.

A solid bet

For domestic pension funds investing in the Bank of Italy means stable returns for members while contributing to investments in the real economy, Domenico Proietti, vice president of Assofondipensione, said at an event.

Mario Cribari, president of Fondenergia, highlighted the main characteristics of the investment of the pension fund in the central bank, being countercyclical, without costs and with “non-existing” risks, with an expected solid performance and a yield dividend of minimum 4.5%, he said at the conference.

It is an investment with stable and robust returns in the long-term, he said, adding that it also responds to the auspice of the governor of Bank of Italy, Ignazio Visco, to reform the share capital of the central bank.

According to Cribari the banks had holdings in excess in the Bank of Italy of €1.5bn, cut after the divestments with a potential impact on the real economy through the possibility to finance businesses.

He added that the investment in Bank of Italy diversifies the asset allocation, has a maximum pay-out ratio of 12.7% on top of a stable dividend yield of 4.5% recorded in the past seven fiscal years.

For Fondo Poste, the equity investment in the bank under its ‘bilanciato’ option represents a solid opportunity, profitable and at the same time diversifies the scheme’s asset allocation, fully in line with the long-term goals of the pension fund, it said in a note.

Cassa Forense has returned over the years a fixed 4.5% from the investment in the central bank.

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