Italian pension funds are adjusting their exposure to US equities to capture investment opportunities while managing concentration risks amid an uncertain market environment.
The pension scheme for biologists, Enpab, is tactically implementing a “blended sectoral strategy” through selective investments in the US technology sector, with a specific focus on artificial intelligence, offset by exposure to more defensive sectors, chief investment officer Danilo Pone told IPE.
“The reason is that, given the current period of geopolitical and monetary policy transition of the Federal Reserve, the path ahead is far from certain, and when the path is uncertain, you cannot afford to rely on just a “single engine”, he added.
According to Pone, Enpab’s multi-layered exposure to US equities allows it to navigate the current market environment without becoming overly dependent on either growth or defensive assets.
“If you rely solely on the technology and it slows down, you stall. By contrast, if you rely only on the defensive component you risk missing the train when the cycle turns in your favour,” he explained.
Portfolio adjustments are driven both by profit-taking and by ongoing risk management considerations.
“Added to this is the management of the currency component. For us, investing in US equities entails exposure to the dollar, an exposure we actively manage by hedging against the euro at times and leaving it unhedged at others,” Pone said.
Despite current uncertainties, Enpab continues to view the US market favourably because of what Pone described as its energy resilience relative to other developed economies.
This resilience, he said, contributes to greater stability in industrial costs and supports the growth prospects of US companies.
“This is an element we take into account in our analysis, alongside, of course, numerous other macroeconomic and sectoral factors,” he said.
Reviewing benchmarks
Meanwhile, Arco, the pension fund for workers in the wood, furniture, forestry, brick and concrete sectors, has revised the benchmarks used for equity allocations in its ‘Bilanciato Prudente’ and ‘Bilanciato Dinamico’ sub-funds.
The pension fund now uses the MSCI World, MSCI Emerging Markets and MSCI World Small Cap indices as benchmarks for allocations to developed markets, emerging markets and global small-cap equities, respectively.
According to Arco, the revised benchmark structure reduces the portfolio’s exposure to US equities and US large-cap stocks while increasing geographic diversification through greater exposure to Japan and selected European markets.
It also increases exposure to small-cap equities, an asset class that has underperformed in recent years but has historically delivered a significant long-term risk premium.
Inarcassa, the pension fund for engineers and architects, has similarly reduced its exposure to US and technology equities, reallocating capital towards small-cap stocks, equal-weighted indices and global infrastructure.
The pension fund of banking group Intesa Sanpaolo has taken a different approach.
It recently selected investment funds for US equity allocations totalling approximately €185m, with capital deployed through direct investments.
Of the total, €100m has been allocated to US equities through its ‘Bilanciato’ sub-fund and €85m through its ‘Dinamico’ sub-fund, according to the pension fund.
