Italian pension funds are stepping up efforts to reduce exposure to the US, increasing allocations to domestic equities, emerging markets and private assets, while making tactical adjustments to US Treasury holdings.
Luca Ruggeri, director general of Fondo Gomma Plastica, the pension fund for the rubber and plastics industry, said that “first and foremost, the listed small/mid-cap segment, both internationally and domestically” offers a route to reallocate away from the US.
The scheme is investing in Italian small- and mid-cap equities alongside peers Previmoda, Foncer and Fondo Pegaso.
Ruggeri said the current concentration in US big tech represents “a significant risk”, even though those investments generated “undeniable returns” last year, partially offset by a weak US dollar.
He also pointed to private markets and emerging markets as further diversification opportunities.
“I see increasing interest in emerging markets, with some, like India, South Korea, and Brazil, proving highly attractive because they allow for significant geographic diversification, but also the simultaneous pursuit of strategies – think electronics for Korea, demographics and urbanisation, and recently AI, for India,” he added.
The €18bn pension fund for architects and engineers, Inarcassa, is also cutting reliance on US technology stocks in favour of broader geographic and sector diversification to contain concentration risk and strengthen portfolio resilience over the medium term, despite the potential opportunity cost of missing mega-cap gains.
A second tranche of divestments from US tech equities, of up to €220m and scheduled for January, is intended to improve the portfolio’s overall risk/return profile, according to Inarcassa.
The fund is weighing strategic options to invest in domestic equities, including the Italian technology sector, which it considers a growing industry with attractive valuations. Further allocations to global government bonds are also under consideration to take advantage of current interest rate levels.
Tactical approach to Treasuries
Fixed income remains a core allocation for Italian pension funds amid heightened market uncertainty.
“Allocation to fixed income is not being questioned, but the way it is managed is being refined, with greater focus on risk management and the pursuit of value,” said Antonella Manganelli, chief executive officer of Payden Global SIM, the Italian subsidiary of Payden & Rygel.
She said schemes are moving away from a purely defensive stance towards a more selective approach, with increased attention to portfolio duration, diversification across sub-funds and the use of solutions designed to capture return opportunities without compromising the asset class’s overall risk profile.
“The goal is to improve portfolio efficiency in a context where inflation, monetary policy, and geopolitical factors make market performance less predictable,” she added.
In this environment, US Treasuries continue to play a role in portfolios, reflecting the depth and liquidity of the US market and their significant weighting in benchmark indices.
However, Manganelli said adjustments are largely tactical rather than structural, driven by yield levels, duration risk, dollar dynamics and assessments of the US fiscal and political backdrop.
“Added to this, is a trend we are definitely observing among our clients to ‘de-Americanise’, due to the great uncertainty that has characterised the US context lately,” she said.
