Italian pension funds see tax exemptions on venture capital allocations as a catalyst for further investment in the asset class, helping to drive technological development in the domestic economy.
First pillar pension funds for white-collar workers, ‘casse di previdenza’, and second pillar industry-wide pension funds (fondi negoziali), benefit from tax exemptions on returns when they invest in so-called qualified venture capital investments.
The €30bn pension fund for doctors, Enpam, views the tax exemption for qualified investments as a tool to support the development of Italy’s venture capital market, broaden the investor base and channel resources into the real economy.
“Tax deductibility [of venture capital] investments can be seen as a systemic catalyst, making venture capital more in line with the needs of long-term pension investors,” Enpam’s chief investment officer Pierluigi Curti told IPE.
Enpam considers venture capital a “niche asset class” within its alternatives portfolio, approached “with discipline”, given the limited size of the domestic venture capital market, fragmentation among asset managers and return volatility, Curti said.
The fund favours a “progressive and prudent” exposure, investing both directly in Italian initiatives and via fund-of-funds, particularly institutional vehicles, which help diversify by vintage, sector and investment stage, reducing idiosyncratic risk.
Enpam has also adopted a clear geographical focus on Italy, consistent with its mission as a national pension institution.
“Venture capital supports high-tech businesses, fostering the modernisation of the production system and, ultimately, supporting employment and contributions,” Curti said.
Investors can tap into structural megatrends such as digitalisation, life sciences and innovation in healthcare services, which also offer potential synergies with the medical profession, he added.
Italian venture capital funds raised close to €1.5bn last year, up 32% year on year, mainly in health and life sciences, deep tech, software and digital services, according to the EY Venture Capital Barometer.
Luca Ruggeri, director general of Fondo Gomma Plastica, the pension fund for workers in the rubber and plastics sector, said one way to channel more pension assets into venture capital would be to set up a vehicle backed by state-owned investment bank Cassa Depositi e Prestiti, investing in domestic funds to diversify risk.
Fondo Gomma Plastica has made its first venture capital investment through the PMI Italia project, which invests in listed SMEs alongside Previmoda, Foncer and Fondo Pegaso, and was launched partly for tax reasons, Ruggeri said.
“This project envisions an investment of approximately €82m in Italian small and medium-sized enterprises through a mandate. Within the mandate, 12.5% of the total is for venture capital in Italy,” said Alessandro Ferretti, head of finance at Fondo Pegaso.
Regulation on tax-deductible investments has accelerated pension funds’ entry into venture capital, Ferretti added.
“Some pension funds, such as Pegaso and many first pillar casse di previdenza, have over time invested in so-called qualified investments. Regulatory provisions have undoubtedly made investing in Italian VCs necessary for institutional investors who already had a qualified investment,” he said.
Pegaso’s venture capital commitment made last year is insufficient to meet the allocation thresholds required by law in the coming years to benefit from tax deductions.
As a result, the fund is likely to invest again in the asset class, while maintaining a geographical focus aligned with tax relief requirements, Ferretti noted.
