The Italian pensions market may not have lived up to asset manager’s expectations, but that has not prevented players, both local and international from rethinking their institutional strategies, reports Maria Theresa Cometto
When assessing the levels of concentration in the Italian investment market, the figures speak for themselves. At the end of April, assets under management by mutual funds were E460.5bn, 51% of which is currently managed by four asset managers: Sanpaolo-Imi, Inxtesa, Unicredito and Arca. All four are controlled by Italian banks.
Taking in the bigger picture, the concentration becomes even more impressive: the top 10 groups control a staggering 76% of the market. And not surprisingly they in turn are also controlled by the banks. The remaining 24% share of the market is scattered among 37 different investment companies and only a few of these can call themselves ‘independent’.
Apart from the banks, the only other players in the market are insurance companies, but they rank very low in terms of the size of mutual fund assets under management. Even if you take life policies into account, Generali, Italy’s largest insurance group, only manages a total of around E30bn in assets, one third of that of Sanpaolo-Imi.
So, the story of the Italian investment market concentration has been born from the story of the Italian banking mergers. In fact, the top three investment groups are the result of the most important recent mergers in Italy to date: Sanpaolo-Imi was created from the merger of Istituto Bancario San Paolo di Torino and Imi-Fideuram (based in Rome); Intesa was formed after Cariplo (Cassa di Risparmio delle Provincie Lombarde) joined forces with Bav (Banco Ambrosiano Veneto), both based in Milan; and Unicredito Italiano is the result of Credito Italiano (Milan), RoloBanca 1473 (Bologna), CRT (Cassa di Risparmio di Torino) and Cariverona (Cassa di risparmio di Verona) all tying up together.
While these mergers were decided long before the arrival of euro, the euro acted as one of the core reasons behind them. The Italian banks’ strategies appear initially to reinforce their presence within the domestic marketplace and then, maybe, try to play a role in Europe. While they may all share the same objective, each group is taking a different path to accomplish these goals.
Firstly, Intesa Asset Management has become the group to set up a società di gestione del risparmio (SGR), which is a new kind of company allowed by new Italian rules and translated literally means a ‘company which manages savings’. An SGR allows the investment group to concentrate the management of mutual funds, individual portfolios, private banking, institutional clients and pension funds under one roof. In managing these funds together, analysts, money-managers and back-offices can be shared taking advantage of the increased economies of scale and in the process cutting costs.
Intesa’s SGR was established at the beginning of this year, following the merger of the two previous investment companies, Fondigest (Cariplo) and Caboto-La Centrale (Bav). The new SGR now manages more than E70bn with E63bn in mutual funds, individual portfolios and life policies, and is developing an impressive amount of new business with institutional clients - namely fondazioni bancarie (banking foundations) and pension funds.
One of its moves to access the institutional market has been to create the first Italian multi-compartmental mutual fund, ‘Geo’, dedicated to institutional investors. There are 10 different sub-funds, managed by 10 different money managers, selected and coordinated by Intesa. Intesa’s first client will come as no real surprise - Fondazione Cariplo, the foundation which controls the largest stake in the Intesa banking group.
Intesa SGR is also the first Italian investment group which is actively considering merging with a foreign partner and to play a role abroad. The partner in question is Indocam the asset mangement arm of Indosuez-Crédit Agricole, which is the major foreign shareholder of Banca Intesa. Furthermore, Intesa SGR and Indocam are jointly participating in the bid for Credit Lyonnais, that could lead to one of the biggest investment groups in Europe. But the whole project is still a work in progress: the ways and means to achieve it are currently under discussion.
While in theory, Sanpaolo-Imi is the leading Italian investment group in terms of assets, managing more than E85bn (E78bn in mutual funds, individual portfolios and life policies) it is not in terms of management strategy. In this case the merger process has not been going as smoothly as the Intesa’s.
The corporate styles and operations of San Paolo in Turin, a traditional commercial bank, and Imi-Fideuram in Rome, an investment bank with an extensive sales network, are so different that the companies are still having problems deciding who should do what. For the time being, Sanpaolo Fondi and Banca Fideuram remain two separate and independent investment companies. Eventually they will probably merge, but the timescale on this is not clear. But the first step of the partnership is imminent - the creation of a single Sanpaolo-Imi SGR to deal with institutional clients.
A third model is the one invented by Unicredito. Last summer, it established an investment company in Dublin, Europlus, which now acts as the central operating arm, housing all its analysts and equity money-managers. The bond specialists have stayed mainly in Milan. Aside from the obvious Irish fiscal benefits, the group claims it chose Dublin for other reasons. Namely that it is English speaking, more cost effective than London though maintains the same international focus, is able to attract good international money-managers and provides a European passport for investment products. At the moment Europlus funds are still only distributed in Italy, thoughUnicredito has pledged it is going to market to other European markets.
The insurance groups have re-mained the laggards of the Italian market. Generali, Ina and Ras (Allianz), the three largest Italian insurance groups are a long way behind the banks. Looking at the total assets managed in mutual funds, individual portfolios and life policies, Generali manages E30bn (ranking fifth), Ina manages slightly over E20bn (ninth) and Ras around E20bn (eleventh). All three firms are looking to become fully integrated financial groups and are setting up their own telephone banking services for their retail clients and concentrating the asset management under the same company (life insurance funds used to be separately managed). But their volumes are only quickly growing with ‘bankassurance’ initiatives.
The Italian investment market is still dominated by ‘brands’. Investors trust traditional banks and, so far, do not shop around, looking for better performances or independent advice. These attitudes do not bode well for outsiders and as a result the two‘best known’ independent groups have a very small market share: Sogersel which manages E2.8bin (0.6% of the mutual funds market) and Symphonia E0.6bn (0.1%).