Inarcassa’s approach to its investments since it was privatised 12 years ago has been both innovative and diligently planned. The former Italian state-managed architects’ and engineers’ scheme has effectively taken the somewhat restrictive and dull balanced mandates policy the government insisted on and replaced it with a multi-faceted specialist investment strategy that works on several levels.

Level one is the fundamental starting point that defines the asset classes Inarcassa favours. At present, there are six asset classes making up its investment portfolios: fixed-income; equities; real estate; inflation-linked bonds; alternatives, and cash.

Level two further breaks the six classes down into subclasses. Inarcassa has identified 13 subclasses that it believes match its risk/return objectives most closely.

Level three involves splitting the subclasses into specialist mandates or classes. For instance, Inarcassa recently created a specialist infrastructure investment fund as part of its private equity subclass which is part of the alternatives fundamental class.

Inarcassa firmly believes that by defining asset classes into subclasses and specialist mandates, it can achieve the maximum degree of portfolio diversification it seeks whilst improving robustness and efficiency at the same time. It uses a top-down analysis model to define each class and its subclasses in order to determine the specialist mandates it needs to build. Inarcassa says the objective of its investment strategy is a 12% return over an average 15-year life span.


Diversification lies at the centre of Inarcassa’s strategic asset allocation and as this implies investing in different sectors, regions and investment types, Inarcassa says it has built its portfolios on the most representative, transparent and replicable indices. In addition, it now implements a tactical asset allocation policy to complement the strategic allocation to cover currency hedging and the exposure its investments incur to different currencies. This is in the form of an overlay model that its depository bank manages.

Investing in a highly diversified portfolio means Inarcassa uses a wide variety of different investment vehicles, such as investment funds, exchange traded funds, direct investments and specialist mandates for both the actively and passively managed sections. Inarcassa says that using a range of specialist instruments enhances and maximises efficiency, transparency and monitoring so that it can control risk effectively.

If you opt for both active and passive management, then the chances are you will adopt some form of core satellite investment model. Inarcassa is no exception. The passively managed investments sit at the core and form the bulk of the strategy as they are more cost-effective and vehicles such as exchange traded funds have low commission rates. Other passive instruments Inarcassa favours include investible indices and futures. Its direct investments are made by its finance department and cleverly pit brokers against each other to uncover the best deals and best execution policy.

The passive managed investments tend to be those that are found in efficient and developed markets, such as US bonds and equities and their European equivalents. Inarcassa says it prefers an active management style for investments that require a little more skill and research to unlock their full potential. Included in this group are emerging markets equities and debt as well as high-yield bonds.

Once it has decided how it will structure its mandates and how it will place them, Inarcassa runs searches to find the best investment vehicles to use and then the best-in-class managers and investment types. For instance, should it use exchange-traded funds for its US equities because they are highly liquid or go for trusts because they are cheaper? Once it has answered these kinds of questions, it can select the right benchmarks and start investing.

For mandates that will be managed actively, it runs a typical manager selection process in conjunction with its consultant, MangustaRisk, to find the best managers who will help the scheme achieve its return targets.


With a recent flurry of interest in private equity and the fact Inarcassa represents engineers and architects, Inarcassa has large ambitions concerning private equity infrastructure funds. Add to this that Italy offers lots of opportunity in this areas since the Italian government is keen to raise capital by privatising many infrastructure projects that need modernising, Inarcassa is confident this will become a significant and substantial investment class going forward.

Indeed, it helped create as well as holding a 6% stake in F2i, the world’s third largest infrastructure fund. Its focus in this area will be energy, railways, airports, utilities, telecommunications, and local public services such as hospitals and car parks. Other than Italy, still its favourite private equity market, it invests mainly in private equity funds in the US and elsewhere in Europe. Overall, 30% of its alternative investments portfolio is now in private equity, which is equivalent to 4.5% of the overall portfolio.


Few pension schemes can admit they do not want to increase the level of diversification in their portfolios. Investing across different asset classes helps control risk while adding high levels of returns.

But the investment markets are highly specialised and complex and within each asset class there are literally dozens of different types of investment. Add to that, they come in a variety of investment vehicles, and the job at hand can become daunting.
Inarcassa has decided that if it is to play highly specialised markets, then it will develop a highly specialised investment strategy to match. This it has successfully accomplished by breaking down each asset class into subclasses and subclass type. Then it has rigorously analysed the specialist vehicles to decide how each specialist mandate should be invested.

Next it has chosen specialist benchmarks to help track its investments’ performance and undergone extensive manager research programmes to find specialist managers.
A special scheme indeed!