Talks between Italy’s government and pension funds to launch a fund to invest in Italian SMEs and infrastructure are heating up.
More details have emerged about the vehicle, which could have a target size of €3bn-5bn and, according to Italian media, could be launched by year-end through the country’s 2015 budget law.
The plan is being discussed by the Ministry of Finance, first-pillar casse di previdenza and second-pillar collective pension funds.
Government-owned bank Cassa Depositi e Prestiti (CdP) is also involved in the design, as it would support the fund by acquiring a minority stake.
Italian media reported that the European Investment Bank (EIB) might also be asked to contribute.
The long-term fund would be closed and finance SMEs as well as infrastructure projects, particularly aimed at reducing the country’s ‘digital gap’.
Stakeholders are exploring how to provide return guarantees to investors – a focal point in the discussion.
There is also a proposal to give tax incentives to pension schemes that subscribe to the fund.
According to MEFOP, a pension think-tank owned by the Ministry of Finance, Italian pension funds are exposed to the domestic economy almost exclusively through sovereign debt.
Around 92% of their assets are invested in Italian government bonds.
However, some Italian institutional investors are increasing their direct exposure to the domestic economy.
Last month, three casse di previdenza – Inarcassa (engineers and architects), CIPAG (surveyors) and EPPI (industrial management consultants) – created ARPINGE, a special-purpose vehicle to invest in Italian infrastructure projects.
The company is currently targeting around 50 projects worth €340m over a three-year period ending 2016.
In other news, in a bid to stimulate consumer spending, prime minister Matteo Renzi’s government is considering raising salaries by handing back part of employees’ Trattamento di Fine Rapporto (TFR), the deferred termination indemnity pay set aside by employers and largely used to finance second-pillar pension scheme contributions.
The proposal has come under fire by employer associations and trade unions.
It is feared that releasing the contribution will put companies’ balance sheets under pressure and slow the growth of second-pillar funds.
Fabio Ortolani, chairman of €4.4bn chemical sector fund Fonchim, said: “The government’s intention to hand back TFR puts Italians’ pension future at risk, as well as renders liquidity for small and medium companies difficult.
“Scrapping one of the main sources of financing for pension plans, which would then be financed solely by employer contributions and voluntary employee contributions, would drastically reduce pension pots and in turn retirement benefits.”
However, Italy’s central bank, Banca d’Italia, and the pension regulator, Covip, are open to the possibility.
Banca d’Italia’s head Ignazio Visco, speaking yesterday after an ECB meeting in Naples, said the ECB’s LTRO initiative could be used to finance bank loans to SMEs lacking liquidity as a result of the missing TFR cushion.
Rino Tarelli, chairman of Covip, told Italian media today that handing back the TFR to employees “should not be considered a taboo”, and that it could potentially be done without damaging the second-pillar system.
The chief executive at Italian automobile giant Fiat, Sergio Marchionne, is also backing the government’s proposal.
He was quoted as saying that, despite representing a cost for the company, the measure was necessary, as it provided employees with much-needed liquidity.
Elsewhere, the €690m fund for employees of Banco di Napoli has launched a search for a manager to build a portfolio of renewable energy investments that have an “alternative bond-like” profile.
The selected manager will take care of the €502 defined benefit pool of the fund, which is currently actively managed and has an equity exposure of 18%.
The deadline for proposals is noon, 30 October.
Further information is available here.