Foreign investors slam tighter rules for Italian funds

Foreign investors have slammed a recent proposal by the Italian government to scrap longstanding tax benefits for foreign institutions investing in Italian property funds. The changes, which were put forward last week, may be enforced by the year-end as part of Italy's 2010 Budget Law.

Although it is still unclear whether the proposals will pass into law, the uncertainty could brake the development of the sector following a period of rapid growth over the past few years, the Italian property industry association Assoimmobiliare warned. 'We must avoid the changes in the new legislation currently being studied by the government discouraging foreign investors.'

According to the organisation, the proposals would 'endanger the continuation of activities by the majority of asset managers and hamper the development of the real estate fund management sector which, according to estimates, now has the potential to double in size in the next two years.

'At a time when Italy needs more capital, this measure risks creating uncertainty in the market and scaring off investors,' noted Manfredi Catella, head of Hines Italy. According to Guido Ardagna, head of Carlyle's Italian unit, which recently received approval for the launch of an SGR fund management unit, the US group may consider exiting the country if the new regulation is adopted.

'Investors risk being double-taxed in their home country and in Italy,' Ardagna said. 'We would like to grow in Italy but the uncertainty present in the market definitely is not helping. How many times has legislation for the SGR fund management vehicles already changed?' he asked rethorically.

Marina Bottero, head of Schroders Italy, concluded that it is still too early to start worrying, but added that Schroders is already studying what the impact may be.