The Italian fund management industry is in the grip of continued turmoil, but a change in the tax law has brightened prospects.
Whatever the internal problems facing the Italian industry, looming over them all is the next wave of European legislation, due to arrive in July: the implementation of Ucits IV will force open Italy’s gates to competition from the rest of Europe and beyond.
The Italian funds industry is not ready, says Giorgio Girelli, chief executive of Banca Generali, one of the largest financial services groups in Italy. Radical reform is desperately needed if the Italian funds industry is to compete at European level.
As Girelli sees it, the problems include a distribution system dominated by the banks, which prefer to sell their own products; a heavy taxation regime; and a continued resistance by fund selectors to adopt the open architecture system.
Even more alarming is an apparent refusal by the industry to discuss and address its shortcomings. Despite the promise that Ucits IV will ‘ revolutionise’ the funds industry in Europe, it is rarely discussed by the industry practitioners, Girelli says. He adds: “It is strange because our funds industry could be disadvantaged. But without a change in the
law, there will be no developments.”
One result of this could be that these banking groups would hinder the process of integration of the Italian funds industry into the European financial markets.
Girelli expressed fears that the current Italian tax system will handicap the Italian funds industry, though this issue has now been addressed by a change in the law. Italian funds are taxed on the fund’s value rather than on profits taken by the investor, though this will change in July. He adds that foreign fund managers also have been unable to build a
significant market share in Italy.
Open architecture has not been widely adopted, says Girelli. But this is also true outside Italy. Banca Generali was one of the first to introduce open architecture in Italy. In June 2009, the bank signed distribution agreements with BlackRock, Crédit Agricole, Morgan Stanley, Invesco and Vontobel. The bank now has 19 agreements in place, with more to come in the next few months.
After a bruising experience of the global financial crisis, when the Italian funds industry saw unprecedented outflows, 2010 ended on a positive note. Data from Assogestioni says the industry saw inflows of assets of more than €1bn. But the picture is not complete – a number of foreign fund managers have yet to announce their data.
While asset inflows for the month of December 2010 ended in the red (down €3.2bn), total assets for the year closed on €1.09bn. Foreign funds accounted for a net €596m, bringing the year’s total to €25.76bn. Italian funds registered a decline of €3.78bn, bring that total to €24.67bn. Italian firms brought in €1.03bn, while cross-border funds saw
Outflows of €437m.