Danilo Pone, CIO at Italy's cassa di previdenza Enpab, outlines the fund's investment focus on illiquid alternatives and megatrends for the new year taking into account ESG principles.
Enpab is the privatised first-pillar fund for biologists in Italy, whose assets under management amounted to €700m at the end of 2019, having invested across various asset classes seeking an absolute return strategy.
Italy's ‘casse di previdenza', first-pillar funds for professionals, operate within a complex regulatory environment since they report to several different authorities, including both the Labour and Finance ministries and the pension fund regulator COVIP.
With alternative funds, we can buy investment ideas that come from the strength of single networks capable to reach the right investment stories thanks to a non-lineal flow of information.”
Therefore, they must ensure financial sustainability in line with the analysis of the actuarial technical balance sheet, while they must guarantee the achievement of an annual minimum return of social security contributions. This minimum target return is communicated by the Ministry of Labour and calculated by Istat, the Italian National Institute of Statistics.
Enpab is also entitled to contribute to the creation of "other type of pension schemes" as long as their cost is under budget and it offers the following services to its subscribers: senior pension, invalidity allowance, disability pension, survivor's pension (of reversibility or indirect), maternity allowance, assistance (in passive and active forms) and integrated welfare.
Danilo Pone, Enpab's chief investment officer (CIO), is responsible for defining the fund's investment strategy, based on the indications and aims of the Enpab's board of directors, which represents the needs of all subscribers. The Italian portfolio manager is also in charge of the analysis and selection of financial instruments and investment solutions and of monitoring the risk/reward profile of the fund's portfolio.
At the end of 2018, the fund invested nearly 13% of its portfolio in alternative assets, including real estate and private equity. Pone says that the fund will continue to invest in alternatives, with a focus on illiquid alternatives and so-called megatrends provided they take into account,where applicable,ESG principles.
Pone continues: "With alternative funds, we can buy investment ideas that come from the strength of single networks that are able to reach the right investment stories thanks to a non-lineal flow of information. They also offer a better risk/return ratio and decorrelation from traditional assets."
He added that by investing in megatrends, they can play an active role in today's change since it involves investing in themes that intercept future changes at technological, economic, social and cultural levels.
At the time of the interview (December 2019), Pone said he had a neutral view on EM exposure, being invested in both EM debt and equities. According to the Italian portfolio manager, investment flows in both asset classes will be led by economic signals likely to come in the coming months and by the ongoing geopolitical risks that might weigh on the various emerging economies.
Enpab's portfolio is well-diversified both in actively managed and tracker funds, which are selected after a macro and micro economic analysis is carried out and, following which, Pone and his team decide whether it is appropriate to buy some specific portion of the financial market through passive funds, without having exposure to the manager's active management.