Banca Finnat: Looking for big gains with small caps

Eugenia Jiménez
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Emanuele Bonabello, Banca Finnat
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Emanuele Bonabello, Banca Finnat

Banca Finnat targets SMEs trading on Italy's junior bourse through its Millennium SICAV AIM Italy fund, set to boost the country's real economy.

Italian banking group Banca Finnat has always eyed the universe of small and medium size companies in Italy with great interest. In particular, it has eyed the AIM Italia market, the junior bourse of the Italian Stock Exchange (Borsa Italiana) devoted to Italian small enterprises with high growth potential.

The Italian bank itself has helped some 132 of the firms presently listed on the AIM Italia market to go public, taking different responsibilities throughout their floatation process such as acting as a nominated advisor (Nomad), carrying out some coverage, or acting as global coordinator for the IPO.  

One of our top priorities now is to promote and stimulate investments in listed SMEs, highlighting the importance of this asset class for the Italian real economy.”

Currently, the bank is a market leader in the role of specialist (appointed intermediary) with the highest number of mandates conferred by listed companies.

The bank's launch in Italy dates back to 1898, when Pietro Nattino set it up as a brokerage firm. More or less a century later, the company started operating as a banking group.

Today, the Italian investment bank, chaired and managed by the fifth generation of the founder's family, offers clients a broad range of financial services including private banking, advisory and corporate finance, trusteeship, family office, real estate and property funds, banking services, institutional investor services, consultancy, services to issuers, and equity research.

The bank's investment management and consultancy department is led by investment director Emanuele Bonabello, who joined the banking group in 2001. 

Within the department, there is a specific unit dedicated to fund selection. Led by Davide Scutti, working alongside Mariano Gambaro, the unit manages over €1bn in assets. 

BOOSTING THE REAL ECONOMY: THE FUND

As proof of the bank's interest in Italian small caps and their impact on the real economy, the firm launched at the end of 2017 the New Millennium Sif-Sicav-AIM Sistema Italia - PIR, an open-end alternative fund investing in listed or to be listed companies on the AIM Italia market.

Managed by Bonabello's team, the Luxembourg-domiciled AIFMD strategy is aimed exclusively at institutional or professional investors.

Investment targets are the top 100 SMEs listed on the AIM Italy market ex SPAC. Such firms are offered the opportunity to access investors focused on small-caps "in an efficient manner."

AIM Italia offers an IPO process tailored on SMEs structure, and built on the figure of a supporting the company during the admission period and during its stay on the market.

Bonabello says: "One of our top priorities now is to promote and stimulate investments in listed SMEs (both from the primary and secondary markets), highlighting the importance of this asset class to the Italian real economy."

OPEN ARCHITECTURE

In recent years, Banca Finnat has been working on the creation of a proprietary methodology for the selection of funds as the task of grouping and defining common criteria for the evaluation of peer groups has become increasingly challenging for fund selector professionals.

The bank makes use of an open multimanager platform containing a wide range of investment strategies, provided they pass the firm's due diligence process.

The fund selection process is led by Davide Scutti, who explains that third party funds are mostly taken to cover those asset classes "less close to them".

Scutti is referring to those asset classes outside their European expertise, plus other areas they consider to require higher levels of expertise such as emerging markets, convertible bonds, high yield, or thematic investing. Convertible bonds and high yield predominate in the bank's portfolios.

The selection process is divided in three phases: clustering; quantitative; and qualitative analysis.

The first of these involves classifying and grouping the funds according to their risk, management strategy and asset class types.

The second is based on the analysis of the consistency of the track record, while the third refers to a thorough due diligence process applied to the fund. 

"This phase is based on the engagement with asset managers to understand the validity and consistency of their investment process," explains Bonabello. 

He adds that they work consistently on the improvement of the process by monitoring and analysing the "meaning" and consistency of the results achieved.

"In addition, the process was recently implemented by adding criteria to the qualitative assessment parameters that reward the reduction of risk due to ESG factors."

With regards to the use of passive investment solutions, Bonabello says these represent but a minority of the bank's total capital invested in funds. Banca Finnat would generally use passive strategies just for those markets that are quite efficient where, therefore, it is more difficult to generate alpha.

Eugenia Jiménez
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Eugenia Jiménez

Eugenia Jiménez speaks Spanish and is Iberia Correspondent for Investment Europe covering Spain & Portugal, as well as Italy.