Diversity, ESG, Brexit discussed at Milan Forum 2019's all-female panel

The role of women in the financial industry, diversity, ESG, a prospect for stock markets, Brexit, and the main geopolitical risks to look at, were some of the hot-button topics discussed at the Milan Forum 2019's panel session held on the International Women's Day.

The All-female panel in the asset management industry expounded some of these key themes to an audience of around 40 Italian fund selectors on the 8 of March at the Four Seasons Hotel in Milan.

Moderated by Morningstar Italy's managing research editor Sara Silano, the panel counted on Manuela D'Onofrio, co-general manager and head of Investment & Products area at Cordusio Sim; Grazia Orlandini, chief investment officer at BPER Banca and member of the board of directors of Optima Sim; and Patrizia Bussoli, responsible for heading the team of Asset Allocation products in Pramerica Sgr.

GEOPOLITICAL RISKS

Geopolitical risk accounts for 50% of the valuation we make of an asset class, according to Orlandini. However, she considered this risk should not be overlooked, given the overall fragility of the economy. "We must remember that fundamentals have always their value, which cannot be neglected. 

"Although taking into account the political context helps us to manage the tail risks, we also know the medium-term fundamentals return. Therefore we have to be careful not to scare too much of the political scenario if there is a solid economy behind it. "

Bussoli explained how attention to geopolitical issues has been growing since 2011, becoming one of the key factors to look at in the analysis phase. What she considered particularly novel is the fact that developed countries face now greater political risks than the emerging ones.

She said: "It means looking at developed countries with the eyes of emerging economies."

ITALY

When asked about Italy's political risks, D' Onofrio commented: "The reason why I am optimistic about Italy and Europe despite all the political turmoil, is because there is need for change, and this is happening."

D'Onofrio emphasised: "The period of transition is never pleasant, one is scared, but I am sure that it is in the interest of all European countries that Europe finds the strength to go beyond these absolute restrictive fiscal policies."

"The positive side of the current situation is that there is desire of change. I think it is legitimate to question whether the Europe we have built during the past 20 years is the best version of itself.

D' Onofrio set an example as the European Central Bank's expansionary monetary policy - in place since 2015 - had failed to meet its inflation target of almost 2%. "Inflation is still nailed to 1% and the ECB cut its growth expectations for the eurozone recently, saying essentially it had failed from the inflation point of view. 

She continued: "Since growth in Europe is not homogeneous, Brussels should not only favour Germany by penalising other countries. Do not be surprised if Brexit occurs in Great Britain, if in France you have the yellow vests movement, and if Italy is the first populist-led country. 

BREXIT

While D'Onofrio said she expected a last-minute extension to the Brexit's transition period, she said that any scenario should be ruled out. " I do not even exclude the possibility that the ECB's latest announcement of anticipating the TLTROs (Targeted longer-term refinancing operations), may represent a move aimed at paving the way for a potential no-deal Brexit."

She concluded: "Should it actually occur, it would not be the end. I think that Germany and France would consider using the tax lever."

EQUITY OUTLOOK

"This year has started very well after a very tough 2018," said Orlandini.

She continued: "Although it is clear that we are seeing less tension on the front of the trade war, which will certainly benefit markets, a global economic slowdown needs also to be managed. But the markets cannot continue with this growth rate. If the current situation gets soon resolved, we will have to stabilize the markets, even if volatility might remain, since we are in a final phase of the cycle."

Bussoli said: "A global recession was priced in the bearish phase of the market, an excess of pessimism that resulted from an implosion of the system - above all trade.

"This excess of pessimism has been reconsidered. The correction offers opportunities to differentiate assessments on the various geographical areas. We must try to understand where we are and in what countries we can expect recession. Germany, for example, is flirting with recession."