Meeting the needs of institutional investors

While there is no panacea or special solution to ­overcome the difficult situation in which the Italian funds market finds itself, according to speakers at the latest PWM ­conference, focusing on the business and avoiding any distractions is paramount. The credit market crisis of this summer took quite a lot of energy from BNP Paribas Investment Partners, which decided to temporally suspend three of its funds that have exposure to the US subprime market. One of those funds, the Parvest Dynamic BS fund, is distributed in Italy and its suspension drew a lot of media interest. “The temporary suspension of the fund for three weeks was only made to protect the interests of shareholders,” explained Marc Raynaud, global head of third-party mutual fund distribution at the French firm. Reminding the ­audience that funds from some competitors in Europe have been suspended and not yet restored, Mr Raynaud said that once BNP Paribas Investment Partners’ analysts found an alternative way to price it, the fund was re-opened. The French firm has always made clear in the fund prospectus that this particular product was invested at least 70 per cent in asset-backed securities, said Mr ­Raynaud, and that the minimum recommended investment horizon was one year, while the level of risk was two, on a scale between one and five. “The big problem derives from how this fund is sold and who sells it,” said Mr Raynaud, also showing his enthusiasm for the new MiFID directive, which will highlight the responsibility of the distributors in advising the investor. Institutional investors, represented by Davide Tinelli, financial director at Compagnia San Paolo banking ­foundation, and Maurizio Agazzi, general director at Cometa, one of the largest Italian second-pillar pension funds, expressed the need for a product line offering ­dedicated solely to the institutional market. The needs of institutional investors are different from those of retail clients: time horizons are longer, illiquidity can be a source of value, and complex products are ­appreciated. But institutions in Italy have always been treated as a secondary distribution channel, traditionally being given those products that have been successful in the retail market, said Mr Agazzi, who complained about the poor quality of the financial instruments available over the past few years. Mr Tinelli also stressed that dealing with the misselling of financial products in the retail ­distribution network, or mergers and acquisitions, can all represent ­distractions that are detrimental to product quality. The recent pension fund reforms, expected to increase today’s limited institutional fund flows, will perhaps bring an improvement to this situation. Alberto Castelli, head of the commercial division, ­institutional and private clients at Eurizon Capital, ­emphasised that it is important to build a Chinese wall – not unlike the one at his own company – between all the production and distribution activities dedicated to the retail market and those focused to serve the institutional clients. However, there are also benefits that can come from the mixture of retail and institutional asset management ­activities, said Mr Castelli. “For example, it is possible to leverage on some investments, such as risk control ­systems, which can have a positive impact on the ­management of institutional portfolios, too.”