RasBank: Italians love brand-name funds too

A new directive on mutual funds from Banca di Italia, linked to European Ucits III legislation, is set to stimulate the growth of open architecture in Italy, as it will remove the restriction imposed on “fondi comuni” to invest in direct securities only.

“Until today, a fund could not invest in another fund, with the exception of the special category of fund of funds, which was established in 2001,” says Dario Brandolini, chief of the quantitative risk management division at leading Italian fund buyer and distributor Ras Asset Management (Ras AM). His group, owned by German insurer Allianz, currently boasts 3000 financial advisers.

“In Italy, there has been this clear distinction, common funds invest only in equities, bonds, futures and so on, funds of funds invest in funds. This new directive will open up new opportunities for fund managers to look for specific sector specialisation.”

Further opportunities will open up for managers who have extensive experience in global emerging markets, now becoming fashionable in Italy. Another strong, developing theme is that of investment style. “Italian asset managers’ experience is still limited in this area, unlike the English and the Americans, who offer a huge variety of value or growth products,” adds Mr Brandolini.

Ras AM, which embraced the open architecture concept in May 2001 through the launch of its Ras MultiPartner fund of funds concept, has been steadily boosting numbers of advisers to consolidate its strong position in the Italian distribution market. “Ras Multi-Partner was one of the first multi-brand funds to be registered in Italy and was created mainly to meet client demand for diversification of asset managers and investment styles,” says Mr Brandolini.

Stronger distribution

Whereas assets in Ras MultiPartner currently amount to just ?850m, third party funds handled by Ras AM total ?2bn, taking into account the ?900m in off the shelf private banking products known as GPFs, and the ?250m in insurance products. These third party holdings represent around 6 per cent of the ?32bn in total assets overseen by the firm.

The acquisition in June 2003 of Commerzbank’s Italian asset management unit added 200 financial advisers and was followed in February 2004 by the acquisition of BNL Investimenti, with 700 financial advisers. Clearly, RasBank is continuing to pursue its objectives of expanding and strengthening distribution capacity.

“I would say that open architecture is driven by client demand, but also by the search for new asset classes,” continues Mr Brandolini, with barely a nod to the often hard-sale nature of the Italian mutual funds market.

But he acknowledges that the on-going Italian love affair with branded products is extending to the financial sector. “Italians have a strong propensity to invest in foreign brands,” says Mr Brandolini. “But institutions like ours cannot have funds in all asset classes, as it would be inefficient.”

Style monitoring

Funds are selected on both quantitative and qualitative factors. Ras AM’s quantitative models enable the fund selectors to see if the fund manager is running money in the style they claim. “We measure fund style allocation and fund sector allocation against the benchmarks and their historical trends,” reveals Mr Brandolini. “Persistency of alpha is then calculated net of the fund style.”

Of the 1000 funds that he monitors, this automatic tool enables his unit to select those 200-250 funds which excel within the mini-clusters created. “The subsequent qualitative analysis enables us to decide whether to include that fund in our portfolio, and in what proportion,” he adds.

The third-party groups selected most frequently by Ras AM include JPMorgan, Invesco and Templeton for equity funds and BNP Paribas, Credit Suisse and Julius Baer for bond funds. “We select them because they offer a wide range of products. But we also use specialist managers like Legg Mason,” ventures Mr Brandolini.

And specialist managers are not spared any of the rigour of the investment process. “If possible, we pay even more attention in selecting them, because their strength tends to lie in the manager’s skills. But it is also true that the manager can be less ‘bridled’ by a strict investment policy. A specialist manager is maybe more opportunistic and therefore it is very important for us to be able to discern what is methodology and what is luck.”

The product strategy of Ras Group is set out in three different lines. “We want to control growing strategic areas such as total returns and hedge funds,” says Mr Brandolini, explaining the launch in 2002 of their alternative investment management arm, Ras Alternative Investments. “There is a strong demand for products that give asymmetry of returns, that preserve the capital when the market goes down and benefit from the rises of the high-risk market. This is the theme of hedge funds, absolute returns and total returns and demand is coming both from retail clients and institutional investors.”