Raquel Pichardo-Allison reports on a new wave of activism starting to swell in Italy
Publicly traded Italian companies have a new investor to answer to – Italian pension funds. There is a nascent movement among these funds to become active shareholders, with at least two of the country’s largest pension funds – Cometa Pension Fund and Fondo Pegaso – leading the way.
Consultants and asset managers expect more pension funds to pick up on this trend as activities like voting on proxies are proven to be beneficial to long-term shareholders. Investors are also using this as a sort of risk management tool in the wake of the financial crisis.
“Italian pension funds are starting to become more active investors, they’re starting to vote at shareholder meetings,” said Andrea Canavesio, partner at consultancy MangustaRisk. “This is a sort of new world for them.”
Guiseppe Chianese, president of Fondo Pegaso, agreed that pension funds historically have not exercised their rights to vote, but said that is changing.
He said: “The issue of socially responsible investing has been repeatedly analysed and, in recent years, it has been transformed into the criteria of ESG (environmental, social and governance) meaning the possibility to invest where there is a strong commitment to ESG issues. It is probably the right time to start considering that funds can begin to take ownership for specific issues, like budget and corporate governance issues.”
Industry experts say the main reason most don’t participate in activist shareholder activities simply comes down to asset allocation – many have only a small percentage in equities, and an even smaller amount in direct holdings in Italian companies.
Italian pension funds typically hold only 5% to 15% of their holding in equities, said Canavesio.
Meanwhile, most Italian pension funds include the MSCI World or MSCI Europe indices in their portfolios which have a limited weighting to Italy, added Lorenzo Randazzo, institutional sales manager at AXA Investment Managers Italia.
Cometa, among the largest pension funds in Italy, has €6bn ($5.2bn) in assets, but only a mere 0.61% is invested directly in shares of Italian companies, said Mauricio Agazzi, general manager. That hasn’t stopped the fund from increasing its shareholder activity.
In the past year, Cometa became signatories of the United Nations Principles for Responsible Investment, guidelines followed by investors worldwide. The UNPRI encourage investors to be active participants in the companies in which they invest and to incorporate ESG principals into their investment practices.
The top stories this week were the High Court's decision to block the £12bn annuity transfer from Prudential to Rothesay Life, and a separate court ruling that 'raises the bar' for pension rectification exercises.
Guaranteed minimum pension (GMP) equalisation has soared to the top of pension schemes' to-do lists, with 58% stating it is a priority project, research from Equiniti has revealed.
Professional Pensions is holding its defined contribution (DC) conference on 4 September.