The high volatility on the Italian stock market at the beginning of January - higher than that of other markets - could be one of the consequences of the introduction of euro. or so market rumour has it.
Indeed, according to some Italian stock brokers, many Italian investment funds arrived at the end of 1998 with a host of euro-related problems, not least were software problems which complicated the risk management of their portfolios.
In actual fact, all Italian funds ceased operating from December 21 until January 7, when they froze their holdings, waiting for the conversion week-end. But it appears that in December many equity managers had accumulated high exposures to the domestic stock market, thinking it would rise with the euro and also anticipating a liquidity trend in January, due to the seasonal effect of government bonds expiring at the beginning of the year.
But in the first half of January, unlike 1998, liquidity did not move so quickly or so massively from fixed income to equity funds, maybe be-cause banks had slowed down their activity towards the public, being preoccupied with the euro. In the meantime, stock markets plunged so violently, that money managers found themselves overinvested in equities; moreover, they had no control over their liquidity, because of the software problems related to euro conversion. The result - the same brokers say - was a mess: a frantic use of derivatives involving selling the Fib30 futures contract on 30 Italian blue chips - to try and follow the market.
Most Italian fund managers have denied they had any problems. But another clue to the difficulties of the Italian asset management industry is the delay in introducing the new rules on benchmarks. Months ago, Consob, the watchdog of the Italian securities market, asked money managers to publish a benchmark for each in-vestment fund in an attempt to make the market more transparent. The deadline for this was fixed for the be-ginning of January, to coincide with the conversion of fund units to euros.
But Assogestioni , the Italian money managers organisation, asked for a delay and Consob agreed to postpone the new rules for some months.
The benchmark for each fund will be made public in a new prospectus (pros-petto), which is to be published, ac-cording to new standards set out by Consob, in the future. Officially the delay is because of the new prospetto, but actually the problem seems that many money managers are not prepared yet to adopt a clear benchmark. Maria Teresa Cometto

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