Assofondipensione works on bond yield guarantee for fund of funds

Italian pension funds association Assofondipensione is in talks with Cassa Depositi e Prestiti (CDP), the partly state-owned Italian investment bank, to offer bond yields as a guarantee to set up a new fund of funds (FoFs) for direct investments to support the Italian economy, open to pension schemes.

Riccardo Realfonzo, the former president of the pension fund for the metal industry Cometa, now coordinator of the technical committee at Assofondipensione, said in an interview with Il Sole 24 Ore that CDP could issue a bond with a 14-year maturity, and a 4% annual yield, as a form of guarantee for schemes investing in the FoFs.

The FoFs would have a two-tier structure, with one part of the assets invested in private equity to support the Italian real economy, Realfonzo added in the interview.

“According to our estimates, an overall flow of investments could be generated for a multiple of six times compared to the volume of funds made available by CDP and the complementary pension schemes,” Realfonzo added.

Assofondipensione has held talks with CDP and asset manager Fondo Italiano d’Investimento in the last few months, as the process led to making “remarkable steps forward” to design the structure of the FoFs with a protection mechanism, he continued.

Realfonzo laid out a first proposal of a public-private partnership to channel pension fund assets towards the FoFs to directly invest in “social infrastructure” and in companies, through private equity, private debt, venture capital allocations, while speaking before the Italian parliamentary committee investigating pension funds’ investment policies in February, at the time as president of Cometa.

The plan proposed in February envisioned a role for CDP as co-investor with pension funds, akin to the role it has in the private equity, private debt and infrastructure FoFs set up under the Real Economy Project.

Realfonzo has now called on the government to act to help pension schemes, CDP and Fondo Italiano d’Investimento to establish the FoFs with a guarantee mechanism.

“To start, the government must clarify the budget law for 2017, and expand the maximum investment limit to 45% of the total capital of a closed-end fund,” he added.

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