The committee of the Italian securities market regulator CONSOB – Comitato degli Operatori di Mercato e degli Investitori (COMI) – is urging the Italian government to force pension funds to invest in equities of small and medium-sized enterprises (SMEs).
COMI, a committee set up in 2018 to facilitate the dialogue among market operators and investors on regulatory and strategic issues, has formally asked the government to introduce a law obliging pension funds to invest in SMEs listed on the Italian stock exchange, newspaper Milano Finanza has reported.
The committee – chaired by former finance minister, now president of UniCredit bank, Pier Carlo Padoan – wrote the request to the government in a memo drafted in the last meeting in February, according to the newspaper.
The committee discussed how to steer liquidity in markets, pointing at an obligation for pension funds to make a “minimum investment in equity instruments issued by Italian or European SMEs”, the report said.
COMI also discussed the possibility of introducing fiscal incentives for investments in equities, and of adding “an intermediate category of investors who can also be allowed to invest in complex products”, especially if assisted by a consultancy or portfolio managers.
The committee has not given details on the minimum quota of allocations for pension funds in the real economy through SMEs listed on the Euronext Growth Milan stock market.
Italian pension funds invest 19.4% of total assets, totalling close to €225bn, in the domestic economy, 2.4% in securities issued by Italian firms, and only 1.8% of total assets in equities of domestic companies, according to the pensions regulator COVIP.
Luca Ruggeri, general director of pension fund Fondo Gomma Plastica, told IPE that the plan to develop the stock market for SMEs is “absolutely acceptable.”
He added that the plan to launch Fondo Nazionale Strategico, the national strategic fund managed by partly state-owned Italian investment bank Cassa Depositi e Prestiti to invest up to €1bn in small-caps listed on the domestic stock exchange, responds to the “need for a correct selection of invested companies”.
Fondo Gomma Plastica has joined other industry-wide pension funds to invest in mid and small-cap equities in Italy.
Giovanni Natali, president of AssoNext, the association of listed SMEs, said it is “not acceptable that savings of Italian workers are mostly invested in foreign companies” competing with Italian SMEs.
An obligation for pension funds to invest in SMEs, combined with the plan put forward by the finance ministry to set up a fund of funds to channel institutional investors’ capital towards the real economy could be a “turning point” to encourage the capitalisation and growth of Italian SMEs, Natali said.
Giulio Cementero, member of parliament (MP) for the Lega party, and member of the finance committee of the Italian Parliament, agrees with the proposal put forward by the CONSOB committee. The government could look at the Competition Law approved in December on venture capital to introduce a law boosting equity investments in SMEs, he added.
Italy has tied tax breaks on investment returns of first and second-pillar pension funds in venture capital funds to a certain share of allocation to the asset class.
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