23 March 2021
Italian Times

Over the last 20 years, Kairos has always adopted an entrepreneurial approach to its investments, founded on the accurate selection of equities, above all small caps, opting for companies with a clear business model and strategies shared by the market.

“This is the type of company who we trust, supporting them during their growth until the macro variables change,” states Massimo Trabattoni, Head of Italian Equity. Trabattoni disclosed that he holds equities that he has invested in for many years and which have yielded a significant return on investment, as well as a few equities that have performed less well in the case of companies that have a better management trend than originally expected, and which Kairos believes are due for an upwards market revaluation in the medium term.

“The ability to create long-lasting relationships puts us in a position to attract smaller sized companies, aiding and supporting them along their growth path and possibly even towards their public offering. We strive not only to be active investors, but truly engaged partners, contributing to the future of the company by means of suggestions and guidelines to enhance the business’ outlook and competitiveness in Italy and abroad,” specifies Trabattoni.

Trabattoni hastens to explain the motivation for this choice: “For years, we have been extremely focused on the development of industrial-based companies that we invest in, because the entire Kairos approach is guided by a sort of entrepreneurial DNA, albeit remaining attentive not to overstretch our mandate in our role as investor: it is the CEO’s exclusive prerogative to decide what to buy, where to set up logistics or what products to develop.”

But what characteristics pique Kairos’ interest towards a company in view of a possible investment? Here’s Trabattoni’s response: “First and foremost, we favour scenarios in which management and ownership carry out clearly defined and reciprocally respected roles: we do not tolerate situations where ownership bears too much on management. Secondly, we evaluate the sector and the growth potential: before investing any capital, we conduct accurate due diligence in order to understand if the entry price could have interesting margins for an increase in value in the medium term. In practice, we want to be able to unite a good management team with a possible growth or turnaround story, i.e. a redevelopment or restructuring plan. We like companies who commit to using any resources to further push growth, and increase margins, cash flows and profits; but also in order to be competitive and gain market shares abroad, perhaps in areas they still have not explored.”

In its relationships maintained over the years with companies, while deeply respecting the relevant roles, Kairos arranges on-site inspections, attends regular meetings with financial partners, provides sector competitor analyses to identify weaknesses with margins for improvement and offers close dialogue with its market analysts who follow the company. “By combining all of these activities, we are able to achieve relatively rigorous screening: for example, from an initial pool of 50 target companies with interesting future growth prospects, around 10 will become possible candidates, and we will finally focus on just a few companies to actually invest in,” states Trabattoni.

“For Italian enterprises,” underlines Trabattoni, “the dawn of the Draghi government has certainly changed the mood vis-à-vis a potential reboot of the country: it has given hope to a nation that appeared to be stubbornly stuck in a rut, giving all those entrepreneurs who had abandoned all plans of new projects a concrete reason to reconsider.”

The first signs of this paradigm shift could be seen in the BTP-Bund spread, which had recovered to halfway between the Greek and Spanish bond yields, and in the Italian stock exchange, that has seen above-average performance compared to the rest of the Eurozone. To make the most of this hope, it will be necessary to conduct reforms and simplify bureaucracy, also in view of judiciary and tax concerns, in order to make it simpler to do business in Italy.

Interview with Massimo Trabattoni, Head of Italian Equity.