Thematic investing certainly has international scope, but Italy can also provide worthwhile opportunities. Due to its size, however, the contribution from the Italian financial centre represent just a few small pieces in a global puzzle. But there are definitely some success stories. We are referring to companies that embody Made in Italy excellence, which is so highly appreciated throughout the world. Quite often, even though these are small and medium-sized enterprises, they manage to become international competitors in specific niche markets.
Regardless of sector, an aspect they all have in common is the need for equity. In other words, funding to expand further, make acquisitions or carry out mergers, or possibly undertake new profitable business initiatives, outlines Marco Trabattoni, Head of Italian Equity.
This is a crucial aspect because, for many decades prior to the 2007-2009 economic crisis, Italy had an almost exclusively bank-based financing system. Smaller companies especially, but also others, secured credit primarily through short-term bank loans, which were often guaranteed by the business owner’s assets, a financing model that is no longer functional in the context of today’s global markets and banks scalded by the 2008 crisis.
The result is that there are many Italian SMEs, which can lay claim to recognised brands, worthwhile growth prospects, excellent governance profiles and highly competitive standards in relation even to their foreign competitors, that need capital to continue growing or to consolidate further, explains Trabattoni. He goes on to say that this has been the subject of extensive debate, resulting in the Italian Government, on the one hand, creating the Individual Savings Plans and, on the other, the introduction of European long-term investment fund (ELTIF) products, with the aim of channelling household savings towards the real economy.
Italian SME securities are very often not included in the main indices and are overlooked by investors and various asset managers due to their low liquidity on the market as a result of limited trading. This becomes a critical aspect, stresses Trabattoni, which cannot be ignored by open-ended fund managers, who are compelled to account for subscribers’ incoming and outgoing flows.
The Italian entrepreneurial fabric is often brimming with worthwhile and new investment themes which, due to the nature of the market, require a professional expert who can provide the right weighting in the portfolio so that these securities can contribute to determining performance.
Interview with Massimo Trabattoni, Head of Italian Equity.