Favourite funds to invest in the Italian market

We consider Italy as a great investment opportunity, especially on the equity side. There are a couple of factors that support the view: first, the optimism about the international context which supports import/export, crucial for a country like Italy; second, the expectations about the economic cycle which supports private consumption and investments.

As a confirmation, ISTAT (the Italian National Statistical Agency) and Bank of Italy, increased the expectation about 2021’s growth. In a medium/long term time frame, growth is expected to be supported by the Pnrr (“Piano Nazionale di Ripresa e Resilienza”), financed with massive public investments and supported by the European Union, with the “Next Generation EU”. We believe it’s worth mentioning the success of the first tranche of emissions of €20 billion for the EU Recovery Bond, which received requests for more than €140 billion, and it will represent an alternative source of funding (even cheaper) for Italy with respect at BTP emissions. 

On a geopolitical level, with respect to the frictions experienced with the Trump administration (as an example, the custom duties introduced by the USA as a response to Italy’s agreement to the Green Belt Initiative with the People’s Republic of China), the Draghi’s (Italian Prime Minister) administration took a clear path toward United States. At the same time, President Biden showed a clear intention to invest in the relation with EU and Italy, with strong openings to external investments and a pattern to exclude additionally custom duties or to remove the duties recently applied. This will create additional opportunities for Italian companies to gain maxi-orders (as happened recently for high-speed railway in Texas), and to reinforce the “Made in Italy” export.

Other than opportunities, there are also risks that should be considered: (i) level of Italian’s debt, high before the pandemic, are now higher and increasing; on the other hand, it’s worth mentioning that the actual increase is going to be used for funding solid growth initiatives (which are also increasing the attractiveness for foreign investors), and that with the new establishment of Draghi’s administration, the level of spread (so, the cost of debt) with the German Bund dropped radically; (ii) governance: potential government crisis, even if not in sight at this very moment, combined with anti-European orientation of some political parties, might put at risk the success of the growth initiatives and the overall Pnrr / Next Generation EU mentioned before, with potential side effects for the country.

Being aware of the risks, Italy still represent a great opportunity for growth and income. For resident private investors, there is a tax benefits for investments in Italy, specifically PIR (Piani Individuali di Risparmio – c.d. “Individual Savings Plans”): open-end funds with a medium/long term investment horizon, reserved to natural persons, which gives the investors a tax benefit on the profit eventually produced; to be elected as a “PIR”, the fund has to align to some conditions (e.g. 70% of the costituents must be Italian companies or European companies with stable organization based in Italy). As products, are worth mentioning:

These solutions may be subscribed without the “PIR” characteristic and the relative tax benefit (for example, for non-private or resident persons).