Italian pension fund Solidarietà Veneto has announced plans to broaden its asset allocation to include infrastructure and real estate for the first time.
Reporting on developments in the first half of this year, the €1.36bn pension fund said that because of the experience it had gained in private debt and private equity, it was now ready to further develop its alternatives investment, but also to introduce two new asset classes: infrastructure and real estate.
In doing this, the fund — which covers staff of companies based in the Veneto region — said it would ideally try to “neutralise the environmental impact”.
Paolo Stefan, director of the pension fund, described this approach as: “highly innovative for our country, but one that is almost normal if we look beyond the Alps”.
The pension fund reported that environmental considerations were increasingly mentioned in meetings by some members.
Solidarietà Veneto said that in the January-to-June period, financial markets had remained hostage to the policies and announcements of the central banks, which meant that attempting to diversify via quoted investments alone was likely to prove partially ineffective.
This, it said, was the reason the pension fund had planned, in its last strategic asset allocation review, gradually to increase its allocation to alternatives.
Since 2013 the fund had been leading the way in Italy in this area, it said, citing the start of its investing in private debt and private equity.
Fresh sub-fund tweaks
The pension fund also said it made changes to some of its sub-funds at the beginning of July, including to the asset allocation mix of the ‘Dynamic’ fund. The equity weighting for this sub-fund has been ramped up to 54% from 50%, with the bond weighting falling to 46% from 50%.
“The intention is to compensate for the greater volatility arising from the increase in equities through deeper diversification and a more effective risk/return ratio, which will benefit the young people associated with this sub-fund,” the pension fund said.
Meanwhile, benchmarks for the ‘Prudent’ and ‘Income’ sub-funds are changing to lengthen the bond duration, which the pension fund said should result in higher expected returns over the next few years.
Solidarietà Veneto’s total assets rose to €1.36bn at the end of June from €1.26bn at the close of 2018.
“The new wave of expansive monetary policies announced by the ECB and the FED has driven the performance of almost all the asset classes in the first part of 2019,” the pension fund said.
The Dynamic sub-fund made a 6.09% return in the six-month period, it reported, while the Income, Prudent and Guaranteed TFR sub-funds posted returns of 3.93%, 3.59%, and 1.03% respectively.