"In the Italian Stock Exchange there is a recovery of confidence and an ongoing repositioning of investors that we will see if it has the strength to become something more" but for a few weeks the music has certainly changed for the better: to say it is one of the brightest and innovative protagonists of the Italian financial scene, Paolo Basilico, founder and CEO of Kairos, who plans to go public by the end of 2017 but without changing the business model that has made it a high-quality financial boutique. Above all, behind the fireworks of the Italian banks there is an obvious red thread for Basilico that is stirring things up. Let's see how and why in this interview that Kairos' number one gave to FIRSTonline.
From the battle of Vivendi over Mediaset to that of Intesa Sanpaolo over Generali, without forgetting the merger between Luxottica and Essilor, the one between Banca Popolare and Bpm and the monstrous capital increase of Unicredit: Mr. Basilico, he expected a start to the year so effervescent for Italian finance?
Among the many operations in the field, there are few links and the concomitance is sometimes casual, except for banking operations, where there is a common thread and it has two origins: the first is the greater serenity that has generated the observation on the Italian market that the outcome of the constitutional referendum, despite having internal political implications that should not be underestimated, did not pave the way for the crisis in the Eurozone, feared above all by large international investors who in 2016 had underweighted Piazza Affari due to an evident distrust in Italy and in the 'Europe. This marked the turning point, to which another no less relevant novelty was added.
What?
The direct intervention of the State in the banking system and above all in Monte dei Paschi, which should have been done earlier, since the time of the Monti government, and which has finally erased the fear of systemic risks which had alienated many international investors from the banks and by the Italian Stock Exchange. The stability of the Eurozone and the state's intervention in Mps, to which more recently the launch of a capital increase of 13 billion by Unicredit has been added, have made everyone perceive the game changer, with positive effects chain that helped to restore impetus to the Stock Exchange, which last year was targeted by bearish strategies, in particular on Italian banks. It is therefore no coincidence that, in the new-found climate of trust, new games open up.
How will they end?
We would need a crystal ball to find out, but one point is already clear: the recovery of the initiative by the two major Italian banks, Unicredit and Intesa, will lead to a general strengthening of the banking system. As for the battle between Vivendi and Mediaset, I understand that the French are trying to remedy the mistake on Premium and reverse the impasse in which they ended up, but what emerges is the awareness that Mediaset is a company which has a share of interesting market that had been underestimated in the past.
Do the changes that are characterizing Italy's financial and banking system authorize us to think that, beyond the physiological volatility of the market, the bullish push with which 2017 opened on Wall Street will continue to infect Piazza Affari as well?
There is an upward push on the Italian financial market and it has all the characteristics to continue, but it does not come only from the United States, where Trump's announced expansionary fiscal policy will play a very significant role and will make the relay with a monetary policy that will make more restrictive, but from the recovery of confidence among international investors who had ended up turning their backs on the Italian stock exchange for the reasons indicated above and who are now rediscovering it at convenient prices, as clearly indicated by the capital flows in the first weeks of the year . For now it's just a repositioning, we'll see if it has the strength to become something more.
Could another turning point for finance and the Italian Stock Exchange also come from the novelty of Individual Savings Plans (PIR) which exempt medium and long-term investments from taxes?
Yes of course. We have been waiting for the PIRs for years and the law that introduces them in Italy is a good law for which we must openly thank the Government and Parliament. After the referendum and Mps are the third leg of the Italian turning point.
Many managers have already announced the launch of new funds dedicated to PIRs: what will Kairos do?
We have two new funds in the works that we will launch on the market between February and March. The first will be wholly equity and wholly played on the Italian Stock Exchange and will take advantage of the fantastic track record of our team led by Massimo Trabattoni who has been at the top of all performance rankings for years. The second new fund will instead be balanced and will also make use of the excellence of the team led by Rocco Bove and that led by Federico Trabucco. We still have to decide whether to go it alone or do it in partnership with institutional counterparts.
Savers are perceiving the novelty of the Pir but fear high costs, especially in entry fees: how will Kairos regulate himself?
We have never applied entry commissions on our funds and we will not do so on PIRs either, also because we have no distribution costs but we are and remain a product factory that does not rely on retail but places its funds by word of mouth or through partnerships.
Will Julius Baer's entry into Kairos forcefully change your business model, until now oriented towards a super affluent and institutional clientele, and will it widen your traditional target?
Absolutely not. We are not changing either the target or the business model which is a successful case on the Italian market. It would make no sense to focus on our distribution network and on retail customers for which many other players with often impressive dimensions are already in the field. Our job is different and we won't change it: we will remain a high-quality product factory and financial boutique.
But is the current shareholding structure of Kairos, which records a controlling stake of 80% of Julius Baer, transitory or definitive?
It is transitory and will rebalance with the listing on the Stock Exchange which, markets permitting, could take place within the second half of 2017 and which should eventually lead to a shareholding structure that will be 50% in the hands of the Swiss partners, 20% to the management of Kairos and for the rest to the market. However, I want to take the opportunity to point out that the entry of Julius Baer has not changed governance and has not reduced the management's management autonomy in the slightest, therefore it has only brought us goodwill.
Despite the fact that the prophets of doom have so far been proven wrong on Brexit, Trump and the Italian referendum, and despite the 2017 financial scenario having a positive tone, the three unknowns linked to the elections in Europe (from France to Germany and perhaps Italy) Don't they risk breaking the spell and calling the big picture into question?
I don't see all the political unknowns that are being talked about in Europe and, as things stand, I don't even see their financial effects. In France, all electoral forecasts say that Le Pen will not be able to conquer the Elysée and, in the worst case scenario, some temporary fibrillation on the markets could only arise if La Pen collects more than expected consensus in the first round, but fortunately then c 'is the final ballot. In Germany, barring terrorist escalations, Merkel is on her way to winning the elections also thanks to an economic growth that travels at American levels.
In Italy, however, the outcome of the referendum, even if fortunately it has not caused political upheavals, has arrested the strategy of reforms and risks paving the way for a proportional electoral system which would be the antechamber of political fragmentation, of weak governments and, in the worst case scenario, ungovernability: wouldn't all this also have financial effects?
There is no doubt that in Italy the political risk remains high as long as economic growth is anemic and social unease is very high. For this reason, the market hopes to buy time and hopes that the political elections will go to the natural deadline of the 2018 legislature.
