Invest and, at the same time, lend a hand to the Italian economic fabric. In a nutshell, this is a debt fund, an instrument that is almost unknown in Italy, but quite popular in Anglo-Saxon countries. With the hope of making the practice more commonly used, Assoprevidenza (Italian Association for Complementary Welfare and Assistance) and FeBAF (Federation of Banks, Insurance and Finance) organized a meeting to explain how this type of fund it could restore oxygen to small and medium enterprises, the true backbone of the Italian economy.
The system is quite simple: capital is raised from institutional investors, such as social security schemes, to disburse loans to small and medium-sized businesses, which have a lot of potential, but which also have difficulty issuing their own bonds.
“Ours is a productive fabric made up of very small bank-dependent businesses – explains Sergio Corbello, president of Assoprevidenza to Firstonline – This means that their needs are met only by credit institutions. The problem is that with the crisis, access to credit has become increasingly difficult. And now the time has come to discover new instruments, which are not to be considered an alternative to banks, but rather a complement".
The need for new instruments comes with the regulatory requirements established by Basel III, underpinning the current process of deleveraging, which has gone to the detriment of funding. “Everything has changed with Basel 3, at least in Europe – clarifies Rainer Masera, former Minister of the Budget in the Dini government, now dean of the Faculty of Economics at the Guglielmo Marconi University in Rome – If in the United States they have introduced differentiations between smaller and territorial (with softer rules) and mega institutions (with stricter rules), the same rules have been applied to everyone in the Old Continent”.
Among the possible paths taken in recent times, there is that of mini-bonds, launched last year by the Growth Decree to allow unlisted SMEs to cope with the credit crunch. But issuing mini-bonds and not finding buyers is a risk that Italian SMEs cannot afford these days.
And here come the debt funds, intended for institutional subjects such as pension funds, professional funds and insurance companies, which to date do not have the new SME debt in their portfolio. The problem is understanding whether the dish will be judged appetizing.
“I believe this tool will be successful in the next year, year and a half. Debt funds can guarantee a very positive economic result, replies Corbello. When asked "how much", the president of Assoprevidenza specifies: "the yield on government bonds doubles".
“These tools, widespread in Great Britain and the United States, can be quite successful – adds Corbello – for various reasons: awareness of supporting the economy of one's own country closely linked to the growth opportunities of SMEs; collateral structure; the search for a positive return when rates are close to zero and, above all, the medium-long term investment time horizon that marries the demands of complementary forms. Finally, the proximity to the territories should not be overlooked, which represents one of the main strengths of debt funds".
The debt fund will have to guarantee the seriousness and quality of the companies. “The guarantees will be based on the company's cash flow and assets,” explains Raniero Proietti of Perennius Capital Partner Sgr. "With this mechanism - assures René Biner of Partners Group - it is possible to understand earlier if the company is not able to pay, it is more efficient than the bond market".
The road to debt funds is still long and full of obstacles. According to Giovanni Guazzarotti, senior economist at the Bank of Italy, institutional subjects are unwilling to invest in non-traditional assets and it is necessary to create policies that promote new intermediaries for the development of debt funds”.
A need confirmed by Luigi Di Falco of Ania, the association of insurance companies. “Direct investment is difficult – explains Di Falco – and instruments such as funds of funds or debt funds can be more attractive, because they bring together a basket of companies making a qualitative selection. But we need to go one step further and understand what the needs of institutional investors are”.
According to Prometeia estimates, there would be over 50 billion of investments to be financed annually. We'll see if, in the coming years, part of this pie will be guaranteed by debt funds.
