MILAN, Italy -- The Previdoc pension fund has received a green light from Italy's Commissione di Vigilanza sui Fondi Pensione to start signing up members.
Designed for the country's 40,000 "dottori commercialisti" --a special breed somewhere between an accountant and a business broker -- the launch of Rome-based Previdoc brings to 11 the number of industrywide funds authorized in Italy, covering 6.5 million of the country's 20 million salaried workers.
Previdoc officials hope to double the minimum participation level of 2,500 members. That should give the fund about 20 billion lire ($240 million) to invest initially, with the first money managers slated to be appointed at the end of 1999, said Roberto Bozzo, president of the fund's provisional board of directors.
Encouraged to start up private plans by a 1993 law, Italian industries and unions are jumping at the opportunity. Industrywide funds for blue-collar workers, jointly sponsored by employers and unions, are expected to grow rapidly. InterSec Research Corp. in Milan estimates that by year-end 2002, some 33% of eligible workers will have signed up to these "closed" pension funds. Total assets are expected to be around $25 billion.
Meanwhile, industries that are too small to set up their own pension funds will be able to buy into the "open" funds that now are coming on stream and are primarily geared for the self-employed. David Booher, director of InterSec, projects open funds collectively will oversee $20 billion to $30 billion by the end of 2002.
The closed funds are experiencing rapid growth as they work to sign up members and start gathering and investing assets. Only three funds -- energy workers fund Fondenergia, Fiat's middle-management fund, and chemical and pharmaceutical workers' fund Fonchim -- have started collecting contributions, while a host of others are working to meet minimum participation levels set by regulators.
Here's a rundown of the major closed funds:
Aimed at the country's 50,000 energy workers spread among 160 companies, Fondenergia, Rome, has 26,000 members who started paying dues at the beginning of the year. By the end of 1998, 45 billion lire will have been collected, and this should rise to 60 billion lire when the scheme is fully up and running, said Elio Gianetti, vice president of the fund.
Banca Commerciale Italiana, Milan, is custodian. Previnet is the administrator. Tenders for money managers are expected to be issued in February.
Two or three managers will be appointed for three years initially, Mr. Gianetti said. While the type of mandate has not been determined, balanced mandates "would probably be our main choice."
Meanwhile, Fondo Quadri e Capi FIAT, which covers middle management in Italy's largest auto-manufacturing concern, is expected to grow by 25 billion lire annually.
Lorenzo Barolo, secretary general of the FIAT middle-management staff association and vice president of the pension fund, said 15,000 of the eligible 18,000 middle-management employees have signed up.
"Our fund is quite unusual in that it is a pension fund for a category within a company," he said.
Fund officials picked Milan-based Banca Commerciale Italiana as their custodian and Previnet as the administrator.
The next stage is to appoint the fund managers. "We are aiming for a maximum of two," he said, "with details of the tender being discussed right now. We hope the selection process will be complete in three months."
Fonchim is the only Italian fund to have picked money managers to date (Pensions & Investments, July 13). The six appointed managers, each to invest 20 billion lire, are still waiting for regulatory approval to start investing assets.
Andrea Girardelli, Fonchim director, said the regulator is checking the fund's contracts, but he hopes to win approval by Nov. 23.
Other funds have farther to go. Cometa, the largest private pension fund in Italy, has signed up 250,000 members out of 1.2 million eligible metal workers, with applications still pouring in.
The board of directors was elected in October and hopes to announce its choice of custodian bank and administrator soon. Bids from money managers will be sought later this year or in early 1999.
"We will be looking for about 10 managers," said Massimo Colombo, director of external relations for Federmeccanica, the Milan-based employers' association.
"By the end of the first year of operation, we should have 300 billion lire under management. This is sure to rise. First, because more people will join. Then, because the government is likely to approve measures that will allow more of the workers' end-of-service bonus to be paid into the fund."
Similarly, Fondodentisti, Rome, the fund for Italy's dentists, has 2,300 members signed up and is awaiting authorization from regulator COVIP to start collecting contributions. The hope is approval will be granted by year-end, "so we can benefit from another year's tax concessions," said Luigi Daleffe, president. "Assuming each member pays in the maximum tax-deductible figure of 5 million lire, we would have 11.5 billion lire in the first year. We hope to boost membership to 10,000 in two years, with 20,000 in five years."
The fund will not formally seek money managers for several months.
Others are at earlier stages of development, including:
Fundum, the Rome-based private pension fund for the sales, services and tourism sector, has reached its 3,000-member target, said Giuseppe Capanna, director general. "We expected a 15% takeup rate, but we have had to revise it upward -- to 20% of the total 8,000 people eligible."
Elections for the board of directors are to be held in January. "Since our members are self-employed, we really have no idea what the total invested will be," he said.
* The Arco pension fund, Milan, sent membership applications at the end of October to the 200,000 people who work in the 10,000-odd companies that make up Italy's wood furniture and furnishings manufacturing industry.
"The target set for us by COVIP, the regulatory authority, is 20,000 members and we should have a clearer picture as to when we will hit that figure by January," said Giacomo Ghirlandetti, head of industrial relations for Federlegno-Arredo, Milan, the trade association for Italy's wood and furniture manufacturers, and a member of the provisional board of directors.
* Alifond, Rome, aims to sign up 30,000 of the 200,000 workers in the food manufacturing trade. "When this target is reached," said Bruno Feligini, a member of the fund's provisional board of directors and a senior manager of Cesare Fiorucci SpA cooked meats company, "we can move on to the next stage, which is for the fund members to elect the board of directors."
* The Previcooper fund, Rome, hopes to have 5,000 participants by February. Officials ultimately hope to pull in 35,000 members out of a total 55,000 workers in the cooperative retail business.
"We expect to have 45 billion lire under management in about two years' time," said Federico Genitoni, a member of the provisional board of directors.
Investment strategies will be decided by the elected board of directors, which will be elected by the middle of next year.
Other funds are taking the first steps in their formation. According to recent reports, these include: Previvolo, for the 2,000 Alitalia pilots and technical staff; Fondart, which applies to 50,000 people who are either craftsmen, or proprietors or partners in crafts or small-business concerns, as well as their family-member employees; Pegaso, covering 33,000 workers in the public sector energy, gas and water industries; Telemaco, which applies to 100,000 telecoms workers employed by Telecom Italia, TIM Telespazio, Stream, CSELT, Stet International, Scuola Reiss Romoli, Elettra TLC, Trainet and TMI Telemedia International; Previmoda, a fund for Italy's 900,000 textile workers; Fondo Pensione Artigiani Lombardi, for the Lombardy region crafts and tradespeople; Fondo Pensione Assologistica, for workers in the shipping industry; Fongiureco, for professionals in the legal and economic sectors; Fonser, for the services workers; and Foncer, for the ceramics industry workers.