Italy demands a value proposition, says Pimco

Alessandro Gandolfi, Pimco’s country head in Italy, discusses the Italian market and which type of products Italian investors are buying.

What are the opportunities in Italian market for ­international asset management firms?

2011 was a challenging year for asset managers in Italy: outflows reached the lows of -€36bn at the end of November, according to an Assogestioni monthly survey.

The outlook for 2012 doesn’t seem much better, if we look at the current conditions. Asset management ­products are under pressure for two reasons.

First of all, players need to cope with yield spreads at historically high levels for Italian BTPs; second, ­traditional distributors, especially banks or bank-related, are searching for lower-cost liquidity via retail investors to roll over their own debts.

Asset managers have to prove they have a clear value proposition, if they want to cope successfully in these ­turbulent times. This can make the difference, as the concept of ‘risk free’ assets is under a close scrutiny from both private and institutional investors.

Those asset managers that can help their clients ­navigate this difficult environment, and thus position themselves as trusted advisers, will ultimately be able to build a strong and long-lasting client relationship. Of course, this is not a question of international versus domestic asset management firms.

Which Pimco strategies, particularly in the fixed income sector, do Italian investors find attractive?

The outlook for the global economy is not really for strong growth, as we probably most agree.

Bill Gross, Pimco’s co-CIO and founder stated in a recent investment outlook that 2012 is expected to be a year of a bimodal distribution of market outcomes, with higher risks on the left side of the distribution curve but also a potential inflationary expansion on the right, with i­nvestors returning to risky assets, pricing them up but not necessarily stabilising markets.

Hence, Pimco will ‘generally remain defensive and only selectively offensive’. This is the main reason for which we like duration in selected countries, such as the US, Norway and Canada.

By ‘offensive’ we mean investment grade credit sustained by healthy balance sheets. At current yield levels, high-quality mortgage and asset-backed securities also seem attractive. In addition, prudently selected US municipal bonds can offer attractive quality yield for investors that are looking for external diversification. In the equity space, we like names able to deliver consistent dividends, also under ­scenarios of a potentially deep recession.

Which products has Pimco launched recently on the Italian market?

Two of the solutions that we are successfully offering our clients to navigate current turbulent markets are in the asset allocation space.

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